author: Titone, J.

text:
    [664 NE2d 488, 641 NYS2d 577]
    In the Matter of Kenneth N. Graby, Respondent, v Janet Graby, Appellant.
    Argued January 3,1996;
    decided February 8, 1996

      POINTS OF COUNSEL

      Elizabeth A. Hendy, Geneva, for appellant.
    I. Under the provisions of the Family Court Act § 413 (1), a noncustodial parent is not entitled to an automatic credit or deduction from the "basic child support obligation” in the amount of any derivative Social Security dependent’s benefits paid to the children. (Passaro v Passaro, 92 AD2d 861; Joachim v Joachim, 57 AD2d 546; Matter of Sergi v Sergi, 58 AD2d 692; Arnoldt v Arnoldt, 147 Misc 2d 37; Szczygiel v Szczygiel, 153 Misc 2d 411; Matter of Cassano v Cassano, 85 NY2d 649; Sullivan v Stroop, 496 US 478; Buccheri-Bianca v Heckler, 768 F2d 1152; Flemming v Nestor, 363 US 603; Richardson v Belcher, 404 US 78.) II. An adjustment to a support obligation can be granted upon grounds that the noncustodial parent’s basic child support obligation is unjust or inappropriate, but must be based upon consideration of the factors delineated in Family Court Act § 413 (1) (f). (Matter of Steuben County Dept. of Social Servs. [Padgett] v James, 171 AD2d 1023; Matter of Monroe County Dept. of Social Servs. [McMillan] v Pendleton, 172 AD2d 1041.)

      Buck, Danaher, Ryan & McGlenn, Elmira (John R. McGlenn of counsel), for respondent. I.
    The Court below properly determined that Social Security benefits received by a child because of a noncustodial parent’s disability should be included in the income of the disabled parent for purposes of calculated child support under Family Court Act § 413 and should then be deducted from that parent’s resulting support obligation. (Passaro v Passaro, 92 AD2d 861; Patten v Patten, 203 AD2d 441.) II. The decision of the Court below does not shift the burden of showing that the presumptive (guideline) amount of child support is "unjust or inappropriate”. III. The decision of the Court below does not alter the statutory scheme of Family Court Act § 413. (Passaro v Passaro, 92 AD2d 861.)
   OPINION OF THE COURT

Titone, J.

Petitioner, a noncustodial parent, seeks to reduce his court-ordered child support obligation calculated pursuant to Family Court Act § 413. The question presented is whether Social Security disability benefits paid to the parties’ children on the basis of the noncustodial parent’s disability should be included as income of that parent and credited against his support obligation. We answer that question in the negative and conclude that, under the precise guidelines of Family Court Act § 413, those benefit payments are more properly characterized as resources of the child to be considered in determining whether the support obligation is "unjust or inappropriate” (see, Family Ct Act § 413 [1] [f]).

Petitioner Kenneth Graby and respondent Janet Graby were divorced in May 1990. Pursuant to their divorce decree, which incorporated but did not merge the provisions of an amended separation agreement, custody of the couple’s two children was granted to respondent, and petitioner was directed to pay child support of $400 per week.

On January 24, 1992, respondent filed a petition to enforce the child support payments. Petitioner cross-petitioned for a downward modification based on his loss of employment in August 1991. On September 18, 1992, Family Court granted the cross petition, and reduced petitioner’s child support obligation to $112.50 per week, plus $27.50 per week for arrears.

Just prior to that decision, however, the Social Security Administration notified petitioner that he was eligible for Social Security disability payments of $1,037 per month, retroactive to February 1992. As his dependents, petitioner’s children similarly became entitled to Social Security payments of $518 per month.

In October 1992, petitioner brought this proceeding to modify Family Court’s September order of support based on his total disability. At that time, respondent sought an upward modification of petitioner’s support obligation, based on his increase in income — his monthly receipt of $1,037 in Social Security disability benefits and $1,080 from his pension.

Based on that income, a Hearing Examiner recalculated petitioner’s child support obligation, fixing it at $536.80 per month. Citing Passaro v Passaro (92 AD2d 861), the Hearing Examiner then applied a credit of $518, the amount of Social Security disability payments made to the children, against petitioner’s child support obligation. Family Court vacated the Hearing Examiner’s order. The court concluded that, under the Child Support Standards Act, disability payments to children could only be credited against a child support obligation that is found to be "unjust or inappropriate” (see, Family Ct Act § 413 [1] [f]). Family Court remitted to the Hearing Examiner for a determination of whether, after consideration of the 10 statutory factors enumerated in section 413 (1) (f), petitioner’s child support obligation fixed pursuant to the statutory formula was unjust or inappropriate.

The Appellate Division modified the determination to be made on remittal. Stating that it was adopting the methodology followed in a majority of jurisdictions, the court ruled that the Social Security disability payments to the children should be included in the disabled parent’s income under Family Court Act § 413 (1) (b) (5) and then credited against that parent’s support obligation. The Court concluded that the Social Security payments to the children could be considered again in determining whether the noncustodial parent’s support obligation was unjust or inappropriate. One Justice dissented, concluding that the Child Support Standards Act does not authorize the courts to either increase a noncustodial parent’s income by the amount of Social Security disability payments paid to the children or to credit those benefits against the noncustodial parent’s support obligation. We find merit in the views advanced in that dissent, and now reverse.

The parties agree that the child support guidelines contained in Family Court Act § 413 do not expressly direct the manner in which Social Security disability payments to dependent children should be treated in calculating a parent’s basic child-support obligation. Petitioner argues that because those payments are derived from the disabled noncustodial parent’s prior employment efforts, they should be treated as income to that parent and then credited against his support obligation. The alternative proposed by respondent is to treat those payments as resources of the child that may be considered pursuant to Family Court Act § 413 (1) (f) in determining whether the noncustodial parent’s basic support obligation should be adjusted because it is "unjust or inappropriate.” We conclude that the latter approach fits within the statutory scheme and advances the goals sought to be achieved by the legislation.

Family Court Act § 413 provides the framework for our analysis. The 1989 amendment to section 413, enacted as part of the Child Support Standards Act, was the Legislature’s response to the Federal Government’s mandate that States establish mandatory guidelines for determining child support awards (42 USC §§ 654, 655; see also, Matter of Rose v Moody, 83 NY2d 65, 69). The statute sets forth a standardized formula for computing a basic child support obligation that "is based on parental income” (Bill Jacket, L 1989, ch 567, Governor’s Approval Mem filed with Assembly Bill 2027-A, at 13, reprinted in 1989 NY Legis Ann, at 248 [emphasis added]). A primary goal of the legislation is to establish equitable support awards that provide a "fair and reasonable sum” for the child’s needs within the parents’ means (Family Ct Act § 413 [1] [a]; see also, Matter of Cassano v Cassano, 85 NY2d 649, 652).

Under the statutory guidelines, the first step is to calculate the "combined parental income” (Family Ct Act § 413 [1] [b] [4]; Matter of Cassano v Cassano, 85 NY2d 649, 653, supra). The amount of "income” attributed to each parent is derived by adding gross income, as reported on the most recent Federal tax return, and, to the extent not included as gross income, investment income, imputed income and other "income received” by the parent from eight enumerated sources (id,., § 413 [1] [b] [5]). Those sources include disability benefits, pension benefits and Social Security benefits (id., § 413 [1] [b] [5] [i]-[vi]). While the statute specifically includes Social Security benefits received by the parent as part of his or her income, it does not similarly include Social Security benefits paid to the dependent children in that definition.

A limited number of statutory deductions are also permitted to be taken from the parent’s income before the child support percentage is applied. These generally include specified business deductions, alimony or maintenance payments, child support paid on behalf of other children, public assistance payments, and certain tax payments (id., § 413 [1] [b] [5] [vii] [A]-[H]). This section contains no authorization to deduct Social Security payments received by dependent children from the support obligation.

Once the combined parental income is calculated and appropriate deductions are taken, a child support percentage, based on the number of children to be supported, is applied to the first $80,000 of that combined amount to reach an annual child support responsibility (id., § 413 [1] [c] [2]). That amount is then "ratably apportioned between the two parents” (Matter of Commissioner of Social Servs. [Wandel] v Segarra, 78 NY2d 220, 223), and the noncustodial parent may be directed to pay his or her proportionate share to the custodial parent (Family Ct Act § 413 [1] [f ] [10]). A rebuttable presumption exists that the amount of child support calculated under the statutory guidelines is correct (id., § 413 [1] [a]; 42 USC § 667 [b]). The presumption may be rebutted, and the support obligation adjusted, upon the court’s finding that the noncustodial parent’s support obligation is "unjust or inappropriate” (§ 413 [1] [f]; 42 USC § 667; see also, Matter of Cassano v Cassano, 85 NY2d 649, 653, supra). In making that determination, the court is guided by a list of 10 statutory factors, which include ”[t]he financial resources of the custodial and non-custodial parent, and those of the child,” the child’s physical and emotional health and special needs, "[t]he standard of living the child would have enjoyed had the marriage or household not been dissolved,” and any other factors deemed relevant by the court (see, Family Ct Act § 413 [1] [¶] [1]-[10] [emphasis added]).

