text:
    Aetna Life and Casualty Company, Respondent, v Kenneth R. Nelson, Individually and as Guardian ad Litem of Gloria A. Nelson and as Natural Guardian of Sheryl Nelson, Appellants.
    Argued February 6, 1986;
    decided April 3, 1986

      POINTS OF COUNSEL

      John J. Nicit for appellants.
    I. The court below properly applied the three-year limitation. (Racine v Morris, 201 NY 240; Glynn v New York Cent. & Hudson Riv. R. R. Co., 125 App Div 186; Healy v Rennert, 9 NY2d 202; Coyne v Campbell, 11 NY2d 372; Greenspan v Travelers Ins. Co., 98 Misc 2d 43.) II. A "recovery” by the Nelsons as against the State occurred when judgment was entered. (Burns v Delaware Lackawanna & W. R. R. Co., 135 NY 268; Reilly v Lee, 33 App Div 201; Matter of Morsillo [La Rose — Backer], 17 AD2d 894; Matter of Steinbeck v Gerosa, 4 NY2d 302; Cameron Estates v Deering, 308 NY 24; Matter of Granger v Urda, 44 NY2d 91; Gonzalez v City of New York, 124 Mise 2d 459.)

      Robert J. Clune for respondent.
    I. Aetna’s action to enforce a liability created or imposed by statute was timely. (Commissioners of State Ins. Fund v Parrilla, 31 Misc 2d 835; Flanagan v Mount Eden Gen. Hosp., 24 NY2d 427; Utica Mut. Ins. Co. v Employers Mut. Liab. Ins. Co., 57 Misc 2d 764; Liberty Mut. Ins. Co. v Borsari Tank Corp., 248 F2d 277; Matter of Lahm, 179 App Div 757, 223 NY 573.) II. Where a statutory lien is created without any remedy for enforcement of the lien, the limitations statute is six years. (Safeco Ins. Co. v Jamaica Water Supply Co., 83 AD2d 427, 57 NY2d 994; Marine Midland Bank v Marcal Enters., 91 Misx 2d 810; State of New York v City of Binghamton, 72 AD2d 870; Van Dussen-Storto Motor Inn v Rochester Tel. Corp., 63 AD2d 244; People v Duggan, 30 AD2d 736; Bogartz v Astor, 7 Misc 2d 158.)
   OPINION OF THE COURT

Chief Judge Wachtler.

The defendants, injured in a one-car accident on a State highway, have been compensated twice for the same medical expenses and lost earnings; first by their own insurance company under the No-Fault Law (Insurance Law art 18 [now art 51]) and subsequently by the State in settlement of a suit brought in the Court of Claims. In the case now before us, the insurance company seeks to recoup the benefits it paid to the defendants by enforcing a statutory lien against that portion of the damages they received from the State which represents reimbursement for losses paid by the company (Insurance Law § 673 [2] [now § 5104 (b)]). The only defense raised is the Statute of Limitations. Both of the courts below rejected the defense and grantéd summary judgment to the insurance company. The defendants have appealed by leave of this court.

Two questions are presented by the appeal. First, whether the insurer’s suit is governed by the three-year Statute of Limitations applicable to liabilities created or imposed by statute (CPLR 214 [2]), or by the six year "residual” Statute of Limitations (CPLR 213 [1]). Second, whether the insurer’s cause of action against the defendants accrued when the defendants’ judgment against the State was entered, or later, when the case was finally settled on appeal and the State actually paid the defendants.

On August 14, 1977 defendant, Kenneth Nelson, was injured when he lost control of his vehicle and collided with a utility pole after skidding on water which had accumulated on Route 89 near Ithaca. Two passengers in the car were also injured. His infant daughter received minor injuries, but his wife sustained permanent brain damage rendering her incompetent. Their insurer, Aetna Life and Casualty Company, paid them "first party benefits” under the No-Fault Law, for medical expenses and lost earnings (Insurance Law § 671 [2] [now § 5102 (b)]). The Nelsons subsequently filed a claim against the State for damages on the theory that the State had been negligent in maintaining the highway. After a trial, the Court of Claims returned a verdict for the defendants, finding the State primarily liable for the injuries (Nelson v State of New York, 105 Mise 2d 107). The Court of Claims decided the case on September 8, 1980 and on September 23, 1980, judgment was entered against the State.

