author: Simons, J. Kaye, J.

text:
    The People of the State of New York, Respondent, v Eulogio Cruz, Appellant. The People of the State of New York, Respondent, v Belton Brims, Appellant.
    Argued September 9, 1985;
    decided October 17, 1985

      POINTS OF COUNSEL

      Robert S. Dean and William E. Hellerstein for appellant in the first above-entitled action.
    Since codefendant’s detailed videotaped confession implicating appellant did not "interlock” with appellant’s alleged oral statement to a citizen informant of doubtful credibility, the trial court’s denial of appellant’s motion to sever (a) denied him his right to confrontation and (b) violated State due process standards relating to joint trials. (Bruton v United States, 391 US 123; People v McNeil, 24 NY2d 550; Parker v Randolph, 442 US 62; People v Berzups, 49 NY2d 417; People v Smalls, 55 NY2d 407; People v Woodward, 50 NY2d 922; People v Garofolo, 46 NY2d 592; People v Schaeffer, 56 NY2d 448; People v Prince, 50 NY2d 883; Tamilio v Fogg, 546 F Supp 364, 713 F2d 18.)

      Mario Merola, District Attorney (Mark L. Freyberg and Peter D. Coddington of counsel), for respondent in the first above-entitled action.
    I. Appellant’s guilt was proven beyond a reasonable doubt. II. The trial court properly denied appellant’s motion for a severance since he and codefendant made nearly identical confessions. (Bruton v United States, 391 US 123; People v La Belle, 18 NY2d 405; People v Baker, 64 NY2d 1027; People v Pollock, 50 NY2d 547; People v Williams, 56 NY2d 236; Parker v Randolph, 442 US 62; People v Jayne, 99 AD2d 589; People v Gilmer, 96 AD2d 679; People v Ridgeway, 101 AD2d 555; People v McNeil, 24 NY2d 550.)

      Bennett L. Gershman for appellant in the second above-entitled action.
    I. Denial of a severance of Brims’ trial from that of his principal accuser, Sheryl Sohn, rendered a fair trial impossible. (People v Bornholdt, 33 NY2d 75; People v Bogdanoff, 254 NY 16; People v La Belle, 18 NY2d 405; People v Burrelle, 21 NY2d 265; People v Wheeler, 62 NY2d 867; People v Owens, 22 NY2d 93; People v Carter, 86 AD2d 451; Bruton v United States, 391 US 123; People v Jackson, 22 NY2d 446; People v Berzups, 49 NY2d 417.) II. The flagrant misconduct of the prosecutor denied Brims a fair trial. (People v Pavao, 59 NY2d 282; People v Fielding, 158 NY 542; People v Lovello, 1 NY2d 436; People v Jackson, 7 NY2d 142; People v Whalen, 59 NY2d 273; People v Childers, 28 AD2d 725; People v Canty, 31 AD2d 976; People v Lombardi, 20 NY2d 266; People v Slaughter, 28 AD2d 1082; People v Moore, 26 AD2d 902.) III. The trial court committed reversible error when it instructed the jury that it could use accomplice testimony to corroborate accomplice testimony. (People v Jelke, 1 NY2d 321; People v Chamberlain, 38 AD2d 306; People v Hudson, 51 NY2d 233.) IV. The court committed reversible error when it admitted color photographs of Mr. Sohn’s body showing large quantities of blood, torn flesh, pieces of protruding bone, and pieces of protruding brain matter. (People v Pobliner, 32 NY2d 356; People v Seeley, 74 AD2d 910.) V. The trial court prevented Brims from receiving a fair trial by denying challenges for cause to several jurors whose objectivity was impaired by prejudicial pretrial publicity and personal bias. (People v Sellers, 73 AD2d 697; People v Moorer, 77 AD2d 575.)

      Kenneth Gribetz, District Attorney (John S. Edwards of counsel), for respondent in the second above-entitled action.
    I. The court did not abuse its discretion when it denied appellant’s motion to sever. (Bruton v United States, 391 US 123; Delli Paoli v United States, 352 US 232; Harrington v California, 395 US 250; Parker v Randolph, 442 US 62; United States v Dizdar, 581 F2d 1031; United States ex rel. Duff v Zelker, 452 F2d 1009; United States ex rel. Stanbridge v Zelker, 514 F2d 45; United States ex rel. Ortiz v Fritz, 476 F2d 37; People v Safian, 46 NY2d 181; People v McNeil, 24 NY2d 550, cert denied sub nom. Spain v New York, 396 US 937.) II. The prosecutor’s conduct did not deprive appellant of his constitutional right to a fair trial. (Berger v United States, 295 US 78; Lutwak v United States, 344 US 604; Bruton v United States, 391 US 123; People v Wade, 35 AD2d 401; People v Reynolds, 39 AD2d 812; People v Santiago, 43 AD2d 925; People v Kingston, 8 NY2d 384; People v Brosnan, 32 NY2d 254; People v

      Shields, 58 AD2d 94; People v De Christofaro, 50 AD2d 994.) III. The court’s instructions respecting accomplice testimony were not so erroneous, in the context of the entire charge, as to warrant a reversal of the instant conviction. (People v Jelke, 1 NY2d 321; People v Chamberlain, 38 AD2d 306; Gilmore v Curry, 523 F Supp 1205; People v Mitchell, 72 AD2d 920; People v Gramaglia, 71 AD2d 441; People v Gardner, 59 AD2d 913; People v Varisco, 57 AD2d 596; People v Daniels, 37 NY2d 624; People v Hudson, 51 NY2d 233.) IV. The reception of photographs in evidence depicting the scene of the crime, including the bodies of the deceased, was not erroneous. (People v Pobliner, 32 NY2d 356; People v Arca, 72 AD2d 205; People v McKown, 71 AD2d 730; People v Corbett, 68 AD2d 772; People v De Tore, 34 NY2d 199; People v Hampton, 38 AD2d 772; People v Seeley, 74 AD2d 910.) V. The trial court properly denied each of appellant’s challenges for cause. (People v Blyden, 55 NY2d 73.)
   OPINION OF THE COURT

Simons, J.

Defendant Eulogio Cruz has been convicted of murder, second degree, committed during the course of a gas station robbery in The Bronx. Defendant Belton Brims has been convicted of two counts of murder, second degree, and other crimes committed during the burglary of a private home in Spring Valley, New York. Both defendants were tried jointly with codefendants and the principal issues submitted in these appeals are whether the courts’ refusal to grant defendants’ motions for severance resulted in trials impermissibly flawed contrary to the rule of Bruton v United States (391 US 123; see also, Roberts v Russell, 392 US 293), and if not whether reversal is nevertheless required because the prosecutions failed to meet minimum standards of fairness (see, People v Payne, 35 NY2d 22; People v La Belle, 18 NY2d 405). In each trial statements of the codefendants and the defendants were received in evidence. The basis for defendants’ claims are their assertions not only that the content of their nontestifying codefendant’s statements did not "interlock” with their own but that even if the statements were substantially the same, defendants were prejudiced because the reliability of the codefendants’ confessions, made in the controlled environment of a police station, to police officers and under circumstances rendering them more credible, was greater than that of defendants’ alleged confessions, made to lay witnesses having motives to falsify. Because of this difference in reliability, defendants contend that the jurors must have used the codefendants’ statements to resolve any doubts about defendants’ guilt, even though they were instructed not to do so. Defendant Brims urges other grounds for reversal but those claims are either unpreserved or harmless (see, People v Crimmins, 36 NY2d 230). Neither defendant challenges the sufficiency of the evidence and, in the absence of legal error, the convictions should be upheld.

There should be an affirmance. The introduction of a codefendant’s testimony may, in some instances, substantially impair the defendant’s right to confrontation or to a fair trial. The confessions of the defendant and codefendant in each of these cases interlocked, however, and even though they differed in length and in the circumstances under which they were made, the codefendant’s statements could properly be received with appropriate limiting instructions, regardless of differences in their comparative reliability (People v McNeil, 24 NY2d 550, cert denied sub nom. Spain v New York, 396 US 937; Parker v Randolph, 442 US 62). Because defendants’ statements not only interlocked with those of their codefendants, but also contained legally corroborated admissions of all the elements of the crime of which they were convicted, defendants were not denied a fair trial and the motions for severance were properly denied.

PEOPLE v CRUZ

Defendant Cruz was indicted with his brother, Benjamin, for the felony murder of a gas station attendant committed November 29,1981. Jerry Cruz, who was not related to defendant, was also a participant in the robbery. Some five months later Jerry Cruz was killed and during the course of the investigation of that homicide, the police interviewed his brother, Norberto. Norberto told the police that defendant and Benjamin came to his apartment the morning after the gas station robbery and that at the time defendant was nervous and wearing a bloodstained bandage around his right forearm. Norberto said that defendant told him that he and Benjamin had gone to a gas station in The Bronx the night before intending to rob it and that during Eulogio’s struggle with the attendant the attendant had bent down behind the counter, procured a gun and shot him in the arm. Defendant said that Benjamin then jumped up and shot the attendant. Norberto said Benjamin told him a similar account of the incident, although he did not explain to Norberto how defendant was injured or that the brothers had gone to the station that night intending to rob it. Norberto said that he had offered to take defendant to the hospital for treatment of his wounds but defendant refused to go because to do so was "very dangerous”. At the trial, Norberto testified that he had been a friend of Eulogio’s for 25 years, since they had grown up together in Puerto Rico. He remembered the date Eulogio and Benjamin came to his apartment because his wife was discharged from the hospital that day. When asked on cross-examination why he had not gone to the police earlier with this information, Norberto said that he could not because his brother Jerry "had the event”.

Shortly after Norberto’s statements to the police, Benjamin Cruz learned that they were looking for him and went to the police station. While he was being questioned about the death of Jerry Cruz, he blurted out that he and defendant had killed the gas station attendant in The Bronx. Subsequently he gave a complete confession to the police which was recorded on videotape. Defendant and his brother were indicted together for felony murder.

Before the trial defendant moved for a severance, but the motion was denied (see, 119 Misc 2d 1080). Both Norberto’s testimony implicating the brothers and the videotape of Benjamin’s confession were received in evidence during the trial with appropriate limiting instructions. The first trial was aborted because of juror misconduct but the confessions were again received at a second trial which resulted in the judgment now before us convicting defendant. In addition, the People presented police testimony, forensic evidence and photographs which established the robbery and the killing, the location of the victim’s body, the injuries to this face and the substantial damage to the office, inferentially establishing defendant’s struggle with the attendant before the murder. Also introduced was medical evidence of the trajectory of the bullets as they entered the victim’s head from above, corroborating the evidence that Benjamin was above the attendant when he shot him. Defendant offered no evidence and both defendants were convicted of felony murder.