Importantly, it is not until this discretionary assessment of the appropriateness of the support obligation that the statute first authorizes the court to consider the financial resources of the child (id., § 413 [1] [¶] [1]). The separate treatment of the children’s financial resources under section 413 (1) (f) indicates that they are distinct from parental income and not intended in any way to be counted within the resources available to satisfy the parent’s child support obligation.

Fundamentally, benefits received by children under certain government welfare programs should not be considered income to the parent for purposes of calculating a parent’s means (see, Sullivan v Stroop, 496 US 478; Head v State, 632 NE2d 749 [Ind App 1994] [Social Security disability payments are not child support]). In fact, in a related context, this Court has already held that a parent’s paramount duty to support minor children is not abrogated by a child’s receipt of public assistance (Matter of Commissioner of Social Servs. [Wandel] v Segarra, 78 NY2d 220, supra; see also, Family Ct Act 415). Like public assistance, Social Security disability dependents’ benefits are an entitlement granted by Congress to children at no purchase cost to the disabled parent (Stulz v Stulz, 659 NE2d 125,127 [Sup Ct Ind 1995]). Social Security payments to dependent children do not reduce the disabled parent’s benefits or in any way increase that parent’s financial burden (see, Matter of Sergi v Sergi, 58 AD2d 692, 693).

Indeed, although a dependent child’s Social Security benefits are derived from the disabled parent’s past employment, they are designed to supplement existing resources, and are not intended to displace the obligation of the parent to support his or her children. Accordingly, under the present statutory scheme, the Social Security benefits paid to petitioner’s dependents on the basis of his disability are "financial resources” of the children that should be considered by the court after the basic support obligation is calculated and only then pursuant to a section 413 (1) (f) "unjust or inappropriate” determination.

In reaching our conclusion, we disagree with lower court holdings that dependents’ benefits paid by Social Security should be included in the sum representing parental income (see, e.g., Passaro v Passaro, 92 AD2d 861, supra). That sense of direction developed at a time when the predecessor statute required the courts to consider the children’s resources in calculating the basic child support obligation (see, Family Ct Act former § 413 [repealed 1989]; see also, Joachim, v Joachim, 57 AD2d 546, 547).

In many cases, granting the noncustodial parent a credit for Social Security disability benefits earmarked for dependent children might effectively abolish the child support obligation of that parent, who has regular and consistent income, and at the same time disproportionately reduce the resources available to the children. Thus, in addition to running afoul of the statute’s plain terms, that consequence is inconsistent with the underlying premise of the Act that both parents meet their obligation to contribute to the support of their children within their means (Bill Jacket, L 1989, ch 567, Governor’s Approval Mem, op. cit.).

A credit for such Social Security payments also interferes with the goal of protecting children "as much as possible from the overall decline in living standards that results from parents maintaining two households” (Bill Jacket, L 1989, ch 567, Governor’s Program Bill Mem, reprinted in 1989 McKinney’s Session Laws of NY, at 2208; see also, Matter of Cassano v Cassano, 85 NY2d 649, 652, supra). Here, had the marriage not been dissolved, petitioner’s children would have enjoyed a standard of living based on both parents’ income plus the Social Security benefits they received as petitioner’s dependents (see, Stulz v Stulz, 659 NE2d 125, 127 [Sup Ct Ind 1995], supra). In fact, requiring a noncustodial parent to pay a fair and adequate support obligation without such a credit will generally "maximizef] collections * * * [and] reduce the need for some families dependent on child support to apply for public assistance” — an additional goal of the statutory support guidelines (Bill Jacket, L 1989, ch 567, Mem of Dem Study Group, at 17; see also, id,., Budget Report on Bills, at 21). Fundamentally, "the focus [must remain] where it belongs: on the standard of living the parents can provide, rather than the meeting of minimal needs” (Bill Jacket, L 1989, ch 567, Mem of State of New York Commn on Child Support, at 27). Absent such direction by our Legislature in its precise child support guidelines, we decline to reduce the resources ultimately available to children by treating Social Security disability payments to dependents as income of the disabled parent or as a credit against that parent’s support obligation.

Accordingly, the judgment of Family Court and the order of the Appellate Division brought up for review should be reversed, with costs, and the June 1, 1993 order of Family Court reinstated. The certified question need not be answered.

Chief Judge Kaye and Judges Simons, Bellacosa, Smith, Levine and Ciparick concur.

Judgment of Family Court and order of the Appellate Division brought up for review reversed, with costs, and June 1, 1993 order of Family Court, Yates County, reinstated. Certified question not answered upon the ground that the judgment of Family Court from which leave was granted finally determines this proceeding.

      . In January 1993, payments to petitioner and his children were increased to $1,068 and $533 per month, respectively.

      . The Appellate Division certified the question to this Court whether it "properly determined that social security benefits of a child should be included in the income of a disabled parent under Family Court Act § 413 and should then be deducted from the resulting child support obligation.” Because the Family Court judgment from which leave to appeal to this Court was granted finally determines this proceeding, we do not answer the certified question.

      . As the United States Supreme Court has stated, "child support,” a term of art used throughout the Social Security Act, "refers to legally compulsory payments made by parents” (Sullivan v Stroop, 486 US, at 482, supra [emphasis added]). Thus, in Sullivan, the Supreme Court ruled that Social Security insurance benefits paid to children did not constitute "child support” payments affecting a family’s eligibility for AFDC benefits (id, at 481-482).

      . Former section 413 (1) of the Family Court Act provided, in relevant part, that in fixing a child support obligation, the court shall consider "(i) the financial resources of the parents and those of the child,-, (ii) the physical and emotional health of the child, and his or her educational or vocational needs and aptitudes; (iii) where practical and relevant, the standard of living the child would have enjoyed had the family remained intact; (iv) where practical and relevant, the tax consequences to the parties; and (v) the non-monetary contributions that the parents will make toward the care and well being of the child [emphasis added].”

      . Some States have passed legislation that specifically provides that Social Security disability payments to children are to be credited against the disabled parent’s child support obligation (see, e.g., Cal Fam Code § 4504; Utah Code Ann § 78-45-7.5 [8] [b]).


source: Caselaw Access Project

author: Chief Judge Kaye.

license: Public Domain

text:
    [664 NE2d 492, 641 NYS2d 581]
    NBT Bancorp Inc. et al., Appellants, v Fleet/Norstar Financial Group, Inc., Formerly Known as Norstar Bancorp, Inc., et al., Respondents.
    Argued February 6,1996;
    decided March 26, 1996

      POINTS OF COUNSEL

      Metzger, Hollis, Gordon & Mortimer (Stephen L. Teichler, Eugene J. Metzger, Douglas E. Ginsburg and Claudia G. Regen, of the District of Columbia Bar, admitted pro hac vice, of counsel) and Lee, Emerson & Dean, Norwich (Thomas C Emerson and Aaron A. Dean of counsel), for appellants.
    I. Breach of contract is not a required element of intentional interference with contract because it is not required by the Restatement, would immunize wrongdoers from liability, and would be contrary to New York’s policy of protecting contractual expectations and promoting contract stability and formation. (Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183; Kronos, Inc. v AVX Corp., 81 NY2d 90; Campbell v Gates, 236 NY 457; Alford & Swift v Muller Constr. Co., 46 NY2d 276; Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Mise 786, 279 App Div 632; Israel v Wood Dolson Co., 1 NY2d 116; Lamb v Cheney & Son, 227 NY 418; Jewel Cos. v Pay Less Drug Stores, 741 F2d 1555.) II. NBT presented sufficient facts to create triable issues of fact with respect to its claim for tortious interference with prospective business relations. (Farkas v Saary, 191 AD2d 178; Hartford Acc. & Indem. Co. v Wesolowski, 33 NY2d 169; Splihte v Commercial Metals Co., 13 Misc 2d 74; Conklin v County of Onondaga, 78 AD2d 962; Myers v Fir Cab Corp., 64 NY2d 806; Anderson v Liberty Lobby, 477 US 242;
      Crosland v New York City Tr. Auth., 68 NY2d 165; Matsushita Elec. Indus. Co. v Zenith Radio, 475 US 574; Dal Constr. Corp. v City of New York, 108 AD2d 892; Jered Contr. Corp. v New York City Tr. Auth., 22 NY2d 187.)