The State immediately appealed on the ground the award was excessive, thus staying enforcement of the judgment (CPLR 5519 [a] [1]). The defendants cross-appealed. The parties then entered into a settlement reducing the judgment, and discontinued the appeals. An order approving the settlement was entered on April 28, 1981. The State paid the defendants on May 28, 1981. It is conceded that a portion of the damages paid by the State represents reimbursement for lost earnings and medical expenses, including amounts paid by Aetna as first-party benefits.

On November 7, 1983, Aetna commenced this action against the defendants to recover the amounts which the company had paid the defendants as first-party benefits. The company relied on Insurance Law § 673 (2) which gives an insurance company a lien against any recovery obtained by a "covered person” (here the Nelsons) against a "non-covered person” (in this instance the State), "to the extent of benefits paid or payable by it to the covered person”. The only defense raised was the Statute of Limitations. The defendants contended that the plaintiffs suit on the lien was governed by the three-year statute applicable to liabilities created or imposed by statute (CPLR 214 [2]), and that it accrued on September 23, 1980, when their judgment against the State was entered. Because Aetna’s suit for recoupment was commenced more than three years after that date, the defendants moved to dismiss on the ground that the suit was time barred. Aetna moved for summary judgment.

The trial court denied the motion to dismiss. The court concluded that the insurance company’s suit was to prevent unjust enrichment, an action recognized in equity, that the statute creating a lien thus did not create a new cause of action, and that the defendants’ suit was governed by the six-year Statute of Limitations applicable to actions for which no other period is prescribed by law (CPLR 213 [1]). In the alternative, the court held that if the three-year statute is applicable, the company’s action was timely because it did not accrue until the defendants had actually received the "double payment” from the State and thus became obligated to reimburse their insurer. Finally, noting that no other issues were in dispute, the court granted the company’s motion for summary judgment.

The Appellate Division affirmed. The court held that the three-year statute applied because the defendants’ liability, if not "created” by statute, was now "imposed” by the statute creating the lien. With respect to accrual, the court agreed with the trial court that the insurer’s action for recoupment accrued when the defendants’ suit against the State was finally settled, and not when the judgment was entered, noting that enforcement of the judgment after entry was stayed as a result of the State’s appeal (112 AD2d 15).

We agree with the Appellate Division that the three-year statute is applicable, but not for the reasons stated by that court. CPLR 214 (2) prescribes a three-year Statute of Limitations for "an action to recover upon a liability, penalty or forfeiture created or imposed by statute”. It has been suggested that because the statute refers to liabilities "created or imposed” by statute, it applies not only to liabilities created by statute, but also to common-law liabilities codified or adopted by statute (see, 35 NY Jur, Limitations and Laches, § 56, at 555). However, we have consistently held that the statute, like its predecessor, only governs liabilities which would not exist but for a statute (State of New York v Stewart’s Ice Cream Co., 64 NY2d 83; State of New York v Cortelle Corp., 38 NY2d 83; see also, Koerner v State of New York, 62 NY2d 442; Murphy v American Home Prods. Corp., 58 NY2d 293). It does not apply to liabilities existing at common law which have been recognized or implemented by statute (State of New York v Stewart’s Ice Cream Co., supra; State of New York v Cortelle Corp., supra). Thus, if the statutory lien merely codifies or implements an existing liability, the three-year statute would be inapplicable.

Insurance Law § 673 (2) offers an insurer two means for recouping first-party benefits paid to a covered person for injuries caused by a noncovered person. Both of the procedures bear some relationship to common-law actions. First, the insurer has the right to proceed directly against the tortfeasor, a right akin to the common-law right of subrogation (Safeco Ins. Co. v Jamaica Water Supply Co., 83 AD2d 427, affd 57 NY2d 994). Second, the insurer may proceed against the injured party by asserting a lien against any recovery obtained by that party from the tort-feasor. This option also had a counterpart in the case law, which, even before the adoption of the statutory lien, permitted this type of recoupment under certain circumstances (see, e.g., 31 NY Jur, Insurance, §§ 1632, 1633; Rights and Remedies of Insurer Paying Loss as Against Insured Who Has Released or Settled With Third Person Responsible For Loss, Ann., 51 ALR2d 697; cf. Frank v Liberty Mut. Ins. Co., 61 NY2d 994; but also see, Healy v Rennert, 9 NY2d 202; Coyne v Campbell, 11 NY2d 372).