BELTON BRIMS

Defendant Belton Brims was convicted of two counts of intentional murder, two counts of felony murder, two counts of robbery, first degree, and two counts of burglary, first degree. The charges arose out of an incident occurring December 28, 1980 when defendant and James Sheffield, with the assistance of Sheryl Sohn and Willie Brims, burglarized Sheryl’s home and killed her parents. On January 1,1981 defendant was arrested in New York on three other felony charges. He was a prime suspect in the Sohn murders at the time but, after he waived extradition, he was returned to New Jersey to answer felony charges against him there. Brims was subsequently convicted in New Jersey of armed robbery and sentenced to a term of imprisonment of 25 years to life. In the meantime, defendant, Sheryl Sohn and James Sheffield were indicted in New York for multiple charges arising out of the Sohn homicides. Defendant was returned to New York and the three defendants were tried together.

None of the defendants testified, but Sheryl Sohn’s confession to the police, in which she told the police that she had helped Brims and Sheffield enter her parents’ home the evening of the crime, was received in evidence against her. She said she had met the two men at a bar and told them she would unlock the door for them; they could await her parents’ return from a party and then, when they returned, rob them. She also agreed that they could have all the valuables they found, except for a diamond ring which her mother would be wearing that she wished for herself. Sheryl said that defendant and others left for the house while she remained at the bar with a friend, but they returned shortly thereafter and told her they were unable to get in. She went home, checked the door again to insure that it was unlocked, and then returned and told defendant and Sheffield. Apparently they were still unable to enter the house and returned to the bar a third time. At that time Sheryl explained the floor plan of the house to the defendants and they left. Her oral statements were later reduced to writing and admitted at the trial. Her statement was redacted to eliminate references to other crimes but the names were left in it.

The People introduced two prior statements by defendant. One was made to his cousin, Willie Brims, who had gone to the Sohn house with defendant and Sheffield but remained in the car while they were inside. Willie Brims was not charged with any crime despite his participation that night. He testified about the several trips from the bar to the house and return while defendant and Sheffield tried to gain entry, about leaving the house after the crime, and about the place where the participants had disposed of various pieces of evidence after the homicides. Willie testified that when defendant returned to the car after leaving the Sohn’s house on the night of the crime, he told him that he had "done some serious business” inside. Defendant explained that statement to him a few days later. He said that when the Sohns had returned to the house that night Sheffield "had beat [Mr. Sohn’s] brains out with the butt of a gun” and that he had "drowned the bitch”. Defendant said he had made Mrs. Sohn drink gin before drowning her and that she had fainted when she saw her husband assaulted. He then dumped her into the bath tub he had filled with water, face down. During this conversation with Willie, defendant showed him a photo of Jackie Shoulders and said she was his girlfriend. Defendant told Willie to "be cool” and in 30 to 90 days they would be paid for the jewelry.

The People introduced another statement of defendant made to John Riegel, a New Jersey prisoner occupying a cell near defendant during his incarceration there in January 1981. Riegel had been a former assistant bank vice-president and private entrepreneur who, after a series of financial setbacks, had turned to crime. Between 1977 and 1981 he had been the subject of several charges involving forgery, issuing bad checks and the use of stolen credit cards.

Riegel testified that, during the nine days they were together in jail, defendant told him that he had planned the Spring Valley robbery with the slain couple’s daughter, that he and his partner had waited in the house until the victims had returned home and that he had drowned the woman. Defendant said he had told his partner to kill the husband by hitting him over the head. Riegel said that defendant claimed he had received about $20,000 to $25,000 in the robbery and that all the daughter wanted for her help was a diamond ring. Defendant also told him that he had given part of the jewelry to a young girl from Virginia (Jackie Shoulders). Defendant was worried because her name was on a slip of paper in his pants pocket and if the police found the slip and located her they would discover that she had received from him a valuable piece of jewelry missing after the robbery.

There was substantial evidence to corroborate these confessions, indeed the evidence of defendant’s guilt was overwhelming. Some of the more significant items included evidence of blood discovered in Willie’s car in places consistent with his testimony about his passengers and where they entered and exited the car after the killings and the ski mask and gun used the evening of the crime, which was found in the place he had described. Forensic evidence was introduced which established that the gun was broken and that the pattern injuries on Mr. Sohn’s skull exactly matched its shape. Forensic evidence also established that blood found on defendant’s sneakers after the crime was the same as a very rare blood type possessed by Mr. Sohn. Defendant attempted to establish an alibi, that he was in New York City acquiring drugs for Sheryl at the time of the killing, but even his witnesses failed to support his alibi.

The Legislature has provided that the prosecution of two or more parties charged with the same offense or offenses may be joined for trial (CPL 200.40). Recognizing that joinder results in prejudice, however, it granted the court the power to order separate trials when the public policy considerations of trial convenience, economy of judicial and prosecutorial resources and speed which underlie the statute are outweighed by unfairness to the accused. An application for severance is addressed to the Trial Judge’s discretion. He must decide whether possible unfairness will result, whether it can be minimized by measures short of separate trials or whether severance is required. Normally, the trial court’s ruling on the motion will not be disturbed but his discretion is not absolute, nor is his determination final, for "[a] retrospective view by an appellate court may reveal injustice or impairment of substantial rights unseen at the beginning” (People v Fisher, 249 NY 419, 427). Accordingly, we may properly review the courts’ severance rulings in these two appeals.

When two defendants are tried together, the extrajudicial statement of one is hearsay as to the other and, if the statement is admissible at all, it may be admitted only when the jury is properly instructed that it may not consider one defendant’s statement as evidence in assessing the guilt of the other. In Bruton the Supreme Court held that because of the substantial risk that a jury, despite such instructions to the contrary, will look to the incriminating extrajudicial statements of a nontestifying codefendant, admitting such a confession violates defendant’s right of confrontation (Bruton v United States, 391 US 123, supra; see also, People v Safian, 46 NY2d 181, 187, cert denied sub nom. Miner v New York, 443 US 912). A recognized exception to the Bruton rule holds that if the statements of the defendant and codefendant are substantially identical, or "interlock”, there is no violation of defendant’s right to confrontation. The rationale is that if the statements interlock, the codefendant’s statement is no more inculpating than is defendant’s statement. It can hardly have the "devastating effect” on defendant’s case referred to in Bruton if defendant similarly has admitted his complicity in the crime (see, People v McNeil, 24 NY2d 550, 553, supra). Key also is recognition that the right to confrontation is not absolute (Dutton v Evans, 400 US 74, 89; People v Sugden, 35 NY2d 453, 460). The confrontation clause is intended to insure fairness and accuracy by giving a defendant an opportunity to challenge evidence against him, particularly a codefendant’s statement, even though the jury may not consider it, because of the natural tendency of a codefendant to shed blame and implicate his accomplice. The danger that the jury will consider unreliable hearsay is minimized, however, when the defendant has confessed. For these reasons, the interlocking confession exception to the Bruton rule was recognized early by this court (People v McNeil, supra; People v Galloway, 24 NY2d 935) and by lower Federal courts (see, e.g., United States ex rel. Catanzaro v Mancusi, 404 F2d 296 [2d Cir], cert denied 397 US 942; Mack v Maggio, 538 F2d 1129 [5th Cir]; United States v Walton, 538 F2d 1348 [8th Cir], cert denied 429 US 1025; United States v Spinks, 470 F2d 64 [7th Cir], cert denied 409 US 1011; Metropolis v Turner, 437 F2d 207 [10th Cir]; but cf. United States v DiGilio, 538 F2d 972 [3d Cir], cert denied sub nom. Lupo v United States, 429 US 1038) and the Supreme Court of the United States has similarly recognized it (Parker v Randolph, 442 US 62, supra). Indeed, one observer has interpreted the plurality opinion in Parker as holding that, as long as the defendant has confessed, "interlocking” is not required (see, Dawson, Joint Trials of Defendants in Criminal Cases: An Analysis of Efficiencies and Prejudices, 77 Mich L Rev 1379, 1421; but see, Parker v Randolph, 442 US 62, supra, at p 75).

Confessions are "interlocking” if their content is substantially similar (People v Smalls, 55 NY2d 407, 415; People v Safian, 46 NY2d 181, 184, supra; Forehand v Fogg, 500 F Supp 851, 853; compare, People v McNeil, supra, at p 552 ["almost identical”]). The statements need not be identical, it is sufficient that both cover all major elements of the crime involved (see, People v Woodward, 50 NY2d 922; People v Berzups, 49 NY2d 417, 425; Tamilio v Fogg, 713 F2d 18, 20) and are "essentially the same” as to motive, plot and execution of the crimes (United States ex rel. Ortiz v Fritz, 476 F2d 37, 39; Forehand v Fogg, supra; cf. United States v Kroesser, 731 F2d 1509). Statements are substantially similar when defendant’s confession is close enough to the codefendant’s with respect to the material facts of the crime charged to make the probability of prejudice so negligible that the end result would be the same without the codefendant’s statement (People v Berzups, supra, at p 425; People v Safian, supra, at p 188; see also, People v Fisher, 249 NY 419, 426, supra). Confessions do not "interlock”, however, if a codefendant’s confession may be used to fill material gaps in the necessary proof against defendant (see, People v Smalls, supra; People v Burns, 84 AD2d 845).

The two sets of confessions before us interlock. There are differences, of course. There always will be, given human nature, the variations in human recall and the manner in which witnesses testify. Indeed, as a practical matter the evidence of witnesses is usually more suspect if their testimony harmonizes too closely. But the Cruz brothers agreed, in their separate statements, on the date and target of the crime, the participants in it, the motive of robbery, and the essential facts of how defendant was injured and the station attendant killed. Although Benjamin’s statement was substantially longer, the details included did not contradict or modify the essential elements of defendant’s statement. The content of the confessions in Brims was markedly different, more because Sheryl Sohn had not entered the house and did not know or apparently contemplate that homicides would occur. But to the extent of her knowledge of the crime, her statement fully interlocked with defendant’s two confessions. Thus, she described the agreement with defendant and Sheffield, the several trips to the house to provide entry and the arrangement for disposition of the jewelry. Sheryl’s confession, admissible only as to her, could hardly have prejudiced defendant whose recitation in his confession of the same events she described was substantially similar. Indeed, it is difficult to perceive how Sheryl’s confession, which described only the preliminary arrangements with defendant, could have a "devastating” effect on defendant in view of his two confessions reciting the gory events that took place once he and Sheffield entered the Sohn home and murdered Sheryl’s parents (cf. People v Smalls, supra).

Defendants’ major complaint is not that the content of the confessions was dissimilar but that they differed in reliability: in the Cruz case Benjamin’s 22-minute videotaped confession to the police was contrasted with defendant’s oral confession to a friend with a possible motive to falsify and that was not revealed to the police for five months; in Brims a written confession to police officers was compared to oral confessions to, first, an accomplice who was extended leniency by the prosecutor and, second, a fellow prisoner awaiting disposition of the charges against him.