      Cleary, Gottlieb, Steen & Hamilton, New York City (Richard F. Ziegler, Peter L. Critchell, Alex E. Miller and William M. Hohengarten of counsel), and Hinman, Howard & Kattell, Binghamton (James L. Chivers of counsel), for respondents.
    I. NBT’s claim for tortious interference with contractual relations was properly dismissed because NBT did not plead a breach of the Merger Agreement. (Inselman & Co. v FNB Fin. Co., 41 NY2d 1078; Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183; Kronos, Inc. v AVX Corp., 81 NY2d 90; Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Misc 786, 279 App Div 632; International News Serv. v Associated Press, 248 US 215.) II. NBT’s claim for tortious interference with prospective business relations was properly dismissed on summary judgment. (Ernst & Ernst v Hochfelder, 425 US 185; Santa Fe Indus. v Green, 430 US 462; Schreiber v Burlington N., 472 US 1; United States v Mulheren, 938 F2d 364; Williams & Co. v Collins Tuttle & Co., 6 AD2d 302, 1006; Rosenberg v Rockville Centre Soccer Club, 166 AD2d 570; Derdiarian v Felix Contr. Corp., 51 NY2d 308; Marenghi v New York City Tr. Auth., 151 AD2d 272, 74 NY2d 822; Mills v Electric Auto-Lite, 396 US 375.)
   OPINION OF THE COURT

Chief Judge Kaye.

This action by a disappointed suitor against its competitor centers on a contest between two financial institutions to acquire the same target bank. Plaintiffs (collectively NBT) and defendants (collectively Nor star) each sought a merger with Central National Bank. NBT ultimately entered into a merger agreement with Central, subject to approval of two thirds of the holders of Central’s common stock. When the agreement failed to garner shareholder approval, NBT filed suit against Norstar, alleging several varieties of tortious interference and seeking lost profits from the failed merger. At issue on this appeal is whether NBT’s claim for tortious interference with contractual relations was properly dismissed on the pleadings (CPLR 3211) and whether its claim for tortious interference with prospective contractual relations was properly dismissed on summary judgment (CPLR 3212). Concluding that the Appellate Division correctly rejected both claims, we now affirm.

Facts

According to NBT’s complaint, on November 4, 1986 Central’s Board of Directors met with representatives of Norstar, NBT and a third financial institution — KeyCorp of Albany — to hear their separate merger proposals. At that meeting, NBT offered $54 a share for Central, and Key and Norstar each made offers worth $60 a share. Each of the proposals was based on an exchange of Central’s stock for the bidder’s stock. (NBT’s shares were unlisted; Norstar and Key traded on the New York Stock Exchange.) No action was taken by Central’s Board at that meeting. Three days later, the Board voted — six to five — to accept a revised merger proposal from NBT.

NBT contends that prior to November 7, 1986, Norstar sold its own NBT holdings, representing a little over 4% of NBT’s outstanding shares, "dumping” them on the open market at a below-market price in an effort to discredit NBT’s merger proposal by creating the appearance that NBT’s shares were worth less than represented. Notwithstanding the alleged dumping, NBT and Central entered into a formal Merger Agreement on November 8, 1986, signed by Central’s president and the five directors who had voted for the merger. The merger was conditioned on approval both by the owners of two thirds of the common stock of Central and by the Comptroller of the Currency. The agreement further provided that Central’s officers and directors would use their best efforts to secure shareholder approval and that Central would not disseminate nonpublic information. Additionally the agreement contained a "fiduciary-out” provision, contemplating that Central might receive competing bids but that it would not initiate contact with anyone else in an effort to solicit another acquisition proposal and would notify NBT if it received any other offer.

Thereafter, according to NBT’s complaint, Norstar covertly met with one of Central’s dissenting directors, Herbert Kling, and counseled him on how to oppose the merger by forming a stockholders’ committee. On December 1, 1986, Norstar’s president wrote to Central’s Board complaining about improprieties in the bidding process — specifically that the Board granted only NBT an opportunity to submit a revised offer and improperly overstated the value of NBT’s shares by 10%.

Central’s management scheduled a stockholders’ meeting for June 10, 1987 to vote on the merger, filed its proxy statements with the SEC, and solicited proxies for the merger. A proxy contest ensued between management and the merger opponents, in which Kling submitted copies of Norstar’s December 1, 1986 letter to local newspapers. This provoked a suit by NBT against Kling and his supporters for violation of Federal securities laws (see, NBT Bancorp v Kling, US Dist Ct, ND NY, 1987, 87-CV-493). Kling and his group countered by suing Central, its directors who had approved the merger and NBT, alleging breach of fiduciary duty and misrepresentations in the proxy materials (see, Kling v NBT Bancorp, US Dist Ct, ND NY, 1987, 87-CV-525).

Two weeks before the June 10 meeting, NBT raised its offer to $66 per share. At a meeting on May 29,1987 to consider the new offer, Central’s Board received a letter from Norstar making a competing offer in excess of $66 per share. The Board then adjourned the June 10 meeting and withdrew its support for the Merger Agreement. Central and NBT agreed to terminate negotiations in exchange for a $150,000 payment to NBT, representing roughly half its expenses. To this day, Central remains independent.

Close to a year later, NBT commenced this action asserting three causes of action and seeking tens of millions of dollars on each: that Norstar tortiously interfered with NBT’s contractual relations with Central, tortiously induced a breach of the Merger Agreement and tortiously interfered with NBT’s prospective business relations. Norstar’s dismissal motion pursuant to CPLR 3211 was granted in its entirety by Supreme Court. The Appellate Division affirmed dismissal of the first two causes of action on the ground that there was no breach of contract, an essential element of both causes of action. The court found that the Central Board did not solicit any competing offer or authorize any agent of Central to disseminate nonpublic information; that adjournment of the June 10 stockholders’ meeting did not constitute a breach, because failure to adjourn the meeting in the circumstances would have been inconsistent with the Board’s fiduciary duty to its stockholders; and that the actions of Kling did not constitute a breach, since the Merger Agreement could not bind dissenting directors acting independently (159 AD2d 902, 903-905). The court, however, reinstated the third cause of action (interference with prospective business relations).

Dissenting in part, then-Justice Levine (joined by Justice Kane), would have dismissed the third cause of action as well, concluding that every wrongful means alleged in the complaint was either entirely proper and lawful or not a substantial factor in bringing about termination of the Merger Agreement. The dissent, however, would have also dismissed NBT’s first cause of action (tortious interference with prospective business relations) on the same basis, equating the cause of action for interference with the Merger Agreement — a voidable contract — with a claim for tortious interference with prospective business relations, requiring proof of wrongful means but not breach (159 AD2d at 911).

After extensive discovery on NBT’s third cause of action, Norstar sought summary judgment on the ground that there was no evidence of wrongful conduct and no evidence that its conduct, even if wrongful, caused the stockholders to vote against the merger. Supreme Court granted the motion and the Appellate Division unanimously affirmed (215 AD2d 990), holding that there was no showing that Norstar’s conduct was wrongful. We now affirm.

Analysis

Insisting that Norstar should somehow stand liable for wrongfully interfering with its anticipated acquisition of Central, NBT’s complaint offers three variations on the theme: tortious interference with contractual relations, tortious inducement of a breach of contract and tortious interference with prospective business relations. In order to succeed on a cause of action for inducement of breach of contract a plaintiff obviously must show a breach of contract. NBT concedes there was no breach of the Merger Agreement and does not challenge dismissal of this claim. Rather, controversy centers on two issues: first, whether breach of contract is essential to a claim for tortious interference with contractual relations and second, whether there is a genuine issue of material fact regarding the use of wrongful means by Norstar. Wé consider each in turn.

The Requirement of Breach

NBT urges that, as a matter of precedent and policy, a defendant’s deliberate interference with plaintiffs contractual rights that causes damage should be punishable as tortious interference whether or not the contract was actually breached.

New York law is to the contrary. Ever since tortious interference with contractual relations made its first cautious appearance in the New York Reports — decades after the seminal case Lumley v Gye (2 El & B1 216, 118 Eng Rep 749 [1853]) — our Court has repeatedly linked availability of the remedy with a breach of contract (see, Posner Co. v Jackson, 223 NY 325; Lamb v Cheney & Son, 227 NY 418). Indeed, breach of contract has repeatedly been listed among the elements of a claim for tortious interference with contractual relations (see, e.g., Gregoris Motors v Nissan Motor Corp., 80 AD2d 631, 632, affd 54 NY2d 634; Inselman & Co. v FNB Fin. Co., 41 NY2d 1078,1080; Israel v Wood Dolson Co., 1 NY2d 116, 120; see also, Kronos, Inc. v AVX Corp., 81 NY2d 90, 94 [intentional inducement to breach or render performance impossible]).

"Tortious interference,” however, can take many forms (see generally, Prosser, Torts § 129 [4th ed]). Even the subset of that amorphous category presented by this appeal — alleged interference with a contract by a competitor — presents a wide range of possibilities. As the Court made clear in Guard-Life Corp. v Parker Hardware Mfg. Corp. (50 NY2d 183, 193), the degree of protection available to a plaintiff for a competitor’s tortious interference with contract is defined by the nature of the plaintiffs enforceable legal rights. Thus, where there is an existing, enforceable contract and a defendant’s deliberate interference results in a breach of that contract, a plaintiff may recover damages for tortious interference with contractual relations even if the defendant was engaged in lawful behavior (see, Israel v Wood Dolson Co., 1 NY2d at 119; cf., Foster v Churchill, 87 NY2d 744 [decided today] [defense of economic justification]). Where there has been no breach of an existing contract, but only interference with prospective contract rights, however, plaintiff must show more culpable conduct on the part of the defendant (see, Guard-Life, 50 NY2d at 193-194).