We have previously held that Insurance Law § 673 (2) creates a new liability to the extent it permits an insurance company to exercise the first option mentioned above, by seeking recoupment directly from the tort-feasor (Safeco Ins. Co. v Jamaica Water Supply Co., supra). In that case, it was noted "that the 'no-fault’ concept embodied into statute (Insurance Law, art 18) modifies the common-law system of reparation for personal injuries under tort law (Montgomery v Daniels, 38 NY2d 41, 46), and that first-party benefits are a form of compensation unknown at common law, resting on predicates independent of the fault or negligence of the injured party. Hence, the provisions of subdivision 2 of section 673 in general engender a liability of a statutory origin” (Safeco Ins. Co. v Jamaica Water Supply Co., 83 AD2d 427, 431, supra). In short, the No-Fault Law does not codify common-law principles; it creates new and independent statutory rights and obligations in order to provide a more efficient means for adjusting financial responsibilities arising out of automobile accidents (Montgomery v Daniels, supra). Thus, both options made available to the insurer pursuant to Insurance Law § 673 (2) for recouping amounts paid as first-party benefits create new liabilities subject to the three-year Statute of Limitations (CPLR 214 [2]).

The only remaining question is when the Statute of Limitations commenced on the insurance company’s right to foreclose the lien. As indicated the defendants contend the date on which their judgment against the State was entered is controlling.

The Statute of Limitations begins to run once a cause of action accrues (CPLR 203 [a]), that is, when all of the facts necessary to the cause of action have occurred so that the party would be entitled to obtain relief in court (1 Weinstein-Korn-Miller, NY Civ Prac ¶ 201.02, at 2-9; City of New York v State of New York, 40 NY2d 659, 668). Thus the question is not when the lien first attached, or when the insurer could have established the lien (cf. Biette v Baxter, 57 NY2d 698) but when the insurance company first had the opportunity to enforce or foreclose the lien and actually recover from the defendants the amounts it had previously paid them as first-party benefits under the No-Fault Law.

One of the primary purposes of the No-Fault Law is to guarantee immediate compensation for basic economic loss, including lost wages and medical expenses, to persons injured in automobile accidents (Montgomery v Daniels, 38 NY2d 41, supra). The purpose of the lien created by Insurance Law § 673 (2) is to prevent a double recovery of basic economic loss by the injured person (Safeco Ins. Co. v Jamaica Water Supply Co., 83 AD2d 427, 431, affd 57 NY2d 994, supra; Acevedo v Government Employees Ins. Co., 87 AD2d 600, lv denied 57 NY2d 605; Matter of Adams [Government Employees Ins. Co.], 52 AD2d 118). Thus, in cases where an injured person who has obtained reimbursement for lost wages and medical expenses from an insurer, is subsequently reimbursed by the tort-feasor for the same injuries, a lien attaches on behalf of the insurer to that portion of the recovery (Acevedo v Government Employees Ins. Co., supra; United States Fid. & Guar. Co. v Stuyvesant Ins. Co., 61 AD2d 1122).

Under this scheme the insurer’s right to foreclose the lien cannot be said to have accrued on the date the judgment was entered, but before it was actually satisfied. By its terms the lien can only be enforced against "any recovery” obtained by the insured (Insurance Law § 673 [2] [now § 5104 (b)]); the insured is not required to immediately return to the insurance company amounts paid as first-party benefits, in advance, or expectation, of obtaining satisfaction on a judgment entered against the third-party tort-feasor. It is only when the insured has actually obtained funds representing a "double recovery” for basic economic loss that the duty to reimburse the insurer, and the insurer’s right to sue for any breach of that duty, can be said to arise. We therefore agree with the determination reached by both of the courts below that Aetna’s cause of action to foreclose its lien did not accrue until the defendants finally settled their case against the State and actually received payment from the State in satisfaction of the modified judgment. Since, as noted, the insurer’s suit to foreclose the lien was commenced within three years of that date, it was timely and the defendants’ motion to dismiss was properly denied.

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

Judges Meyer, Simons, Kaye, Alexander, Titone and Hancock, Jr., concur.

Order affirmed, with costs.