The contention that the exception to the Bruton rule for interlocking confessions does not apply when the confessions differ as to reliability has been rejected by this court (see, People v Woodward, 50 NY2d 922, affg 66 AD2d 866 [see, dissenting opn of Shapiro, J., for facts, at p 866]) and other courts (see, People v Santa nella, 63 AD2d 744, lv denied sub nom. People v Tamilio, 45 NY2d 784, cert denied sub nom. Tamilio v New York, 443 US 912; Tamilio v Fogg, 713 F2d 18, revg 546 F Supp 364, supra). Indeed, when the rule was announced it was both anticipated that there would be differences in the scope and reliability of the confessions, and accepted that such differences would be tolerated (see, dissenting opns in People v McNeil, 24 NY2d 550, supra; and Parker v Randolph, 442 US 62, supra). Thus, decisions following the McNeil case have held that the use of the confessions is not foreclosed because one confession is oral and the other is written (People v Woodward, supra; Parker v Randolph, supra) because one is made to police officers and the other to lay witnesses (Tamilio v Fogg, supra), or because one is long and the other is short (see, People v Woodward, supra; People v Safian, 46 NY2d 181, supra). Nor is the rule any different because defendant repudiates his confession or challenges its voluntariness. None of the confessions in these two prosecutions was unreliable as a matter of law and once admissibility was determined by the court, credibility was a question for the jury (People v Woodward, supra; People v Anthony, 24 NY2d 696; United States ex rel. Dukes v Wallack, 414 F2d 246, 247; United States ex rel. Catanzaro v Mancusi, 404 F2d 296, supra).

Defendant Cruz argues that, quite independent of any error in ruling on his constitutional right of confrontation, he is entitled to reversal because the trial violated fair trial standards applicable to trials in New York involving multiple defendants and the violation resulted in "injustice or the impairment of substantial rights” (see, People v Payne, 35 NY2d 22, 26-27, supra; People v La Belle, 18 NY2d 405, 409, supra; People v Fisher, 249 NY 419, 427, supra; People v Evans, 99 AD2d 452). Defendant’s right under that standard is broader than his right to confrontation. It may be violated even where the codefendant has remained silent both before and during the trial or conversely has chosen to testify. A defendant’s right to a fair trial is not impaired, however, when there is substantial evidence of guilt independent of the codefendant’s statement (see, People v Fisher, supra, at p 426), or when the defendant has himself made inculpatory admissions substantially identical to those offered against him, and that admission, properly corroborated, establishes the crime (see, People v Snyder, 246 NY 491), i.e., when the error is harmless or when there is no substantial risk of prejudice. Defendant’s fair trial rights are violated, however, when he is prevented, because of the complexities of a joint trial, from presenting exculpatory evidence (see, People v La Belle, supra), or when, although defendant’s right to confrontation has not been impaired, his codefendant’s confession includes material evidence of crime which results in substantial prejudice to defendant by filling gaps in the evidence against him. Thus, in Payne a severance was ordered because defendant’s confession implicated him in lesser criminal activity, but did not resolve the question of whether he was guilty of felony murder. The court found a substantial risk that the missing evidence could be filled, and apparently was, by reference to the codefendant’s confession (People v Payne, supra).

The statement of defendant contained all the necessary elements to incriminate him in the felony murder. It interlocked with Benjamin’s statement and it was corroborated by independent evidence sufficient to warrant the jury in accepting it as true and sufficient to support a guilty verdict. That being so, the trial court could properly deny severance finding, in the sound exercise of its discretion, that there was no substantial risk that the jury would borrow information from Benjamin’s hearsay statement to fill gaps in the evidence against defendant. If defendant was prejudiced by the joint trial, the prejudice resulted not from the fact that Benjamin’s statement added substantial weight to the proof of defendant’s guilt but from the fact that the denial of a severance prevented defendant from obtaining a more favorable atmosphere in which to attack his confession. That may have harmed his case tactically, but it did not deny his fundamental right to a fair trial (see, United States v Losada, 674 F2d 167, 171; United States v Werner, 620 F2d 922, 928).

Somewhat similar to defendant Cruz’s fair trial claim is defendant Brims’ claim that he was prejudiced because he was prevented from calling Sheryl Sohn as a witness. There was nothing before the court, however, to indicate that Sheryl would testify for defendant or that her testimony would tend to exculpate him if she did (see, People v Owens, 22 NY2d 93, 97-98; People v Kampshoff, 53 AD2d 325, 338, cert denied 433 US 911).

Finally, defendant Brims contends that the defendants’ defenses were antagonistic. A claim of antagonism may arise from a variety of circumstances, not easily cataloged, but it is clear that severance is not required solely because of hostility between the defendants, differences in their trial strategies or inconsistencies in their defenses. It must appear that a joint trial necessarily will, or did, result in unfair prejudice to the moving party and substantially impair his defense (People v La Belle, 18 NY2d 405, supra; People v Papa, 47 AD2d 902; see generally, Antagonistic Defenses as Ground for Separate Trials of Codefendants in Criminal Case, Ann., 82 ALR3d 245; Dawson, Joint Trials of Defendants in Criminal Cases: An Analysis of Efficiencies and Prejudices, 77 Mich L Rev 1379, 1422-1425). Indeed, some courts have looked to see if the defenses are directly and mutually antagonistic before granting a severance, believing that the accuseds are not entitled to separate trials if one defendant seeks to exculpate himself by inculpating the other (see, Rhone v United States, 365 F2d 980; People v Braune, 363 Ill 551, 2 NE2d 839).

It was Brim¿’ contention at trial that he was innocent of the crime, that he had seen Sheryl Sohn that evening, but that he had been in New York City obtaining drugs and returned only after the murders had been completed. He claimed that he obtained the Sohn jewelry from a friend of Sheryl’s in exchange for supplying her with drugs. Sheryl Sohn’s principal defense was to contest the voluntariness of her confession for, without it, there was no case against her. Failing this, she sought to establish that she did not actively participate in the robbery-murder and that she did not know the perpetrators would be armed. There were a few questions designed to establish that she acted out of fear of Brims because of money she owed him for prior drug transactions, but the evidence of duress was so slight that counsel neither argued the point in the summation nor requested a charge on it. Despite defendant’s general claims that Sheryl Sohn’s presence in the trial impeded his defense or reflected unfairly on him by causing the jury to unjustifiably infer he was guilty, there is nothing before us to establish that he was prevented from presenting exculpatory evidence by the court’s desire to protect his codefendant’s rights. His present claim that he was prevented from establishing that he received the jewelry from Sheryl as payment for her prior drug purchases is contrary to his testimony at trial.

Accordingly, in each case, the order of the Appellate Division should be affirmed.

Kaye, J.

(dissenting). With respect to People v Cruz, today’s decision falls far short of the standards recognized by the majority. The concern expressed in Bruton v United States (391 US 123) was that substantial weight would impermissibly be added to the government’s case if a codefendant’s powerfully incriminating extrajudicial statements, not subject to cross-examination by defendont, were admitted at a joint trial. The exception to the Bruton rule for "interlocking confessions” rests on the premise that where two confessions are virtually identical, the jury in assessing defendant’s guilt gains little or nothing from the codefendant’s confession. But confessions do not interlock if the codefendant’s confession may be used to fill material gaps in the necessary proof against defendant.

By no stretch of the imagination can it be said that the 22-min-ute videotaped confession of defendant’s brother to the prosecution — inadmissible against defendant — added no substantial weight to the government’s case against defendant or did not fill material gaps in the necessary proof against him. The only direct incriminating evidence against defendant was his alleged statement to Norberto (see, People v Cruz, 119 Misc 2d 1080, 1084), recapitulated in one question and answer during Norberto’s brief testimony:

"Q. What did [defendant] tell you?

"A. That they had gone to give a hold up to a gas station and that he started struggling with him.

"the court: Excuse me, speak up. Raise your voice.

"A. He started fighting with the man and the man bent down. He took out a gun and fired and then Benjamin jumped up and fired at the man in the gas station.” Norberto had a prior record; worked intermittently "on the street” as a mechanic and received welfare payments for his family of six; accepted money from his brother, Jerry, who lived with him, though he testified he had no notion of how Jerry got that money; testified earlier that Benjamin — not defendant — had made the confession to him; and most significantly, reported nothing of defendant’s alleged statement to him for five months, until after his brother Jerry had been murdered and defendant, in Norberto’s words, "tried to take me to the place where they had killed my brother.”

The videotape played to the jury, by contrast, was a 22-minute depiction of the crime by defendant’s own brother, explicitly detailing his role as well as defendant’s. In its reliability it was so overpowering that it necessarily added credibility to Norberto’s testimony, and erased the indicia of nonreliability. As an example, while Norberto in his testimony related only that Benjamin and defendant had gone to hold up the gas station, Benjamin in his confession stated that several persons, including Norberto’s brother Jerry, had done many holdups together including the one in issue. This clear statement of Jerry’s complicity explained for the jury not only why Norberto had not come forward with defendant’s statement for five months, but also why defendant and Benjamin would have gone to Jerry’s residence just after the crime. The jury could hardly have avoided looking to Benjamin’s confession to resolve any doubts about whether his brother had in fact confessed to Norberto.

The issue is simply whether on these facts there should have been a severance. I do not find in the prior decisions of this court the per se rule now established by this case that even an enormous disparity in reliability is not to be considered as a factor in deciding whether confessions interlock. In particular cases where there is a patent danger, as there was here, that the jury may from the inadmissible evidence, impermissibly draw evidence establishing defendant’s guilt, then the viable alternative of ordering separate trials should be followed. The rationale of Bruton is otherwise rendered meaningless. I would reverse the order below and order a new trial.

In People v Cruz: Order affirmed.

Chief Judge Wachtler and Judges Jasen and Titone concur with Judge Simons; Judge Kaye dissents and votes to reverse in a separate opinion in which Judge Meyer concurs; Judge Alexander taking no part.

In People v Brims: Order affirmed.

Chief Judge Wachtler and Judges Jasen, Meyer, Kaye and Titone concur; Judge Alexander taking no part.

      . On a related point made by defendant Brims, there was no error in receiving his two confessions although they differed in minor detail. Neither was hearsay as to him.

      . Defendant speculates that Norberto may have sought revenge against him for the death of Jerry Cruz. There is nothing in the record to support that claim.