The policy reasons underlying these settled principles were fully explicated in Guard-Life. Two agreements were at issue in Guard-Life, the first an exclusive supply contract between plaintiff-importer and a supplier, to continue indefinitely subject to termination by either party on one year’s notice, the second plaintiff’s order for 12 monthly shipments. Defendant (plaintiff’s competitor) then successfully negotiated its own contract with the supplier, who immediately terminated its relationship with plaintiff, prompting plaintiff’s claim for tortious interference. We affirmed an award to plaintiff representing lost profits on cancellation of the 12-month order but otherwise granted summary judgment dismissing the complaint, concluding that there is no liability in tort with respect to an unenforceable contract — here a contract terminable at the will of either party — unless the means employed by defendant-competitor were wrongful.

Guard-Life explains that this rule represents a balance struck between "society’s interest in respect for the integrity of contractual relationships, on the one hand, and, on the other, the right to freedom of action on the part of the party interfering and society’s concern that competition not be unduly hampered” (50 NY2d at 190). In fixing this balance, the focus is not on the defendant’s conduct but rather on the nature of the relationship that has suffered the interference. "[G]reater protection is accorded an interest in an existing contract (as to which respect for individual contract rights outweighs the public benefit to be derived from unfettered competition) than to the less substantive, more speculative interest in a prospective relationship (as to which liability will be imposed only on proof of more culpable conduct on the part of the interferer)” {id. at 191).

Thus, Guard-Life answers the "central question” posed by NBT: When C intentionally interferes with A’s contract with B, to A’s great harm, why should the identical conduct of C be unacceptable when B breaches and acceptable when B does not breach? Although the intentional interference by C may be the same whether or not A’s contract with B is actually breached, it is not C’s conduct that is the determinative factor in striking the balance and fixing the rule. Rather, the determinative factor is the nature of the relationship that suffered the interference, with greater protection accorded enforceable contract rights and greater deference accorded free competition where the contract rights are only prospective.

Applying these principles, it is apparent that for NBT, consummation of the Merger Agreement represented no more than a hope that Central shareholders holding at least two thirds of the outstanding capital stock would in fact approve the transaction. The right NBT seeks to protect here — its expectation that Central Bank’s stockholders would approve the Merger Agreement — is thus not entitled to the same protection that would have been accorded a legally enforceable right to performance under that agreement (see, Jewel Cos. v Pay Less Drug Stores Northwest, 741 F2d 1555 [9th Cir] [acquiring party only has a mere expectancy with respect to consummation of a merger in that the directors can only bind the corporation pending shareholder approval]; Belden Corp. v InterNorth, Inc., 90 111 App 3d 547, 553, 413 NE2d 98, 102 [acquiring firm has a mere expectancy with respect to consummation of the merger]).

Far from a negative, NET urges that the factual context of this case — the modern phenomenon of a contested merger— presents social policy considerations that favor our adoption of a more relaxed rule. NET argues that the unique nature of mergers — including the complexity of the transactions, the required regulatory approvals, and the proxy and solicitation requirements — supports dispensing with the requirement of breach or wrongful means. In the case of mergers, says NET, deliberate interference alone should suffice.

No persuasive policy reason is advanced for such a limitation on competition or such a deviation from precedent, which would open lawful actions such as hostile tender offers and competing proxy solicitations to tortious interference claims by suitors disappointed in the marketplace. Indeed, "fiduciary-out” clauses such as existed in the present Merger Agreement contemplate the likelihood of competing bidders, and corporate directors have a fiduciary obligation to present higher offers to their shareholders. It is therefore hardly surprising that NET cites no case imposing the liability it advocates we sanction (see, by contrast, Viacom Intl. v Tele-Communications, Inc., 1994 WL 561377 [SD NY, Oct. 12,1994 (court refused to sustain the claim of tortious interference relating to the Viacom-Paramount merger where neither breach of the merger agreement nor wrongful means were pleaded)]; Frandsen v JensenSundquist Agency, 802 F2d 941, 947-948 [7th Cir 1986] [dismissing tortious interference action where there was no breach and no wrongful means]; Jewel Cos. v Pay Less Drug Stores Northwest, 741 F2d 1555, 1567-1569 [9th Cir 1984] [liability for interference with merger agreement possible where agreement breached]).

Thus, we reject NBT’s policy arguments and stand by our considered precedents. Our requirement of breach promotes the integrity of contract as well as integrity of the marketplace; it signifies the substantiality of the interest protected, and it conforms with this tort’s function as a back-up remedy for breaches of contract (see, Frandsen v Jensen-Sundquist Agency, 802 F2d 941, 947). The requirement of wrongful means where only prospective rights are threatened honors free and lawful competition and accords an appropriate level of protection to a plaintiff’s interest — by definition not its contract rights — in its expectancy of future benefits.

Wrongful Means

We turn next to the issue of "wrongful means,” defined in Guard-Life as representing "physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure; they do not, however, include persuasion alone although it is knowingly directed at interference with the contract” (50 NY2d at 191).

NBT points to three acts of Norstar which it claims were wrongful: sale of NBT’s stock; the December 1, 1986 letter complaining about the bidding process; and the May 29, 1987 letter expressing a willingness to submit a new offer to compete with NBT’s revised bid. As to each, we agree with the trial court and the Appellate Division that no genuine issue of material fact was raised regarding this essential element of a claim for tortious interference with prospective business relations.

Norstar sold two blocks of NBT stock in two arm’s length, fully disclosed transactions shortly before Central’s Board voted in favor of merger with NBT. The sales were made on the open market in Norstar’s "street name” to NBT’s lead market maker for the highest price offered. Norstar made a profit of more than $1.6 million on the sales; the transaction had no negative effect on NBT’s stock price; and NBT was fully aware of the sale. The determination was therefore correct that there was no triable issue regarding an effort to manipulate the market or misrepresent the value of NBT stock.

NBT’s claim of wrongful means with respect to the two letters also lacks foundation in the record. As found, the December 1, 1986 letter was acknowledged by its recipient as an expression of pique at the rejection of Norstar’s bid; it was not sent to shareholders nor was it shown to be intended for public release; and it contained no actionable misrepresentation. And again as found, the May 29, 1987 letter was written to secure an economic advantage, not to injure plaintiffs, and it therefore constituted persuasion alone, not a malevolent act. There being no triable issue of fact regarding wrongful means, summary judgment was correctly granted dismissing NBT’s claim for interference with prospective contractual relations.

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

Judges Simons, Titone, Bellacosa, Smith and Ciparick concur; Judge Levine taking no part.

Order affirmed, with costs.

      . The Guard-Life holding, as well as its reasoning, put to rest NBT’s assertion that the Court in that case was adopting the test propounded in the Restatement (Second) of Torts § 766. "Wrongful means” were required for interference with prospective contractual relations, and the line of authority from Posner to Inselman, requiring breach for claims of tortious interference with contractual relations, was left undisturbed.

      . The subject of tortious interference with contract continues to excite scholarly commentary, much of it suggesting that the tort be limited so as to protect lawful competition (see, e.g., Perlman, Interference with Contract and Other Economic Expectancies: A Clash of Tort and Contract Doctrine, 49 U Chi L Rev 61 [1982] [the interference tort should be limited to cases in which defendant’s acts are independently unlawful]; see also, Myers, The Differing Treatment of Efficiency and Competition in Antitrust and Tortious Interference Law, 77 Minn L Rev 1097 [1993] [tortious interference gives excessive protection at the expense of competition]; Dobbs, Tortious Interference with Contractual Relationships, 34 Ark L Rev 335 [1980] [tort should be drastically limited]).


author: ClPABICK, J.

text:
    [664 NE2d 884, 641 NYS2d 819]
    In the Matter of Arthur Davis, Appellant, v Richard A. Brown, as District Attorney of Queens County, et al., Respondents.
    Argued February 13, 1996;
    decided March 28, 1996

      POINTS OF COUNSEL

      Mark W. Zeno, Kew Gardens, Robert M. Baum and Lori L. Zeno for appellant.
    Because defense counsel requested only a mistrial with prejudice, notified the Judge that appellant was not requesting a mistrial without prejudice as soon as he indicated he might order a new trial, advised the Judge that appellant would not consent to a mistrial without prejudice before the mistrial was "perfected”, and objected when the Judge granted a mistrial without prejudice, defense counsel neither requested nor consented to the mistrial without prejudice ordered by the Judge; since the mistrial was not supported by manifest necessity, double jeopardy bars a retrial. (People v Daniels, 88 AD2d 392; Weston v Kernan, 50 F3d 633; United States v Huang, 960 F2d 1128; United States v Dinitz, 424 US 600; United States v Jorn, 400 US 470; Wade v Hunter, 336 US 684; United States v Martin Linen Supply Co., 430 US 564; United States v Tateo, 377 US 463; People v Adames, 83 NY2d 89; United States v Scott, 437 US 82.)