       Without Benjamin’s vivid exposition, the only evidence to fill this logical gap is Norberto’s meaningless, or at best ambiguous, comment that he did not come forward sooner because his brother "had the event”.


source: Caselaw Access Project

author: Kaye, J.

license: Public Domain

text:
    The People of the State of New York, Respondent, v Orestes Bayron, Appellant. The People of the State of New York, Respondent, v Jesus Roman, Appellant.
    Argued September 9, 1985;
    decided October 17, 1985
    POINTS OF COUNSEL

      Robin J. Nichinsky and William E. Hellerstein for Orestes Bayron, appellant.
    I. Testimony of complainant’s prior out-of-court identification of defendants was erroneously admitted at trial under CPL 60.25 where the complainant was not unable on the basis of present recollection, but simply refused, to identify defendants in court, in violation of appellant’s due process right to a fair trial. (People v Trowbridge, 305 NY 471; People v Lagana, 36 NY2d 71; People v Nival, 33 NY2d 391, 417 US 903; Matter of Pablo F., 98 Misc 2d 919; People v Floyd J., 61 NY2d 895; People v Adler, 140 NY 331; People v Cwikla, 46 NY2d 434; People v Clinton, 42 AD2d 815; People v Gumbs, 124 Misc 2d 564; Piemonte v United States, 367 US 556.) II. Complainant in this case should not have been permitted to testify under this court’s decision in People v Berg (59 NY2d 294 [1983]) and, when he did testify, his fearful refusal to "even look” at defendants in court, coupled with his repeated inability to recall details surrounding the crime on cross-examinatian after giving competent and incriminating testimony on direct examination, deprived appellant of the right to confront the witnesses against him and to due process of law. (People v Berg, 59 NY2d 294; Namet v United States, 373 US 179; United States v Maloney, 262 F2d 535; Davis v Alaska, 415 US 308; Dunbar v Harris, 612 F2d 690; United States v Cardillo, 316 F2d 606, 375 US 822; People v Baker, 39 NY2d 923,429 US 868; People v Schneider, 44 AD2d 845, 36 NY2d 708; Piemonte v United States, 367 US 556; People v Clinton, 42 AD2d 815.) III. Appellant’s guilt was not proven beyond a reasonable doubt as a matter of law when the People’s case relied upon a single witness who had consumed 5 to 10 beers, without eating dinner, immediately before being robbed, and who was contradicted by the People’s rebuttal witness and a defense witness who both placed defendants — two men with no prior records arrested unarmed one hour after the gun and knifepoint robbery — elsewhere at the time of the crime. (Jackson v Virginia, 443 US 307; People v Santos, 38 NY2d 173; People v Ledwon, 153 NY 10; People v Kennedy, 47 NY2d 196; People v Reed, 40 NY2d 204.)

      Lawrence Fleischer for Jesus Roman, appellant.
    I. The trial court erred in allowing complainant to testify as to his out-of-court identification and compounded this error by allowing the police officers to impermissibly bolster complainant’s out-of-court identification in that complainant’s willful refusal to identify defendants at trial failed to trigger any statutory exception to the antibolstering rule contained in CPL 60.25. (People v Trowbridge, 305 NY 471; People v Burton, 46 AD2d 774.) II. The judge committed reversible error in permitting the impermissible bolster testimony before the jurors. (People v Burgess, 66 AD2d 667; People v Otero, 45 AD2d 952.) III. Defendant was denied a fair trial by the prosecutor’s repeatedly asking complainant to identify defendant and complainant’s repeated refusal to answer such questions. (People v Berg, 59 NY2d 294; Namet v United States, 373 US 179.)

      Mario Merola, District Attorney (Mark L. Freyberg and Peter D. Coddington of counsel), for respondent.
    I. Appellants’ guilt was proven beyond a reasonable doubt. (People v Butler, 58 NY2d 1056; People v Carter, 63 NY2d 530; People v Johnson, 57 NY2d 969; People v Benzinger, 36 NY2d 29.) II. A proper foundation existed for the admission of complainant’s out-of-court identifications of appellants. (People v Butler, 58 NY2d 1056; People v Cwikla, 46 NY2d 434; People v Lagana, 36 NY2d 71; People v Ni-val, 33 NY2d 391, 417 US 903; People v Berg, 59 NY2d 294.) III. Appellants were afforded their rights to a fair trial despite complainant’s inability to identify them in court and to recall certain details from the day of the robbery. (People v Berg, 59 NY2d 294; People v Santiago, 52 NY2d 865; People v Weston, 56 NY2d 844; People v Pollock, 50 NY2d 547; People v Williams, 56 NY2d 236; Namet v United States, 373 US 179; Rado v State of Connecticut, 607 F2d 572; United States v Maloney, 262 F2d 535; People v Roberts, 103 AD2d 975, 64 NY2d 854; People v Trinidad, 59 NY2d 820.)
   OPINION OF THE COURT

Kaye, J.

Third-party testimony recounting a witness’s pretrial identification of defendants, while admissible at trial in situations where the witness cannot on the basis of present recollection identify defendants {see, CPL 60.25), is not rendered admissible by the witness’s refusal at trial to make an identification because of fear. The Appellate Division orders affirming defendants’ robbery convictions, which were founded on the inadmissible testimony of third parties, should therefore be reversed and a new trial ordered.

After visiting a sick friend in The Bronx late in the afternoon of May 26, 1982, complainant, Abraham Rodriguez — with $280 in cash in his back pocket — stopped at Mike’s Jackpot Bar where he drank several beers. He left the bar at about 3:30 a.m., and was accosted at a bus stop by four or five men, who forced him into a nearby courtyard. One of the assailants put a gun to his chest, while another held a knife to his back and robbed him of the cash and his house keys. When they had left, Rodriguez returned to the bar, where he borrowed two dollars from the bar manager, took a cab to the police station, and reported the incident.

Two police officers put Rodriguez in the back seat of a patrol car, and began searching the area. Rodriguez furnished no physical description of his attackers. After 15 minutes, he spotted three men standing together on the street and from the car identified two as the assailants. The officers placed the three under arrest, but released the third after Rodriguez stepped from the vehicle, identified the two and told the officers the third had not been involved in the robbery. At the time of arrest, one of the two had $70 on his person, the other had no cash, and neither had a weapon.

At a pretrial Wade hearing a year later, Rodriguez refused to identify defendants as the assailants. When asked if he saw in court the men who had robbed him he answered, "Wait one moment, I cannot see them, absolutely none of them because they can see me another day and take away my life. Because my boss told me don’t do.” Again asked if he saw his assailants in the courtroom, Rodriguez responded: "No, I don’t know, I don’t want to see them.” The court denied defendants’ in limine motion to preclude introduction of the identification Rodriguez had made to the police officers at the time of arrest, holding that the evidence was admissible because Rodriguez’s refusal to make an identification was due to fear.

At a jury trial commencing the following day, identity was the crucial issue. The People’s direct case consisted of the testimony of Rodriguez and the two police officers. Rodriguez testified that the two men he had identified at the time of arrest were the ones who had robbed him, but he refused to identify defendants. Both on direct and on cross-examination, despite several instructions from the bench to respond to questions, Rodriguez refused even to look at defendants, repeatedly asserting, "I don’t want to even see them.” Over objection, both officers thereafter testified to Rodriguez’s identification of defendants at the time of arrest. Defendants testified in their own behalf, denying guilt, and also presented the testimony of the bar manager to the effect that Rodriguez consumed 10 beers and appeared intoxicated on the night of the robbery, that both defendants were in the bar from midnight until his return for cab fare, and that defendants had in fact alerted Rodriguez when his taxicab arrived.

Defendants were convicted of robbery in the first degree, convictions which the Appellate Division affirmed, one judge dissenting. The court noted that, while this was not the "ordinary case” where recognition of the identification witness has been dimmed by time passage or made difficult by changed appearance, here fear made it impossible for Rodriguez to identify defendants. This finding furnished the ground for admission of the officers’ testimony under CPL 60.25, and with this testimony there was adequate support for the convictions. The dissenter concluded that the complainant’s fear was not a proper basis for admission of the officers’ testimony, adding that in this case substantial doubt as to identification arose from the evidence of complainant’s consumption of alcohol and the alibi testimony of a seemingly objective witness.

Since there was no identification of defendants without the testimony of the two police officers, admitted by the trial judge on the authority of CPL 60.25, we focus on the narrow legal question whether under the statute an eyewitness’s failure to identify defendants because he fears them allows admission of third-party testimony of an identification made by him at the time of arrest. We conclude that the statute does not permit introduction of this evidence.

The testimony of third parties recounting a witness’s prior identification is in general inadmissible to establish identification (see, People v Trowbridge, 305 NY 471). CPL 60.25, however, permits a witness to relate his own prior identification where he is "unable at the proceeding to state, on the basis of present recollection, whether or not the defendant is the person in question” (CPL 60.25 [1] [a] [in]), and also permits third parties who were present at that prior identification to testify that defendant is the person previously identified (CPL 60.25 [2]). Thus, where at the time of trial the eyewitness is unable to recognize the defendant, testimony of his own previous identification, as well as testimony of third persons "to whom the witness promptly declared his recognition on such occasion” (CPL 60.25 [1] [b]), is allowable as evidence-in-chief of identification.

Central to the admissibility of third-party testimony under CPL 60.25 is the fact that the witness cannot state, "on the basis of present recollection,” whether or not defendant is the person in question. (Contrast, Proposed Code of New York Evidence § 803 [a] [3]; § 804, and Federal Rules of Evidence rule 801 [d] [1] [C]; rule 804.) A witness who is able to identify defendant may relate his own prior identification of the same person, thus lending strength to his own in-court identification, but the added confirmatory testimony of third parties is not permitted (CPL 60.30).

CPL 60.25 has been applied in instances where the eyewitness has been unable to recognize defendant due to lapse of time or change in appearance (see, People v Cwikla, 46 NY2d 434, 444; People v Lagana, 36 NY2d 71, 74, cert denied 424 US 942; People v Nival, 33 NY2d 391, 394-395; People v Ponton, 90 AD2d 799, 799-800; see also, Bellacosa, Practice Commentary, McKinney’s Cons Laws of NY, Book 11A, CPL 60.25, 60.30, pp 501-503, 511-512; Staff Comment, New York State Temporary Commission on Revision of the Penal Law and Criminal Code, Proposed New York Criminal Procedure Law, § 30.30, at 67 [1967]), but has not previously been applied where, as here, the witness expresses fear of identifying defendants.

We decline to extend CPL 60.25 to the present situation because to do so would require us to read out of the statute the unambiguous legislative prerequisite that the witness be unable to make the identification "on the basis of present recollection.” As both lower courts found, an inability to recognize defendants decidedly did not account for Rodriguez’s failure to make the identification. By his repeated refusals to identify defendants because of fear of retribution, Rodriguez manifested not an inability to identify these defendants — a neutral fact — but the converse. In these circumstances, CPL 60.25 does not permit the introduction of confirmatory third-party testimony to buttress the evidence of a prior identification.

Accordingly, the orders of the Appellate Division should be reversed and a new trial ordered (CPL 470.20 [1]).

Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Alexander and Titone concur.

In each case: Order reversed and a new trial ordered.


author: Alexander, J.

text:
    In the Matter of Niagara Mohawk Power Corporation, Respondent-Appellant, v Public Service Commission of the State of New York, Appellant-Respondent.
    Argued September 12, 1985;
    decided October 22, 1985

      POINTS OF COUNSEL

      David E. Blabey and. Lawrence G. Malone for appellant-respondent.
    I. The company’s counterstatement of the facts distorts the record. II. Niagara Mohawk’s position reflects a fundamental misunderstanding of Public Service Law § 113 (2). (Power Commn. v Hope Gas Co., 320 US 591; Matter of City of New York v Public Serv. Commn., 17 AD2d 581, 13 NY2d 594; Power Commn. v Interstate Gas Co., 336 US 577; Texas E. Transmission Co. v Federal Power Commn., 414 F2d 344, 398 US 928; Matter of Niagara Mohawk Power Corp. v Public Serv. Commn., 54 AD2d 255.) III. The Commission had a sound evidentiary basis for flowing through a portion of the tax benefits at issue to Niagara Mohawk’s customers. (Niagara Mohawk Power Corp. v United States, 525 F2d 1380.) IV. There is no basis for Niagara Mohawk’s claim of a constitutional entitlement to retain all tax refunds. (Power Commn. v Hope Gas Co., 320 US 591; Power Commn. v Pipeline Co., 315 US 575.) V. The court below properly concluded that the Commission’s 1961 decision did not award Niagara Mohawk the refunds in question. (Matter of Campo Corp. v Feinberg, 279 App Div 302, 303 NY 995; Matter of Venes v Community School Bd., 43 NY2d 520; Matter of Howard v Wyman, 28 NY2d 434; Matter of Niagara Mohawk Power Corp. v Public Serv. Commn., 67 AD2d 802.) VI. Public Service Law § 113 (2) expressly authorizes the Commission to order a ratepayer/utility sharing of tax refunds. (Matter of Orange & Rockland Utils. v Public Serv. Commn., 86 AD2d 912.) VII. The court below erred in finding that the Commission’s exercise of discretion under Public Service Law § 113 (2) lacked a rational basis. (Matter of Orange & Rockland Utils. v Public Serv. Commn., 86 AD2d 912; Matter of Rochester Tel. Corp. v Public Serv. Commn., 87 AD2d 672; Matter of New York State Council of Retail Merchants v Public Serv. Commn., 45 NY2d 661; Rochester Tel. Corp. v United States, 307 US 125; People ex rel. New York & Queens Gas Co. v McCall, 219 NY 84, 245 US 345; Matter of New York Tel. Co. v Public Serv. Commn., 64 AD2d 232, 46 NY2d 710; Matter of City of New York v Public Serv. Commn., 17 AD2d 581, 13 NY2d 594.)

      Samuel M. Sugden, Halcyon G. Skinner and Bruce V. Miller for respondent-appellant.
    I. The Commission was not given unbounded powers to invade a utility’s property rights in tax refunds. (Matter of Lefkowitz v Public Serv. Commn., 40 NY2d 1047.) II. The court below erred because there was not substantial evidence to support giving any part of the company’s tax refund to its customers. (Matter of Rochester Tel. Corp. v Public Serv. Commn., 87 AD2d 672, 58 NY2d 874; Matter of Orange & Rockland Utils. v Public Serv. Commn., 86 AD2d 912; 300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; Board of Commrs. v New York Tel. Co., 271 US 23; Matter of General Motors Corp. v Public Serv. Commn., 95 AD2d 876, 60 NY2d 557; Matter of Village of Wellsville v Maltbie, 257 App Div 746; Niagara Mohawk Power Corp. v United States, 525 F2d 1380; Onondaga County Water Auth. v New York Water Serv. Corp., 285 App Div 655; Matter of Board of Supervisors v Sherlo Realty, 32 Misc 2d 579, 19 AD2d 590, 13 NY2d 1172.) III. The court below erred in finding that the Commission was not bound to follow its 1961 determination which gave the company all of the tax benefits. (Matter of New York Tel. Co. v Public Serv. Commn., 64 AD2d 232, 46 NY2d 710; Matter of Venes v Community School Bd., 43 NY2d 520; Matter of Evans v Monaghan, 306 NY 312; Matter of Abrams v Public Serv. Commn., 96 AD2d 701, 61 NY2d 718; Matter of Niagara Mohawk Power Corp. v Public Serv. Commn., 54 AD2d 255.)
   OPINION OF THE COURT

Alexander, J.

This matter commenced with a request made to the Public Service Commission (PSC) by Niagara Mohawk Power Corporation for permission to retain a refund of Federal income taxes. The PSC, pursuant to Public Service Law § 113 (2), authorized the utility to retain one half of the refund and directed that the remainder be passed on to the ratepayers. Terming this plan "arbitrary and capricious”, the Appellate Division annulled the agency’s determination. Because we find that the determination has a rational basis, we now reverse.

The genesis of the dispute is a natural disaster that occurred in June 1956 when rockslides along the Niagara River severely damaged Niagara Mohawk’s Schoellkopf hydroelectric generating station. In 1957, Congress passed legislation (71 US Stat 401, Pub L 85-159) giving to the Power Authority of the State of New York (PASNY) the use of the Niagara River for the production of power to the exclusion of Niagara Mohawk. In consequence of this legislation an agreement was reached between Niagara Mohawk and PASNY by which the utility transferred to PASNY its Schoellkopf and Adams generating facilities, other related real property and buildings, including land held for future development, and its license and water rights in the Niagara River. In exchange, PASNY promised to sell Niagara Mohawk the same amount of power that the utility had been generating prior to the rockslides. It is the utility’s contention that it lost $11.4 million on the transfer of real property and $25.7 million through the surrender of its water rights.

In 1956, Niagara Mohawk applied to the PSC to amortize the claimed real property loss in order to pass it on to the ratepayers. The utility withdrew this application three years later without explanation. Although no similar application was made with respect to the $25.7 million loss in water rights, the utility did report that loss as deductions in computing its Federal income tax for the years 1957 through 1962. In computing utility rates for those years, however, it did not apply the deductions against its income tax expense. Consequently, in 1961 the County of Erie applied to the PSC for a ruling that the deductions should be used to reduce the income tax expense factor in the rate calculation for that year in order to arrive at lower rates.

PSC denied the county’s application, stating in an order denying rehearing that the tax deductions "may be considered as a partial offset to the $10,000,000 property loss which the Company faces upon retirement of its Adams and Schoellkopf plants.” PSC indicated, however, that the income tax deduction would be recorded in an "Other Deferred Credit” account pending settlement of the tax returns involved and a determination of the future use of the Niagara power facilities.

In 1972, the Internal Revenue Service disallowed the deductions taken for the water-rights loss in the years 1957 through 1962, and assessed a deficiency. Thus, Niagara Mohawk was required to pay the IRS $18.8 million in additional taxes and interest. This sum had not been used as a tax expense in computing utility rates. Niagara Mohawk challenged the determination, and a settlement was reached on September 15,1981 giving the utility a partial refund of the deficiency assessment in the amount of $9,942,928.33.

Niagara Mohawk petitioned the PSC for permission to retain the refund for the benefit of its shareholders. Pursuant to Public Service Law § 113 (2), the PSC conducted a hearing before an administrative law judge. The judge recommended that the refund be divided equally between the utility and the ratepayers. Specifically, the judge found (1) that PSC’s determination in the 1961 Erie County proceeding that the utility was entitled to retain the tax deduction for that year was not dispositive of the present application; (2) that both the utility, through physical loss of its property, and the ratepayers, in consequence of the increased cost of power, had suffered a loss by reason of the 1956 disaster and thus both "had an investment in” the water loss deduction refund; and (3) that "the shareholders’ equity in the refund * * * is nearly on a par with the * * * ratepayer investment.”

The PSC adopted the administrative law judge’s recommendation. Noting that its 1961 opinion could not be read as finally resolving the issue of the disposition to be made of the water-rights loss tax deduction, and observing that the "just and reasonable” standard contained in Public Service Law § 113 (2) afforded it considerable latitude in making a disposition with respect to the refund, the agency determined that neither the shareholders nor the ratepayers were clearly entitled to the full refund, and that the administrative law judge’s attempt to balance the equities represented a "reasonable approach” to applying the statutory standard.

Niagara Mohawk commenced this article 78 proceeding, which was transferred to the Appellate Division, Third Department, challenging PSC’s determination. The court, with two justices dissenting, annulled the determination and remitted the matter to the PSC for further proceedings. Notwithstanding that the court found evidence in the record to support both the utility’s claim to the refund and the claim that the refund should be passed through to the ratepayers, it labeled the determination "arbitrary and capricious”, and held that the "refund should not be shared, but should either be retained by petitioner or passed along to the ratepayers.” Both the utility and PSC were granted leave to appeal to this court pursuant to CPLR 5602 (a) (2).

Initially, we agree with the PSC that res judicata effect should not be given to its 1961 determination allowing deferred accounting of Niagara Mohawk’s tax deductions pending a decision by the IRS as to whether the deductions would be allowed. This decision was not final or binding, and involved only one of the tax years at issue in the present proceeding. Application of res judicata would not be "consistent with the nature of th[is] particular administrative adjudication” (Matter of Venes v Community School Bd., 43 NY2d 520, 524).

The Legislature has accorded the PSC broad latitude in determining whether a utility should retain a refund or pass it on to the ratepayers (see, Matter of Orange & Rockland Utils. v Public Serv. Commn., 86 AD2d 912). The language of section 113 (2) is clear: "the commission shall have the power * * * to determine whether or not such refund should be passed on, in whole or in part * * * in the manner and to the extent determined just and reasonable ” (emphasis added).

Here, the PSC was presented with evidence that Niagara Mohawk had suffered a property loss of $11.4 million for the 1957-1962 period. There also was evidence, however, that during this same period the consumers paid rates that did not take into account the water-rights deductions that the refund represents. The rates during these years also reflected the cost of the litigation required to secure the refund as well as the higher operating costs resulting from the loss of facilities and water rights. Thus, it cannot be said that PSC’s finding that the burden borne by the ratepayers closely proximates the shareholders’ loss is wholly unsupported by the record.

Furthermore, PSC’s authority to require that refunds be dealt with "in the manner and to the extent determined just and reasonable” cannot be overlooked. In reaching its determination, the agency recognized the valid competing interests of the consumers and the utility, developed over a 25-year time span, and sought to resolve uncertainties through what it viewed as an equitable plan. The determination is neither inconsistent with the evidence nor irrational. This being so, it cannot be disturbed on judicial review.

Accordingly, the judgment of the Appellate Division should be reversed, the petition dismissed and the determination of PSC reinstated.