      Richard A. Brown, District Attorney of Queens County, Kew Gardens (Andrew L. Crabtree and Steven J. Chananie of counsel), for Richard A. Brown, respondent pro se.

    Defendant may not use the Double Jeopardy Clause to bar his reprosecution where defendant requested the mistrial and the People did not intentionally goad that request. (Wade v Hunter, 336 US 684; United States v Scott, 437 US 82; Oregon v Kennedy, 456 US 667; United States v Huang, 960 F2d 1128; United States v Dinitz, 424 US 600; United States v Jorn, 400 US 470; People v Ferguson, 67 NY2d 383; People v Catten, 69 NY2d 547; People v Winchell, 64 NY2d 826; People v Leonti, 18 NY2d 384.)

      Dennis C. Vacco, Attorney-General, New York City {Arnold D. Fleischer and Barbara G. Billet of counsel), for Stanley Katz, respondent.
    A mistrial was not declared over petitioner’s objection, and he is not being subjected to double jeopardy, because he did not move to withdraw his motion for a mistrial until after it was granted without prejudice. (People v Ferguson, 67 NY2d 383; United States v Scott, 437 US 82; United States v Dinitz, 424 US 600; Oregon v Kennedy, 456 US 667; People v Catten, 69 NY2d 547; United States v Huang, 960 F2d 1128; United States v Mastrangelo, 662 F2d 946, 456 US 973; Weston v Kernan, 50 F3d 633; United States v Grasso, 552 F2d 46.)
   OPINION OF THE COURT

ClPABICK, J.

Petitioner Arthur Davis commenced this CPLR article 78 proceeding in the nature of prohibition to bar, on double jeopardy grounds, his retrial for robbery in the second degree. Petitioner claims that his motion for a mistrial was specifically delimited a request for a mistrial with prejudice and that the court, by granting a mistrial without prejudice, granted the mistrial without his consent. Under the particular facts of this case, we agree and hold that double jeopardy bars petitioner’s retrial.

I.

Before petitioner’s trial for robbery in the second degree, Supreme Court issued two rulings precluding the People from eliciting testimony that the complaining witness had identified petitioner while watching a Court TV program and from introducing any evidence of prior warrants issued against petitioner. Despite the pretrial rulings, a prosecution witness mentioned that he had taped a show on channel 51. Petitioner moved for a mistrial, arguing that this testimony was prejudicial because the jury would know that channel 51 was the local television channel of Court TV. The Judge reserved decision.

The next day, the arresting officer, in contravention of the pretrial ruling, testified that a prior warrant had been issued against petitioner. Petitioner’s counsel again moved for a mistrial and this time stated that "I am going to ask it be granted with prejudice.” When petitioner’s counsel reminded the Judge of the previous mistrial motion, the Judge asked, "Are you pressing that motion for a mistrial now?”, to which counsel responded that she was "pressing it with prejudice.” To this end, petitioner’s counsel argued that "I think there is evidence that the People intentionally brought in this information before the jury * * * ignoring the Court’s order and I am moving for a mistrial with prejudice.”

The Judge announced that he was granting a mistrial, but stated that "[a]s to whether or not I will grant it with prejudice I will decide later.” Petitioner’s counsel immediately requested that the court "decide whether you’re going to grant it with prejudice at this time because, Judge, I may withdraw my motion” and reminded the court that the "motion at this time is a motion for a mistrial with prejudice.” The Judge repeated that he was granting the motion, but that he would reserve decision on whether the mistrial would be with or without prejudice. The court adjourned for the day, without discharging the jury, and counsel were instructed to submit legal memoranda addressing whether the grant of the mistrial should be with prejudice.

The first page of petitioner’s memorandum, submitted to the court the following morning, contained the unequivocal statement that petitioner’s motion was only for a mistrial with prejudice: "[petitioner] only wanted the mistrial order if it also included a finding that the prosecutor’s actions had been intentionally designed to provoke a mistrial, and that, therefore, double jeopardy would bar reprosecution.”

When petitioner later renewed his motion for a mistrial with prejudice in open court, the Judge stated that he was granting a mistrial, but that it would be granted without prejudice because "there was no intent upon the People to provoke the defendant in moving for a mistrial.” Petitioner’s counsel objected on the grounds that petitioner only consented to a mistrial with prejudice, that he objected to a mistrial without prejudice, and that he wanted the case to proceed before the already empaneled jury. The court adhered to its ruling, noting that the initial mistrial motion, when originally made, was not limited to a motion for a mistrial with prejudice, and that petitioner’s qualification that he only wanted a mistrial with prejudice was "an addendum * * * added yesterday.” The jury was discharged and petitioner was released on his own recognizance pending a retrial.

Petitioner thereafter sought a writ of prohibition to prevent his retrial. The Appellate Division denied petitioner’s application, concluding that "[w]hile the petitioner made a request for a mistrial with prejudice, he waited until after the court ordered a mistrial without prejudice to inform the court that he did not want a mistrial unless it was with prejudice” (Matter of Davis v Brown, 215 AD2d 381, 382). This Court granted leave to appeal and we now reverse.

II.

Under the protection of the Double Jeopardy Clauses of the State and Federal Constitutions, a defendant may not be twice put in jeopardy of criminal prosecution for the same offense (see, NY Const, art I, § 6; US Const 5th Amend). A cornerstone of the double jeopardy protection is the defendant’s right, in the event of prosecutorial or judicial error warranting a mistrial, to choose whether to request a new trial before an untainted jury or to continue to defend the case before the already empaneled jury (see, United States v Dinitz, 424 US 600, 609; People v Ferguson, 67 NY2d 383, 388). Recognizing the importance of the defendant’s right to have the case completed before the first jury, we have held that the defendant is free to withdraw a motion for a mistrial at any time before its grant and to continue before the already empaneled jury (see, People v Catten, 69 NY2d 547, 555).

It follows that when a mistrial is granted over the defendant’s objection or without the defendant’s consent, double jeopardy will, as a general rule, bar retrial (see, People v Ferguson, supra, at 388). However, the right to have one’s case decided by the first empaneled jury is not absolute, and a mistrial granted as the product of manifest necessity will not bar a retrial (see generally, Matter of Enright v Siedlecki, 59 NY2d 195, 199-200; cf., CPL 280.10 [3]). There is no claim of manifest necessity in this case.

Conversely, when the defendant requests or consents to a mistrial, double jeopardy typically erects no barrier to a retrial. There is one situation, however, in which retrial will be barred even though the defendant requests, and thereby consents to, a mistrial — when the prosecution deliberately provokes a mistrial (see, Oregon v Kennedy, 456 US 667, 673). When the prosecution fears the case is headed toward acquittal and intentionally causes a mistrial, the calculated result of this prosecutorial misconduct is to deprive the defendant of the right to have the case completed before the first jury. In such a case, a second trial of the defendant would constitute an impermissible second bite at the apple for the prosecution, in direct violation of the letter and spirit of both the State and Federal Double Jeopardy Clauses’ prohibitions against repeated prosecution.

III.

This case requires us to decide whether a criminal defendant may specifically limit a motion to one for a mistrial with prejudice — one based on the ground that the prosecution engaged in misconduct intended to provoke a mistrial, with its attendant retrial bar. We conclude that a defendant should be permitted to so delimit a mistrial motion and be given the opportunity to withdraw it if the total relief requested will not be granted (cf., People v Catten, 69 NY2d 547, 555, supra).

It is important to recognize that a specifically limited motion for a mistrial with prejudice will impose no greater burden on the trial courts than an unqualified mistrial motion. Whenever the court agrees that the prosecution has engaged in prejudicial misconduct deliberately intended to cause a mistrial, then a mistrial should be granted and retrial will be barred (see, Oregon v Kennedy, 456 US 667, 673, supra). On the other hand, if the court believes the prosecution has acted entirely properly, or simply that the prosecution’s conduct, albeit improper, was not intended to provoke a mistrial, the court should deny the defendant’s motion for a mistrial with prejudice and the trial will continue apace.

The People would have us adopt a rule whereby the defendant would in effect be penalized when the prosecution’s misconduct, though not rising to the level of misconduct intended to cause a mistrial, nevertheless would warrant the grant of a mistrial. Such a rule, requiring the defendant to surrender the first jury and proceed before a new jury because the level of deliberateness of prosecutorial misconduct was misperceived, would unnecessarily erode the defendant’s valued right to have the first empaneled jury determine the case.

The better rule, and the one more in keeping with double jeopardy jurisprudence, is that the defendant may challenge questionable prosecutorial conduct based on the specifically limited theory that the prosecution intended to provoke a mistrial, while reserving the right to have the case determined by the first jury in the event the court rejects the defendant’s argument (see, e.g., Weston v Keman, 50 F3d 633, 637-638, cert denied — US —, 116 S Ct 351; United States v Huang, 960 F2d 1128).

IV.