Chief Judge Wachtler and Judges Meyer, Simons, Kaye and Titone concur; Judge Jasen taking no part.

On the Public Service Commission’s appeal, judgment reversed, without costs, petition dismissed, and determination of the Public Service Commission reinstated. Petitioner’s cross appeal dismissed as academic.

      . The refund was comprised of: (1) a basic tax refund of $5,623,326.34 relating to the deductions taken in the years 1957-1962; (2) a refund of $1,135,726.58 of interest paid in 1972; (3) interest of $6,863,536.37 on those amounts; (4) less Federal income tax of $3,679,660.96 on the interest received from the IRS.

      . This subdivision provides: "2. Whenever any public utility company or municipality, whose rates are subject to the jurisdiction of the commission, shall receive any refund of amounts charged and collected from it by any source, the commission shall have the power after a hearing, upon its own motion, upon complaint or upon the application of such public utility company or municipality, to determine whether or not such refund should be passed on, in whole or in part, to the consumers of such public utility company or municipality and to order such public utility company or municipality to pass such refunds on to its consumers, in the manner and to the extent determined just and reasonable by the commission.”


author: Meyer, J.

text:
    Citibank, N. A., et al., Respondents, v Allan R. Plapinger et al., Appellants.
    Argued September 3, 1985;
    decided October 22, 1985

      POINTS OF COUNSEL

      Owen McGivern, George S. Leisure, Jr., Eric J. Lobenfeld and Robin Kaufman for appellants.
    I. Defendants’ uncontradicted proof of fraud was more than sufficient to preclude summary judgment. (Rotuba Extruders v Ceppos, 46 NY2d 223; Strychalski v Mekus, 54 AD2d 1068; Becker-Fineman Camps v Public Serv. Mut. Ins. Co., 52 AD2d 656; Baker’s Serv. v Robinson, 85 AD2d 811; Tahini Invs. v Bobrowsky, 99 AD2d 489; Hladczuk v Epstein, 98 AD2d 990; National Bank v Chu, 64 AD2d 573, 47 NY2d 946; Millerton Agway Coop. v Briarcliff Farms, 17 NY2d 57; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395; Rexford Plumbing, Heating & Hardware Co. v City of Johnstown, 89 AD2d 1035.) II. Defendants were erroneously barred from proving their defenses. (Crowell-Collier Pub. Co. v Josefowitz, 5 NY2d 998; Sabo v Delman, 3 NY2d 155; Millerton Agway Coop. v Briarcliff Farms, 17 NY2d 57; Spencer Co. v New York Review, 282 App Div 659; Pease & Elliman v Stewart, 50 Misc 2d 330, 332; Danann Realty Corp. v Harris, 5 NY2d 317; Barash v Pennsylvania Term. Real Estate Corp., 26 NY2d 77; Magi Communications v Jac-Lu Assoc., 65 AD2d 727; Forest Bay Homes v Kosinski, 50 AD2d 829; Galgani v Fleming, 56 AD2d 644.) III. Dismissal of the counterclaims was erroneous. (Millerton Agway Coop. v Briarcliff Farms, 17 NY2d 57; General Rubber Co. v Benedict, 215 NY 18; Kono v Roeth, 237 App Div 252, 238 App Div 775; Meyerson v Franklin Knitting Mills, 185 App Div 458; Banker’s Trust Co. v Steenburn, 95 Misc 2d 967; Illinois McGraw Elec. Co. v John J. Walters, Inc., 7 NY2d 874; Albi S.A.R.L. v American Textramics, 64 AD2d 552.)

      George J. Wade and Stanley S. Arkin for respondents.
    I. As a matter of law, the guarantors may not evade liability under the terms of their unequivocal and unconditional guarantee. (Bank of Suffolk County v Kite, 49 NY2d 827; Fleck v Bank of Suffolk County, 67 AD2d 676; Chemical Bank v Nattin Realty, 61 AD2d 921; Rusch Factors v Sheffler, 58 AD2d 557; Silbert v Silbert, 85 AD2d 661; Bank of N. Y. v Cariello, 69 AD2d 805; Millerton Agway Coop. v Briarcliff Farms, 17 NY2d 57; Community Natl. Bank

      & Trust Co. v Intercoastal Trading Corp., 55 AD2d 525; Seaman-Andwall Corp. v Wright Mach. Corp., 31 AD2d 136, 29 NY2d 617; Wittenberg v Robinov, 9 NY2d 261.) II. The guarantors may not counterclaim for damages. (Vincel v White Motor Corp., 521 F2d 1113; Niles v New York Cent. & Hudson Riv. R. R. Co., 176 NY 119; Silver v Chase Manhattan Bank, 44 AD2d 797; Carvel Farms Corp. v Bartomeo, 50 Misc 2d 1073.)
   OPINION OF THE COURT

Meyer, J.

Fraud in the inducement of a guarantee by corporate officers of the corporation’s indebtedness is not a defense to an action on the guarantee when the guarantee recites that it is absolute and unconditional irrespective of any lack of validity or enforceability of the guarantee, or any other circumstance which might otherwise constitute a defense available to a guarantor in respect of the guarantee, those recitals being inconsistent with the guarantors’ claim of reliance upon an oral representation that the lending banks were committed to extend to the corporation an additional line of credit. The order of the Appellate Division should, therefore, be affirmed, with costs.

I

Defendants are officers and directors of and own all the voting stock of United Department Stores, a holding company with a number of retail department store subsidiaries. Plaintiff, Citibank, N. A., and the other four plaintiff banks provided United with a $15,200,000 line of credit. After default by United, discussions took place concerning restructuring of the indebtedness as a term loan guaranteed by the defendants and the extension to United of an additional line of credit of $8,000,000. On August 10, 1981, the $15,200,000 term loan transaction closed, but the line of credit was never funded.

On January 25,1982, United filed a voluntary petition in bankruptcy. Plaintiff banks then declared the term loan principal and interest due and brought the present action against defendants on the guarantee. Defendants’ answer set up defenses of fraud in the inducement, negligent misrepresentation and failure of a condition precedent and asserted counterclaims based upon fraud, negligent misrepresentation and breach of contract. On motion of plaintiff banks, Special Term struck the affirmative defenses and counterclaims and directed entry of judgment in favor of plaintiffs, holding that by the specific language of the unconditional guarantee defendants waived their right to assert the defenses and counterclaims.

On appeal to the Appellate Division, that court affirmed, the Presiding Justice dissenting. The majority found the evidence of fraud in the inducement contained in defendants’ affidavits to consist of "shadowy and conclusory statements,” but, also, as evidenced by its citation to page 138 of its own decision in Seaman-Andwall Corp. v Wright Mach. Corp. (31 AD2d 136, affd 29 NY2d 617), apparently held the disclaimer in the guarantee sufficiently specific to bar consideration of the defenses in any event. The Presiding Justice disagreed on both points. We agree with him that defendants’ affidavits contained evidence, uncontradicted by plaintiffs, sufficient to raise a triable issue concerning fraud in the inducement, but also agree with Special Term and the Appellate Division majority that the language of disclaimer in the guarantee is sufficiently specific to foreclose as a matter of law the defenses and counterclaims based on fraud, negligence or failure to perform a condition precedent asserted against plaintiff banks, under the rule of Danann Realty Corp. v Harris (5 NY2d 317). We therefore affirm.

II

Defendants’ papers on the summary judgment motion contain evidence in admissible form which, with the inferences that could reasonably be drawn therefrom, was sufficient to raise a triable issue of fact. The affidavit of Allan R Plapinger states that before the commitment letter for the term loan was signed, he advised Froehler, the Citibank officer who was negotiating on behalf of all the banks, that neither he nor the other stockholders would sign the letter until the line of credit was agreed to and that "Froehler promised that we had the line,” that the line of credit would be funded half by Citibank and half by National Bank of Detroit, that National Bank prepared papers for its share of the line of credit including a note which was signed on behalf of United by one of the defendants, that the Citibank officer who then took over the negotiations imposed additional conditions as to the line of credit which were accepted by United and defendants, that defendants relied on those representations and would not have entered into the guarantee had they not been made, and that the representations were false when made or were recklessly made. In an unverified reply, Citibank, National Bank of Detroit and Equibank deny that they entered into the oral contract for the line of credit alleged in defendants’ answer but filed no affidavit in support of that denial. People’s Trust and Broad Street National, in a verified reply, likewise deny the allegations of the counterclaims and in an attorney’s affidavit point out that their representatives are not alleged to have made any representations or been present when representations were made as to the line of credit, nor did defendants allege that they were to be participants in the line of credit. The undenied statement that defendants were told that they had the line of credit was a representation of present fact, not of future intent (Sabo v Delman, 3 NY2d 155), the falsity of which, in the absence of explanation, can reasonably be inferred from the refusal to extend the promised credit, and the attorney’s affidavit submitted on behalf of People’s Trust and Broad Street National does no more than raise a fact question concerning whether, in making the representation he is alleged to have made in order to obtain defendants’ guarantee, the Citibank officer was acting in behalf of those banks. Summary judgment should not have been granted plaintiffs, therefore, based upon the insufficiency of defendants’ evidence in opposition.

Ill

Summary judgment was properly granted plaintiffs, however, because defendants were foreclosed by the rule of Danann Realty Corp. v Harris (5 NY2d 317, supra) from establishing reliance. In that case, expounding on our prior decision in Cohen v Cohen (13 NY2d 813, affg 1 AD2d 586, 588-589) and distinguishing our prior holding in Sabo v Delman (3 NY2d 155, supra) that a general merger clause is ineffective to exclude paroi evidence of fraud in the inducement, we held the rule that fraud in the inducement vitiates a contract to be subject to exception where the person claiming to have been defrauded has by his own specific disclaimer of reliance upon oral representations himself been "guilty of deliberately misrepresenting [his] true intention” (5 NY2d, at p 323). And in later cases we have adhered to that rule (Seaman-Andwall Corp. v Wright Mach. Corp., 29 NY2d 617, affg 31 AD2d 136, supra; Wittenberg v Robinov, 9 NY2d 261) or distinguished the language involved as a general merger clause rather than a specific disclaimer (Barash v Pennsylvania Term. Real Estate Corp., 26 NY2d 77, 86). Millerton Agway Coop. v Briarcliff Farms (17 NY2d 57), relied on by defendants, is not to the contrary for, as examination of the record in that case reveals, the guarantees there involved contained neither a general merger clause nor a specific disclaimer. Millerton held no more than that summary judgment should not have been granted plaintiffs in that case, defendants’ affidavits having presented sufficient evidence of reliance on the claimed fraudulent representation to require a trial.