Applying the foregoing principles to the case now on appeal, we conclude that petitioner apprised the court, before it granted the mistrial without prejudice, that petitioner’s motion was specifically limited to a motion for a mistrial with prejudice. In the absence of petitioner’s unequivocal acquiescence to a mistrial without prejudice, the court lacked petitioner’s consent to the discharge of the first jury and his retrial is therefore barred by the constitutional prohibition against double jeopardy (cf., Weston, supra, at 638).

The Appellate Division’s conclusion that petitioner "waited until after the court ordered a mistrial without prejudice to inform the court that he did not want a mistrial unless it was with prejudice” is without support in the record. The day after petitioner initially moved for a mistrial without qualification, petitioner renewed his mistrial motion, but this time, petitioner’s counsel explained, it was being pressed with prejudice because the prosecution had deliberately attempted to cause a mistrial. Supreme Court erroneously concluded that since petitioner’s initial mistrial motion was unqualified it remained so notwithstanding the "addendum * * * added yesterday” that he only wanted a mistrial with prejudice. The settled right of a defendant to withdraw a . mistrial motion at any time before its grant similarly implies the right to modify or limit the motion before such grant (see, People v Catten, 69 NY2d 547, 555, supra).

Moreover, any remaining doubts the court might have had about the terms of the mistrial motion were dispelled by petitioner before the court announced its declaration of a mistrial without prejudice. In immediate response to the court’s statement that it was granting the mistrial but had not yet decided whether to grant it with prejudice, defense counsel reminded the court that the "motion at this time is a motion for a mistrial with prejudice.” Furthermore, in the legal memorandum submitted by petitioner at the court’s request, petitioner reiterated that he "only wanted the mistrial order if it also included a finding that the prosecutor’s actions had been intentionally designed to provoke a mistrial, and that, therefore, double jeopardy would bar reprosecution.”

Accordingly, the judgment of the Appellate Division should be reversed, without costs, the petition granted, and respondents prohibited from retrying petitioner under Queens County indictment No. 3592/94.

Chief Judge Kaye and Judges Simons, Titone, Bellacosa, Smith and Levine concur.

Judgment reversed, etc.


author: Bellacosa, J.

text:
    [664 NE2d 1209, 642 NYS2d 147]
    In the Matter of Dorothy A. Reynolds, Deceased. John W. Baker et al., as Coexecutors of Dorothy A. Reynolds, Deceased, Respondents. William A. Reynolds, Appellant.
    Argued February 7,1996;
    decided March 21, 1996

      POINTS OF COUNSEL

      Kenneth Joyce, Syracuse, and Aaron Mark Zimmerman for appellant.
    I. Trust is a testamentary substitute. (Matter of Riefberg, 58 NY2d 134; Matter of Agioritis, 40 NY2d 646; Matter of DeVita, 141 AD2d 46; Matter of McGrattan, 76 Misc 2d 873.) II. Attorneys for the estate acted in violation of attorney disciplinary rules and otherwise engaged in an impermissible conflict of interest. (Matter of Kinzler, 195 AD2d 464; Matter of Baxter, 196 AD2d 186.)

      Sugarman, Wallace, Manheim & Schoenwald, Syracuse (:Timothy J. Perry of counsel), for respondents.
    I. Dorothy Reynold’s irrevocable trust was not a testamentary substitute as defined by EPTL 5-1.1 (b) (1) (E). (Matter of DeVita, 141 AD2d 46; Matter of Riefberg, 58 NY2d 134.) II. The award of fees to the estate’s attorneys should not be disturbed.
   OPINION OF THE COURT

Bellacosa, J.

This appeal raises for this Court’s review the question whether an inter vivas trust, in which a deceased spouse retained a limited power of appointment, constitutes a testamentary substitute in violation of the surviving spouse’s right of election (EPTL 5-1.1). The Appellate Division, with one Justice dissenting, found the trust was not subject to the right of election and ruled against the surviving spouse. This Court granted leave to appeal. We agree with the Surrogate’s Court and the dissenting Justice that the trust was a testamentary substitute under the applicable statute and, thus, we modify the Appellate Division’s order in that respect.

Appellant William Reynolds and decedent Dorothy Reynolds were married in 1963 and remained wed until her death in 1989. The decedent had four children from a previous marriage. On May 11, 1989, Dorothy Reynolds, suffering from adverse health, created a trust for the purpose of qualifying for Medicaid benefits in the event that nursing home care was needed. She named two of her children from a previous marriage as trustees and, pursuant to the terms of the trust, transferred the majority of her assets to the trust while designating her children as remainder beneficiaries. As the settlor of the trust, she relinquished all right, title and interest in the property thus transferred, except for retaining the right to appoint remainder beneficiaries at any time prior to the termination of the trust. The limitation on the exercise of the retained power was that the settlor could not appoint herself, her spouse, her creditors, or her estate and its creditors. The trust agreement fixed a termination date of one day prior to the death of the settlor.

Dorothy Reynolds died on August 29,1989, leaving her entire estate to her children from a previous marriage. The Surrogate’s Court, Onondaga County, admitted her will to probate on May 14,1991. Appellant, her surviving spouse, filed a notice of election, which was given effect by the Surrogate’s Court (EPTL 5-1.1). The election and the decree effectuating it are not at issue here.

Subsequently, however, appellant filed objections to the proposed accounting for the estate. He particularly objected to the exclusion of inter vivas trust assets from the estate accounting for purposes of computing his elective share. The Surrogate sustained the objection and decreed that the assets of the trust were part of decedent’s estate.

The Appellate Division disagreed and modified so much of the decree as had included the trust in the estate for purposes of determining appellant’s elective share. The Appellate Division held that the trust was not a testamentary substitute under EPTL 5-1.1 because the transfer was irrevocable and the decedent had relinquished the right to appoint herself or her estate as beneficiary. As so modified, the Appellate Division affirmed. The validity of the trust, as such, is also not at issue on this appeal.

The answer to the question of whether the decedent’s inter vivas trust constitutes a testamentary substitute depends on the application of EPTL 5-1.1 (b) (1) (E). That statute ordains that a transfer of property during the lifetime of a donor may be deemed a testamentary substitute when the disposition is "in trust or otherwise, to the extent that the decedent at the date of his [or her] death retained, either alone or in conjunction with another person, by the express provisions of the disposing instrument, a power to revoke such disposition or a power to consume, invade or dispose of the principal” (emphasis added). In construing and applying this important safeguard, this Court has strongly reinforced the legislative intent and history underlying its enactment (Matter of Riefberg, 58 NY2d 134, 139; Matter of Agioritis, 40 NY2d 646, 649-650).

The context of this dispute is the surviving spouse’s right of election, whose roots are found in former Decedent Estate Law § 18, which, in turn, abolished the common-law rights of dower and curtesy. In their place, a surviving spouse was given a right to elect to take a percentage share of a deceased spouse’s estate, limited to assets passing under a will.

Experience developed under that statute indicated the right of election protection for surviving spouses could be easily evaded by timely use of various inter vivas transfers. Adjudicative efforts to recapture asset transfers, which had as their sole purpose the circumvention of the rights of the surviving spouse, proved inadequate or uneven (compare, Matter of Halpern, 303 NY 33; Matter of Crystal, 39 NY2d 934; with Newman v Dore, 275 NY 371). Thus, the Legislature initiated a special study for the purpose of proposing legislation which would more effectively protect the survival rights of spouses (3d Report of Temp St Commn on Estates ["Bennett Report”], 1964 NY Legis Doc No. 19, at 11). The Bennett Report concluded that certain inter vivas transfers should be subject to a surviving spouse’s right of election against a deceased spouse’s total testamentary dispositional plan.

The Bennett Report suggested that the Legislature follow the basic approach outlined in the Report of the New York State Bar Association Committee on Trusts and Estates, which declared that "whatever test or approach is used, the following types of transfers might be considered subject to the elective rights of the surviving spouse * * * [including those] where a power of appointment has been retained” (1964 NY Legis Doc No. 19, at 138 [emphasis added]). That is the only type at issue here. While the precise proposed phrasing did not find its way into the law, the enacted version had the same goal and purpose, as reflected in EPTL 5-1.1. The history and language thus strongly demonstrate that the intent behind the "testamentary substitute” protection for the surviving spouse’s right of election was to fold into the estate those assets over which a settlor retains meaningful control in addition to the right to receive the lifetime income.

Applying the reasonable and fair interpretation of the statute’s words and purpose to the instant case, we conclude that Dorothy Reynolds’ retained power of appointment, though limited, left her with meaningful control over the trust during her lifetime, in contravention of the statute’s explicit and intended protection. Because the settlor, despite her general relinquishment of title and ownership of the property, was free to designate any person, charity or entity as a beneficiary of the trust except for herself, her spouse or her estate and creditors, she possessed personal power to execute what were essentially testamentary transfers to any number of other specific beneficiaries of her choosing. This was a functional substitute allowing disposal of the entire trust corpus by way of one or a series of specific bequests that constitute a forbidden reserved "power to consume, invade or dispose" (EPTL 5-1.1 [b] [1] [E]). The power here to designate many beneficiaries or classes is essentially indistinguishable from the power to dispose of the principal of the trust as contemplated by the statute (EPTL 5-1.1 [b] [1] [E]; see, Matter of DeVita, 141 AD2d 46, 53).