The Danann rule has been criticized as encouraging the use of boilerplate and likely to result in more verbose merger clauses (Calamari and Perillo, Contracts § 9-21 [2d ed]; Note, 47 Cornell LQ 655), a sounder distinction being between a negotiated clause and a standard form clause (Calamari and Perillo, loe. cit., supra). Here it cannot be said, as in Danann, that the defendants have "in the plainest language announced and stipulated that [they were] not relying on any representations as to the very matter [the additional line of credit] as to which [they] now [claim they were] defrauded” (5 NY2d, at p 320). But here we do not have the generalized boilerplate exclusion referred to by the commentators. Rather, following extended negotiations between sophisticated business people, what has been hammered out is a multimillion dollar personal guarantee proclaimed by defendants to be "absolute and unconditional.” It is unrealistic in such circumstances to expect an express stipulation that defendants were not relying on a separate oral agreement to fund an additional multimillion dollar line of credit, when they themselves have denominated their obligation unconditional, and have reinforced that declaration by their agreement that the "absolute and unconditional” nature of their guarantee was "irrespective of (i) any lack of validity * * * of the * * * Restated Loan Agreement * * * or any other agreement or instrument relating thereto”, or "(vii) any other circumstance which might otherwise constitute a defense” to the guarantee.

Though not the explicit disclaimer present in Danann, the substance of defendants’ guarantee forecloses their reliance on the claim that they were fraudulently induced to sign the guarantee by the banks’ oral promise of an additional line of credit. To permit that would in effect condone defendants’ own fraud in "deliberately misrepresenting [their] true intention” (Danann Realty Corp. v Harris, 5 NY2d, at p 323) when putting their signatures to their "absolute and unconditional” guarantee.

Finally, to the extent that defendants rely upon the denial of the additional line of credit as a failure of a condition precedent, it is necessary only to note that in light of the above-quoted provisions the condition precedent rule is inapplicable because the alleged condition would contradict the express terms of the written agreement and, therefore, could not be proved by paroi evidence (Hicks v Bush, 10 NY2d 488, 491; Meadow Brook Natl. Bank v Bzura, 20 AD2d 287, 289; see, Long Is. Trust Co. v International Inst. for Packaging Educ., 38 NY2d 493, 497).

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

Chief Judge Wachtler and Judges Jasen, Simons, Kaye, Alexander and Titone concur.

Order affirmed, with costs.

       A further reason for dismissal of the counterclaims is that defendants lack standing to sue for an injury to the corporation even though it results in depreciation in the value of their shares of the corporation’s stock. Normally a shareholder has no individual right of action for such an injury (Niles v New York Cent. & Hudson Riv. R. R. Co., 176 NY 119). Although exceptions to that rule have been recognized (Kano v Roeth, 237 App Div 252, lv denied 238 App Div 775; see, General Rubber Co. v Benedict, 215 NY 18; Vincel v White Motor Corp., 521 F2d 1113), the counterclaim in the instant case alleges nothing that would bring defendants within the exception.


text:
    GAF Corporation, Respondent, v Jesse Werner, Appellant, et al., Defendants. (Action No. 1.) In the Matter of the Arbitration between GAF Corporation, Respondent, and Jesse Werner, Appellant. (Proceeding No. 2.) Jesse Werner, Appellant, v GAF Corporation, Respondent, et al., Defendants. (Action No. 3.)
    Argued September 10, 1985;
    decided October 22, 1985

      POINTS OF COUNSEL

      Arthur Richenthal for appellant.
    I. United States Supreme Court decisions make it clear that GAF’s assertion of a broader interrelated common-law waste controversy involving additional persons is not a basis under the Federal Arbitration Act for refusing to enforce the agreement to arbitrate the employment contract dispute. (Cone Hosp. v Mercury Constr. Corp., 460 US 1; Sibley v Tandy Corp., 543 F2d 540; Home Life Ins. Co. v Kaufman, 547 F Supp 833; Harris v Shearson Hayden Stone, 82 AD2d 87; Media Intl. v Salzman, 24 AD2d 710; Syracuse Plaster Co. v Agostini Bros. Bldg. Corp., 169 Misc 564; Lee v Ply*Gem Indus., 593 F2d 1266, 441 US 967; Southland Corp. v Keating, 465 US 1.) II. Special Term properly stayed an actual trial between GAF and Dr. Werner of the consolidated waste and stock option actions to the extent of the employment contract issues to be decided by the arbitrators.

      Norman Solovay, Harvey J. Goldschmid, David R. Foley, R. Nicholas Gimbel and Mark H. Moore for respondent.
    I. Arbitration of the controversy between Werner and GAF and its shareholders would deprive those shareholders of essential rights. (Matter of Susquehanna Val. Cent. School Dist. [Susquehanna Val. Teachers' Assn.], 37 NY2d 614; Matter of Silverman [Benmor

      Coats], 61 NY2d 299; Matter of Marlene Indus. Corp. [Carnac Textiles], 45 NY2d 327; M.I.F. Secs. Co. v Stamm & Co., 94 AD2d 211, 60 NY2d 936; Globe Woolen Co. v Utica Gas & Elec. Co., 224 NY 483; Rogers v Hill, 289 US 582; Koster v Lumbermens Mut. Co., 330 US 518.) II. The Federal Arbitration Act authorizes this court to stay arbitration of Werner’s claim. (Scherk v Alberto-Culver Co., 417 US 506; Matter of State of New York v Avco Fin. Serv., 50 NY2d 383; State of New York v Wolowitz, 96 AD2d 47; Matter of Allied Van Lines [Hollander Express Van Co.], 29 NY2d 35; Matter of Aimcee Wholesale Corp. [Tomar Prods.], 21 NY2d 621; Wilko v Swan, 346 US 427; American Safety Equip. Corp. v Maguire & Co., 391 F2d 821; Applied Digital Technology v Continental Cas. Co., 576F2dll6; Power Replacements v Air Preheater Co., 426 F2d 980; Allegaert v Perot, 548 F2d 432, 432 US 910.) III. Werner has in all events waived any right to seek arbitration. (Burton-Dixie Corp. v McCarthy Constr. Co., 436 F2d 405; Ohio-Sealy Mattress Mfg. Co. v Kaplan, 712 F2d 270; Dempsey & Assoc. v S. S. Sea Star, 461 F2d 1009; Cornell & Co. v Barber & Ross Co., 360 F2d 512; Gutor Intl. AG. v Raymond Packer Co., 493 F2d 928; Du Pont De Nemours & Co. v Lyles & Lang Constr. Co., 219 F2d 328, 349 US 956; N & D Fashions v DHJ Indus., 548 F2d 722; Midwest Window Sys. v Amcor Indus., 630 F2d 535; Auerbach v Bennett, 47 NY2d 619.)
   OPINION OF THE COURT

Meyer, J.

Under the Federal Arbitration Act it is not a basis for stay of arbitration that the arbitrator may be called upon to consider issues of waste and overreaching on the part of a corporate officer that are also involved in an action under Business Corporation Law § 720 brought by the corporation against the officer, or that a party to the court proceeding may later argue that the arbitrator’s determination should be given preclusive effect. The order of the Appellate Division should, therefore, be reversed, with costs, and the order of Special Term, New York County, should be reinstated.

I

GAF Corporation is a Delaware corporation engaged in the manufacture and sale of chemicals and other products. Jesse Werner joined the company in 1938 as a research chemist and remained with it until December 1983, when, after losing a proxy fight, he was terminated. He was then chairman of the board of directors, a position he had held since 1964. At the time he was terminated he was serving under a written agreement dated September 17,1981, under which he was employed by GAF for a term of five years at a salary of $425,000 for the first year, increasing each year thereafter by $25,000, plus lifetime dental, medical and hospital benefits for himself and his wife and supplemental retirement benefits. He had also been granted options to purchase 120,000 shares of common stock under a stock option plan adopted by GAF in 1975.

As a result of Werner’s termination he was not paid the salary due him for the last half of December 1983 or the first half of January 1984 and on January 9,1984 was advised that pending the report of a study committee investigating his relationship with the company neither salary nor benefits would be paid. On January 18, 1984, Werner demanded arbitration pursuant to paragraph 12 of his employment agreement. GAF then moved to stay arbitration, and Werner cross-moved to compel arbitration and to disqualify GAF’s designated arbitrator.

On January 3, 1984, Werner advised GAF of his intention to exercise his options to purchase 120,000 shares of its stock. He thereafter tendered payment by certified check of the $1,323,500 consideration due for those shares, but delivery was refused. On February 13,1984, Werner began an action against the corporation for compensatory and punitive damages for breach of the stock option agreements and against the new board of directors for compensatory and punitive damages for emotional distress.

In 1982 and 1983, during Werner’s tenure as chairman of the board, five separate derivative actions were begun in the Delaware Chancery Court, in New York State Supreme Court and in the United States District Court for the Southern District of New York against the corporation, Werner and the other members of the board of directors. Those actions charged mismanagement, waste, unfairness and self-dealing, resulting in approval by the board of Werner’s salary and benefits and improper and excessive use of corporate funds in the proxy battle. After its study committee’s report, the new board determined that the derivative claims against the old board should be prosecuted by the corporation. On March 5,1984, such an action by the corporation was begun and was followed by an application to stay Werner’s stock option action or, in the alternative, to consolidate it with GAF’s action.

Special Term denied GAF’s motion to stay arbitration, granted Werner’s motion to compel arbitration but denied his motion to disqualify GAF’s arbitrator, and granted GAF’s consolidation request but stayed trial of so much of the consolidated action as related to Werner’s compensation rights under the September 17, 1981 employment agreement until completion of the arbitration. In denying the stay of arbitration, the Special Term Judge reasoned that GAF was involved in interstate commerce and, therefore, the Federal Arbitration Act (9 USC §§ 1-14) applied, that under both Federal and State law the validity of the agreement to arbitrate was a matter for the arbitrator and that the claims which involved overriding public policy considerations were minimal and did not so permeate the arbitrable issues as to require a stay.

The Appellate Division disagreed. Notwithstanding that CPLR 7503, dealing with stay of arbitration, contained no provision for a stay under such circumstances, it found authority to do so in CPLR 2201, which permits a stay to avoid a multiplicity of suits, and in the inherent power of the courts to control matters on its docket. It concluded that a stay of arbitration was required in the interests of justice because the arbitrable issue was but a minor part of the larger controversy presented by the GAF action, because the arbitrators may reach results inconsistent with the courts and because the members of the old board other than Werner who are defendants in GAF’s action are not parties to the arbitration, but may be affected collaterally by the arbitrator’s determination. It, therefore, modified Special Term’s order by granting the stay of arbitration, denying the cross motion to compel arbitration, and vacating the stay of trial. Werner appeals to us as of right (CPLR 5601 [a]). We conclude that under the Federal law applicable to this case, arbitration should not have been stayed and, therefore, reverse.

II

The Federal Arbitration Act (Act) provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract” (9 USC § 2). In a series of recent decisions the United States Supreme Court has emphasized again and again the overriding force of the policy favoring arbitration thus declared.