The respondents estate representatives nevertheless urge a narrow construction of the statute, relying on this Court’s Matter of Crystal (39 NY2d 934, supra) and the Appellate Division’s holding in the instant case. We held in Crystal that the retention of a power of appointment does not, by itself, cause a transfer to be deemed a testamentary disposition or substitute. Notably, though, the transfer there occurred prior to the effective date of the testamentary substitute statute that governs this case. Thus, Crystal does not support or compel the result that respondents urge. Moreover, the restrained reading and reach they would impose on the statutory language would frustrate the Legislature’s remedial intent to provide greater protection for surviving spouses, not only against outright disinheritance, but also against attempted lifetime evasions of the plain import of the statutory scheme and its balanced policy.

A brief comment is also necessary to answer respondents’ argument that the power of appointment terminated one day prior to the settlor’s death and, therefore, was not a testamentary power. This power of appointment is no less testamentary here because it purports to expire the day before the settlor’s death, particularly since this limitation is temporally indeterminate. Since the termination date of the power cannot be ascertained with any certainty until after the death of the settlor, it is illusory in this case and effects no cognizable or realistic limitation on the exercise of the meaningful power retained by the settlor during virtually her entire lifetime.

The argument concerning the Surrogate’s determination that the award of attorney’s fees was reasonable, as affirmed by the Appellate Division, is without merit. Thus, no discussion of that issue is warranted.

Accordingly, the order of the Appellate Division should be modified, with costs payable out of the estate to all parties appearing separately and filing separate briefs, by reinstating the order of Surrogate’s Court, Onondaga County, in accordance with this opinion and, as so modified, affirmed.

Chief Judge Kaye and Judges Simons, Titone, Smith, Levine and Ciparick concur.

Order modified, etc.

       Because Dorothy Reynolds died in 1989, the question of whether her trust is a testamentary substitute must be determined under EPTL 5-1.1. That statute has been replaced by EPTL 5-1.1-A for decedents dying on or after September 1, 1992 (see, L 1992, ch 595,10; see also, Turano, Supp Practice Commentaries, McKinney’s Cons Laws of NY, Book 17B, EPTL 5-1.1, 1996 Pocket Part, at 2).


author: Simons, J. Bellacosa, J.

text:
    [664 NE2d 1212, 642 NYS2d 150]
    The People of the State of New York, Respondent, v Jose Laureano, Also Known as Eddie, Appellant.
    Argued January 4, 1996;
    decided March 26, 1996

      POINTS OF COUNSEL

      Mitchell J. Briskey, New York City, Daniel L. Greenberg and Richard Joselson for appellant.
    Appellant’s sentences should be modified to run concurrently, because the act forming the basis of the manslaughter conviction was also a material element of the robbery conviction. (People v Young, 191 AD2d 605; People v Catone, 65 NY2d 1003; People v Lopez, 28 NY2d 148; Matter of Kisloff v Covington, 73 NY2d 445; People v Callahan, 80 NY2d 273; People v Seaberg, 74 NY2d 1; People v Leabo, 196 AD2d 910, 84 NY2d 952; People v Day, 73 NY2d 208; People v Derhi, 110 AD2d 709.)

      Robert M. Morgenthau, District Attorney of New York County, New York City (Sylvia Wertheimer and Eleanor J. Os-trow of counsel), for respondent.
    The Penal Law does not bar the consecutive sentences negotiated as part of the plea agreement. (People v Day, 73 NY2d 208; People v Brown, 80 NY2d 361; People v Underwood, 52 NY2d 882; People v Griffin, 7 NY2d 511; People v Clairborne, 29 NY2d 950; People v Adams, 57 NY2d 1035; People v Francis, 38 NY2d 150; People v Pelchat, 62 NY2d 97; People v Foster, 19 NY2d 150; People v Di Lapo, 14 NY2d 170.)
   OPINION OF THE COURT

Simons, J.

The issue presented is whether Penal Law § 70.25 (2) requires that defendant be sentenced to concurrent sentences for convictions of manslaughter in the first degree and robbery in the first degree, when the same act caused the victim’s serious physical injury (constituting a material element of robbery in the first degree) and his death (constituting the crime of manslaughter).

Defendant was indicted for two counts of murder in the second degree and two counts of robbery in the first degree arising from the robbery and death of Steven Zabel. As the result of a plea bargain, he pleaded guilty to one count of manslaughter in the first degree as a lesser included offense of intentional murder and one count of robbery in the first degree in satisfaction of all counts of the indictment. At the allocution to the manslaughter count, defendant admitted that while acting in concert with another, he intended to cause Steven Zabel serious physical injury and that he caused Zabel’s death by cutting his throat. Addressing the robbery count, defendant admitted that he and his accomplice forcibly stole property from Zabel and that they caused him serious physical injury during the commission of the robbery. Following the allocution the court imposed consecutive terms of imprisonment as the parties had agreed.

Defendant maintains that the sentences must run concurrently and are therefore illegal. He may advance that contention on appeal, notwithstanding his plea of guilty (see, People v Seaberg, 74 NY2d 1, 9; People v Francabandera, 33 NY2d 429, 434, n 2; People v Lopez, 28 NY2d 148, 151-152).

The Penal Law provides that concurrent sentences must be imposed "for two or more offenses committed through a single act or omission, or through an act or omission which in itself constituted one of the offenses and also was a material element of the other” (Penal Law § 70.25 [2]). Thus, sentences imposed for two or more offenses may not run consecutively: (1) where a single act constitutes two offenses, or (2) where a single act constitutes one of the offenses and a material element of the other (People v Catone, 65 NY2d 1003, 1004-1005; see also, People ex rel. Maurer v Jackson, 2 NY2d 259, 264). When consecutive sentences are imposed, the People are obligated to establish their legality (see, People v Day, 73 NY2d 208, 211).

In determining whether concurrent sentences are required, the sentencing court must first examine the statutory definitions of the crimes for which defendant has been convicted (see, People v Day, 73 NY2d, at 211, supra; People v Catone, 65 NY2d 1003, 1005, supra; see also, People v Di Lapo, 14 NY2d 170, 172). Because both prongs of Penal Law § 70.25 (2) refer to the "act or omission,” that is, the "actus reus” that constitutes the offense (see, Penal Law § 15.00 [1] [bodily movement]; Penal Law § 15.00 [3] [failure to act]), the court must determine whether the actus reus element is, by definition, the same for both offenses (under the first prong of the statute), or if the actus reus for one offense is, by definition, a material element of the second offense (under the second prong). If it is neither, then the People have satisfied their obligation of showing that concurrent sentences are not required (see, People v Day, 73 NY2d, at 211, supra; compare, People v Catone, supra; People v Young, 191 AD2d 605; People v Grant, 96 AD2d 867). If the statutory elements do overlap under either prong of the statute, the People may yet establish the legality of consecutive sentencing by showing that the "acts or omissions” committed by defendant were separate and distinct acts (see, People v Brown, 80 NY2d 361, 364; People v Truesdell, 70 NY2d 809, 811; People v Brathwaite, 63 NY2d 839, 843; People v Di Lapo, supra).

Defendant maintains that the offense of manslaughter in the first degree constitutes a material element of robbery in the first degree. The "act or omission” that constitutes manslaughter in the first degree is "causing] the death of [a] person or of a third person” while intending to cause serious physical injury (Penal Law § 125.20 [1]). A person commits robbery in the first degree when he forcibly steals property and "in the course of the commission of the crime or of immediate flight therefrom, he or another participant in the crime * * * [clauses serious physical injury to any person who is not a participant in the crime” (Penal Law § 160.15 [1]). By definition, the act of causing death is subsumed within the element of causing serious physical injury (see, Penal Law § 10.00 [10]). Thus, the statutory comparison reveals that the act constituting manslaughter in the first degree can be a material element of robbery in the first degree, and accordingly, at this first analytical step, the People have failed to establish the legality of consecutive sentences.

The People maintain, however, that manslaughter in the first degree cannot constitute a material element of robbery in the first degree because the mental states of the two crimes do not match, and thus the whole of the manslaughter offense does not constitute any single material element of robbery in the first degree. But Penal Law § 70.25 (2) does not require incorporation of every element of the first offense into the material element of the other; the statute requires only incorporation of the "act or omission”, that is, the bodily movement or failure to act that constitutes the offense (see, Penal Law § 15.00 [1], [3]; compare, Penal Law § 15.00 [6]).

The People next contend that concurrent sentences are not required because the crimes involved two separate and distinct acts. They must establish that claim by identifying the facts which support their view (see, People v Underwood, 52 NY2d 882, 883). They may offer facts from the trial record where there has been a trial (see, People v Di Lapo, 14 NY2d, at 173, supra), and where defendant has pleaded guilty to one or more counts alleged in the indictment, they may rely on the allegations of those counts as well as the facts adduced at the allocution (see, People ex rel. Maurer v Jackson, 2 NY2d, at 263-264, supra). Where defendant has been convicted upon a plea to a lesser offense than that charged in the indictment, the People may rely only on those facts and circumstances admitted during the plea allocution (see, People v Griffin, 7 NY2d 511, 515). Here, defendant pleaded guilty to the robbery count charged in the indictment and manslaughter in the first degree as a lesser included offense of the intentional murder count. Thus, the People may rely on facts alleged in the indictment with respect to the robbery offense, but only the allocution with respect to the manslaughter offense.

When defendant was allocuted in this case, he admitted that he caused Zabel’s death by cutting his throat and further admitted that he forcibly stole property from Zabel and caused him serious physical injury. The only admitted act relevant to an injury was the act of cutting the victim’s throat. The robbery count of the indictment provided no additional facts. Thus, the People have advanced no facts supporting a view that Zabel’s serious physical injury was caused by an act other than the homicidal act (compare, People v Tanner, 30 NY2d 102, 108; People v Di Lapo, supra). Accordingly, the People have failed to establish that the act constituting the manslaughter offense was an act separate and distinct from that element of robbery in the first degree.

Given the penal statutes and facts involved in this case, the imposition of consecutive sentences for manslaughter and robbery was illegal. Because the People no longer request vacatur of defendant’s guilty pleas if we find the sentences illegal, we have no occasion to consider whether vacatur would be a proper remedy when defendant has agreed to the sentence as part of a plea bargain. Defendant’s sentences should be modified to run concurrently (see, People v Leabo, 84 NY2d 952; People v Catone, supra).

Accordingly, the order of the Appellate Division should be modified to provide that defendant’s sentences for manslaughter in the first degree and robbery in the first degree run concurrently and, as so modified, affirmed.

Bellacosa, J.

(dissenting). I would uphold the consecutive sentences imposed by the trial court after defendant’s guilty plea to lesser charges under a four-count indictment charging murder and other criminal acts. At the defendant’s request, the People agreed to the lesser plea, and the Trial Justice approved the mutually beneficial bargain, which included the sentence particulars (see, CPL 220.30 [3] [a] [i]). The three-way consensus achieved by the essential participants at the trial level and the finality of this resolution of the criminal proceeding are nevertheless erased upon defendant’s ultimate appeal to this Court, in which he now successfully attacks the legality of the agreed-to consecutive sentences (see, Penal Law § 70.25 [2]).

My view of this case, which coincides with that of the two lower courts, rests on a more flexible sense of the governing legal principles as applied to this particular situation. Yet, I cannot disagree entirely with the taut logic of the statutory interlocks that forms the basis of the majority’s interpretation, which significantly curtails sentencing courts’ discretion under Penal Law § 70.25 (2). Ultimately, however, I vote to affirm so that I may respectfully express some additional guidance and special emphasis for the Bench and Bar so that they may reach more fruitful outcomes in future dispositions of such cases. Since the overwhelming number of criminal cases are disposed of by negotiated guilty pleas and sentencing bargains, all participants — particularly overburdened trial courts charged with approving such resolutions — must guard, against the delayed overturnings that are built-in at the very same time that these cases are "finally” settled by the parties at the trial level. Thus, trial courts must undertake an extra measure of probity and in-depth examination of the governing principles as applied to the nuanced features of each plea deal.

Part of my difficulty with this case and its serious precedential and practical consequences is that I am not persuaded that the crime of manslaughter in the first degree inevitably constitutes an element of the crime of robbery in the first degree for purposes of the restrictions prescribed in Penal Law § 70.25. The determination that courts in these circumstances need examine only the actus reus of manslaughter — the physical act of the homicide — to determine whether it "in itself’ constituted the "serious physical injury” element of robbery in the first degree (majority opn, at 643), misses the functional objective of the plain language of Penal Law § 70.25 (2) and of this Court’s precedents. That section provides:

"When more than one sentence of imprisonment is imposed on a person for two or more offenses committed through a single act or omission, or through an act or omission which in itself constituted one of the offenses and also was a material element of the other, the sentences * * * must run concurrently” (Penal Law § 70.25 [2] [emphasis added]).

In my view, the statute states and contemplates that the "act or omission” must in its entirety constitute one of the crimes for which a conviction adheres, while at the same time constituting one element of the other crime for which there has also been a conviction (see, People v Day, 73 NY2d 208, 211; see also, People v Catone, 65 NY2d 1003, 1005).

While the statutory definitions of "act” and "omission” do refer only to "actus reus” conduct (see, Penal Law § 15.00 [1], [3]), this Court’s precedents and Penal Law § 70.25 (2) nevertheless mandate that the "act or omission” comprise the entire first offense and an element of the second one (see, People v Day, supra; People v Catone, supra; People ex rel. Maurer v Jackson, 2 NY2d 259, 264). Therefore, the entire crime of manslaughter in the first degree should not be deemed an element of robbery in the first degree for purposes of the sentencing limitation at issue here. To be classified as such, the statutory definition of the manslaughter offense would have to encompass "a necessary component in the legislative classification and definitional sense” (People v Day, supra, at 211). Yet, manslaughter in the first degree contains an additional element, namely "intent to cause serious physical injury” (Penal Law § 125.20 [1]), which does not inexorably encompass a "necessary component” of the crime of robbery in the first degree. Instead, that crime is elevated to the first degree by the actual causing of "serious physical injury” with no corresponding requirement of intent to cause such injury (see, People ex rel. Maurer v Jackson, supra, at 265). Thus, these crimes are — or should be deemed — legally distinct for the purposes of this curtailment of judicial sentencing authority.

Moreover, the aggravating element of robbery in the first degree in this case is that the defendant "[clauses serious physical injury” (Penal Law § 160.15 [1]). For purposes of the sentencing restriction and as commonly understood, though, "death” is different (Penal Law § 125.20 [1]) and does not, by tautological compulsion, always have to equate with "serious physical injury” as otherwise generally defined by Penal Law § 10.00 (10). That section defines "serious physical injury” in part as "physical injury * * * which causes death” (Penal Law § 10.00 [10]). The "death” element of manslaughter, by contrast, ensues when the perpetrator actually "causes the death of such person” (Penal Law § 125.20 [1] [emphasis added]). While these two ingredients share similarities, they are not, in essence, the same. It need not be held that causing the death of another individual is identical to causing serious physical injury, even if that injury results in the death of the victim. The act, to be sure, started an inexorable process that ultimately caused death, but at some later temporal and naturally attenuated point. In this case, for purposes of a sentencing limitation statute, the intended causation of serious physical injury by the act of slitting the victim’s throat can be treated as factually and conceptually distinct from the victim’s ultimate death.

It should not be overlooked in this regard that the Trial Justice in this very case possessed the discretion to impose concurrent sentences for the two serious crimes that constituted the lesser plea and sentence deal made by the parties. That deviation from the parties’ agreement, however, would have required the prosecutor’s consent. Thus, Trial Judges will have to be skeptically vigilant concerning all the theoretical permutations that will have to be exhaustively examined before any consecutive sentence arrangements are approved, even when parties appear before sentencing courts in total agreement, with what appears to be a reasonable, fair and final resolution of criminal proceedings.

Finally, to illustrate but one of the peculiar anomalies that may be wrought by this unnecessary restriction on trial court sentencing authority, I point out the diametrically different outcome if, instead of pleading guilty to robbery in the first degree, the defendant had agreed to plead guilty to robbery in the third degree, the lowest degree of robbery (Penal Law § 160.05). In that circumstance, consecutive sentences for robbery, third degree, and manslaughter, first degree, would not be legally forbidden, because causing serious physical injury to another is not an element of robbery in the third degree (Penal Law § 160.05). What a strange statute Penal Law § 70.25 turns out to be when it allows a trial court to use the greater consecutive sentence regimen for a criminal who admits to committing only a simple robbery, but forbids it for one who additionally admits to a more serious robbery that includes causing serious physical injury. I do not believe that the Legislature could have intended such a topsy-turvy result or the many other incongruous combinations that will unfold (see, McKinney’s Cons Laws of NY, Book 1, Statutes § 92, at 176). Yet, that is what the rationale of this case projects for the future operation and application of this sentencing restriction statute.

In the end, defendant is allowed to keep the benefit of the lesser plea bargain, and yet belatedly escape from the agreed-upon sentence, the minimum of which is cut nearly in half by being reduced from 15 years to 81/s years. I conclude with the observation that this case is not about plea bargaining as such, or disproportionate prosecutorial power, or even defendants’ rights and protections in that arena. It is simply about judicial sentencing discretion, the legislative effort to restrict it in a narrow range of circumstances, and this Court’s constricting interpretation of the pertinent statute as applied to this and like fact patterns.

Chief Judge Kaye and Judges Titone, Smith, Levine and Ciparick concur with Judge Simons; Judge Bellacosa dissents in a separate opinion.

Order modified in accordance with the opinion herein and, as so modified, affirmed.