Those cases make clear that the Act is "a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary” (Cone Hosp. v Mer cury Constr. Corp., 460 US 1, 24) and that, subject to only two limitations, it withdrew from the States the power to require resolution in a judicial forum of a claim which the parties have agreed to arbitrate, those limitations being that the arbitration agreement "must be part of a written maritime contract or a contract 'evidencing a transaction involving commerce’ and such claims may be revoked upon 'grounds as exist at law or in equity for the revocation of any contract’ ” (Southland Corp. v Keating, 465 US 1, 10-11). The right which the Act grants to enforce an arbitration provision is not dependent upon the forum — Federal or State — in which it is asserted (id., 465 US, at pp 13-17), nor will fraud in the inducement of the contract in which is contained the arbitration clause defeat the right (id., 465 US, at pp 10-11; Cone Hosp. v Mercury Constr. Corp., 460 US, at p 24, supra; Prima Paint Corp. v Flood & Conklin Mfg. Corp., 388 US 395; see, Ann., 11 ALR4th 774). The preeminent concern of the Congress being that arbitration agreements within the coverage of the Act be carried out, such agreements are to be rigorously enforced, absent a countervailing policy in another Federal statute, even if the result is "piecemeal” litigation of the issues in separate proceedings in different forums (Dean Witter Reynolds v Byrd, 470 US —, —, 105 S Ct 1238, 1241-1243; Cone Hosp. v Mercury Constr. Corp., 460 US, at p 20, supra). Nor is the potentially preclusive effect of the arbitrator’s determination in the judicial forum a reason for refusing to compel arbitration, although the judge must consider in deciding whether and to what extent to accord preclusive effect to the arbitrators’ holding not only the differences in the expertise and authority of, and fact-finding procedures used by, the arbitrators from those of the judge, but also any difference in the interest of the party pressing the arbitration claim from that of the party litigating before the judge, and the Federal and State statutory interests to be protected (Dean Witter Reynolds v Byrd, 470 US, at p—, 105 S Ct, at pp 1243-1244, supra; McDonald v City of W. Branch, 466 US 284, 287-292).

Applying these principles in the Southland case, the Supreme Court held the policy of the California Franchise Investment Law, which the California Supreme Court had interpreted to mandate judicial, and exclude arbitral, consideration, to be in violation of the Act and of the supremacy clause of the Federal Constitution (art VI, cl 2). The statutory policy embodied in Business Corporation Law § 720, which, GAF argues, was intended to protect shareholders of a publicly held corporation against the waste, overreaching and misconduct of corporate officers and directors, against which such shareholders are ill equipped to protect themselves, differs little, if at all, from that of the California statute. Neither the public shareholder nor the franchisee has much bargaining power, but both the franchisor and the directors and officers of a publicly held corporation are subject to governmental oversight. We conclude, therefore, with respect to Business Corporation Law § 720, that the Supreme Court decisions, and particularly the Southland decision, foreclose according it the effect for which GAF contends.

GAF argues also that a stronger Federal statutory policy than that which favors arbitration may proscribe enforcement of an arbitration clause and points to the Securities Act of 1933 (15 USC § 77a ff) and the Sherman Antitrust Act (15 USC § 1 ff) as examples of statutes that have been given that effect. The Supreme Court has held in Wilko v Swan (346 US 427) that a predispute agreement to arbitrate claims under the Securities Act of 1933 is not enforceable, but in Scherk v Alberto-Culver Co. (417 US 506) and again in Dean Witter Reynolds v Byrd (470 US, at p—, n 1, 105 S Ct, at p 1240, n 1) reserved the question whether the Securities Exchange Act of 1934 (15 USC § 78a ff) has the same effect. Neither the complaint in the GAF action nor its brief in this court refers to any particular section of either securities law as applicable and we do not deem it necessary to parse these statutes in light of the fact that only the employment agreement contains an arbitration provision and only the issues relating to Werner’s compensation rights were stayed by Special Term’s order. Thus, GAF remains free to litigate any issues which might be affected by either securities law raised by the stock option contracts on which Werner sued, or the excessive proxy fight expenditures involved in GAF’s second cause of action. It is at risk, therefore, if the arbitration proceeds, only to the extent that it raises such issues before the arbitrators as a defense to the compensation claim, but, as we have already seen, is free to argue the overriding Federal policies of the securities laws as a reason why any determination of the arbitrators adverse to it on those issues should not be given preclusive effect. Nor, in view of the holding in Dean Witter Reynolds (470 US, at p—, 105 S Ct, at pp 1240-1241, supra), can its suggestion that the issues are inextricably intertwined avail it.

We conclude, therefore, that the issues in the consolidated action do not so involve a Federal policy preemptive of the policy favoring arbitration enunciated by the Federal Arbitration Act as to require that arbitration be stayed, and that, in any event, Business Corporation Law § 720 could not constitutionally be given that effect.

Ill

The ambiguity arising from the fact that sections 3 and 4 of the Federal Arbitration Act speak only of United States courts has been noted by the Supreme Court in Cone Hosp. v Mercury Constr. Corp. (460 US, at p 26, nn 34, 35, supra) and is pointed up by the fact that the consolidated action and the stay proceeding are in State, rather than Federal, court. There is no question that State courts are obligated by section 3 to grant a stay of arbitration (id.), but, as the Cone opinion states, it is less clear whether the same is true of an order to compel arbitration under section 4 of the Act (id.). Although GAF has not argued that so much of the Special Term order as compels it to arbitrate is improper (presumably because that would simply precipitate a Federal court application for such an order [id., at p 27]), we deem it proper to note the basis of our approval of that portion of the order.

Although the Arbitration Act does not contain a provision similar to that in the Federal Civil Rights Act directing that to the extent that the Federal laws "are deficient in the provisions necessary to furnish suitable remedies * * * the common law, as modified and changed by the constitution and statutes of the State wherein the court having jurisdiction of such * * * cause * * * shall * * * govern the said courts in the trial and disposition of the cause” (42 USC § 1988), we conclude that the necessary effect of requiring that State courts enforce the Arbitration Act is the same, at least where, as in New York, there exists a statutory procedure for compelling arbitration (CPLR 7503 [a]). This is not a situation such as was involved in Matter of Rederi (Dow Chem. Co.) (25 NY2d 576, cert denied 398 US 939) where application of New York procedural law would be outcome determinative. To the contrary, as the Cone opinion notes, refusing to do so would achieve no more than to require an application to a Federal court, "a pointless and wasteful burden on the supposedly summary and speedy procedures prescribed by the Arbitration Act” (460 US, at p 27), and "at least one state court has held that § 4 does require state courts to issue § 4 orders to arbitrate where the section’s conditions are met. Main v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 67 Cal. App. 3d 19, 24-25, 136 Cal. Rptr. 378, 380-381” (460 US, at p 26, n 35).

Moreover, doing so is consistent with our cases construing a broad arbitration clause, such as is in Werner’s employment contract, in conjunction with the mandate of CPLR article 75, to require submission to arbitration of all issues, including fraud in the inducement of the contract, except such as are specifically excluded by enumeration in the arbitration clause itself (Matter of Silverman [Benmor Coats], 61 NY2d 299, 308; Bayly, Martin & Fay v Glaser, 60 NY2d 577, affg 92 AD2d 850; Matter of Nationwide Gen. Ins. Co. v Investors Ins. Co., 37 NY2d 91; Matter of Weinrott [Carp], 32 NY2d 190).

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

Chief Judge Wachtler and Judges Jasen, Simons, Kaye and Titone concur; Judge Alexander taking no part.

Order reversed, etc.

      . That paragraph provides in pertinent part: "In the event that any disagreement of any kind shall arise between the parties hereto as to any matter or thing whatsoever hereunder, such disagreement shall be arbitrated in the City of New York”. The stock option agreements contained no arbitration provision.

      . Prima Paint held (388 US, at pp 403-404) that in view of the direction in section 4 of the Act that the court consider "the making of the agreement for arbitration,” a court could determine whether the arbitration clause itself had been induced by fraud, but not whether the contract in which it was contained was so induced, that being an issue for the arbitrator, and both the Southland and Cone cases were careful to preserve that distinction. GAF’s brief seeks to bring this case within the distinction by arguing that Werner’s arbitration clause was a product of overreaching, but its petition claimed only that the agreement was void for waste and self-dealing and its papers contain nothing relating to the invalidity of the clause as distinct from the agreement. The issue, not having been considered by the courts below, is not properly before us. Therefore, we do not consider it further (Matter of Lane [Abel-Bey], 50 NY2d 864). Likewise not considered because not raised below is GAF’s contention that by failing to raise the arbitration clause in the earlier derivative actions, Werner has waived the right to arbitration.

      . GAF points to the method for selection of the arbitrators outlined in the arbitration clause of the employment agreement (each party to appoint an arbitrator, the third "neutral arbitrator” to be selected by the two thus chosen or if they cannot agree by the President of the Association of the Bar of the City of New York) as an added policy reason against enforcement "[s]ince an arbitrator * ** * would be selected pursuant to a procedure established by the very defendants he is to judge.” To Special Term’s response that this method of choosing arbitrators has long been approved as a matter of New York law (Matter of Astoria Med. Group [Health Ins. Plan], 11 NY2d 128) we add that section 5 of the Federal Arbitration Act directs that if the contract for arbitration contains provision for a method of appointing arbitrators "such method shall be followed” (9 USC §5).

        . Indeed, a number of State courts other than California have enforced an arbitration clause governed by the Federal Act (Merrill Lynch, Pierce, Fenner & Smith v Melamed, 453 So 2d 858 [Fla]; Merrill Lynch, Pierce, Fenner & Smith v Falowski, 425 So 2d 129, 130 [Fla]; Pittsfield Weaving Co. v Grove Textiles, 121 NH 344, 430 A2d 638; Episcopal Hons. Corp. v Federal Ins. Co., 269 SC 631, 239 SE2d 647; Merrill Lynch, Pierce, Fenner & Smith v McCollum, 666 SW2d 604 [Tex], writ refd n.r.e., cert denied — US —, 105 S Ct 811, reh denied — US —, 105 S Ct 1384; Allison v Medicab Intl., 92 Wn 2d 199, 597 P2d 380; see, Palmer Constr. Co. v Wichita Band Instrument Co., 7 Kan App 2d 363, 642 P2d 127; Village of Cairo v Bodine Contr. Co., 685 SW2d 253 [Mo]; Sentry Sys. v Guy, 98 Nev 507, 654 P2d 1008; Dean Witter Reynolds v Roven, 94 NM 273, 609 P2d 720; Burke County Public Schools v Shaver Partnership, 303 NC 408, 279 SE2d 816; Tennessee Riv. Pulp & Paper Co. v Eichleay Corp., 637 SW2d 853 [Tenn]).