       Insurance Law § 673 (2) (now § 5104 [b]), states: "In any action by or on behalf of a covered person, against a non-covered person, where damages for personal injuries arising out of the use or operation of a motor vehicle or a motorcycle may be recovered, an insurer which paid or is liable for first party benefits on account of such injuries shall have a lien against any recovery to the extent of benefits paid or payable by it to the covered person. No such action may be compromised by the covered person except with the written consent of the insurer, or with the approval of the court, or where the amount of such settlement exceeds fifty thousand dollars. The failure of such person to commence such action within two years after the accrual thereof shall operate to give the insurer a cause of action for the amount of first party benefits paid or payable against any person who may be liable to the covered person for his personal injuries, which cause of action shall be in addition to the cause of action of the covered person; provided however, that in any action subsequently commenced by the covered person for such injuries, the amount of his basic economic loss shall not be recoverable.”


source: Caselaw Access Project

author: Meyer, J.

license: Public Domain

text:
    In the Matter of the Estate of Jacob L. Greatsinger, Deceased. Walter G. Farrell et al., Respondents; John J. Jennings et al., Appellants.
    Decided April 1, 1986

      APPEARANCES OF COUNSEL

      John J. Jennings and Donald H. Tuttle, appellants pro se.

      Joseph C. Buck for respondents.
   OPINION OF THE COURT

Meyer, J.

It was an abuse of discretion as a matter of law for the Appellate Division to direct that the fees of counsel for the unsuccessful contestants in a will construction proceeding for the remainder of a trust of 10% of the residuary estate be paid out of the trust because it was the only one of several trusts created by the testator which was the subject of the proceeding. Other factors that should have been considered by the Appellate Division in making its determination but were ignored were that the proceeding had been brought by the trustee, not by the unsuccessful contestants, that the latter had received distribution of 50% of the residuary estate and that the fees awarded together with the fees allowed the trustee’s attorney and the fees payable by the successful contestants would reduce the remainder of the 10% trust by more than 20%. The order of the Appellate Division affirming the Surrogate’s order fixing counsel fees pursuant to the direction of the Appellate Division should, therefore, be reversed, with costs, and the application of the unsuccessful contestants for an award of counsel fees out of the estate should be denied.

I

The will of Jacob Greatsinger divided his residuary estate into six separate trusts. Of one, consisting of 50% of the residuary estate, Edna G. Farrell was the life tenant. The remaining 50% was divided into five trusts of 10% each, of one of which Elsie A. Hammond was life tenant. Because Elsie Hammond outlived all of the other life tenants (she was 97 when she died), the only part of the residuary estate remaining in the hands of the trustees was the corpus of Elsie’s 10% trust. The Greatsinger will being unclear concerning disposition of the remainder of Elsie’s trust, the trustee began a construction proceeding. The issue for determination in that proceeding was whether Chauncey B. Hammond, Elsie’s brother, had a vested or a contingent remainder in that trust upon termination of her life estate. If vested, the trust corpus, valued at some $53,000, belonged to his heirs (hereafter "Chauncey’s heirs” for short); if contingent, they would receive but 10% of the corpus, the remaining 90% going to the remaindermen of the other residuary trusts, with the remaindermen of Edna Farrell’s 50% trust (hereafter "Edna’s remaindermen”) receiving 50% of the corpus.

The Surrogate held that Elsie’s trust passed to Chauncey’s heirs but, as authorized by SCPA 2301 (5), reserved for future consideration, pending the outcome of any appeal, the question of counsel fees. Edna’s remaindermen appealed on the merits; Chauncey’s heirs cross-appealed as to counsel fees. The Appellate Division affirmed on the merits, but on the cross appeal directed an award of fees to the remaindermen, citing SCPA 2302 (6), because "the instant proceeding has served to resolve a justifiable doubt as to the testator’s intent caused by the language used in the will” (95 AD2d 123, 128). On remand to the Surrogate, he allowed counsel fees of $5,000, plus disbursements, to the. attorneys for the trustee and of $4,900, plus disbursements, to the attorneys for Edna’s remainder-men. On further appeal by Chauncey’s heirs to the Appellate Division, they did not contest the fee to the trustee’s attorneys, but argued that Edna’s remaindermen, having been unsuccessful, were not entitled to allowance of attorney’s fees. The Appellate Division noted its prior holding "that the proceeding * * * had resolved a justifiable doubt as to the testator’s intent and that counsel fees were appropriate”, and that the present appeal involved the amount and manner of payment of such fees (107 AD2d 873). It held that the Surrogate had not abused his discretion in fixing the amount, and as to the manner of payment ruled "that since only one trust of several created by the will was the subject of these proceedings, the Elsie Hammond Trust, it is entirely appropriate that all fees and disbursements be paid from this source alone” (id., at p 874).

Chauncey’s heirs then appealed under CPLR 5601 (d) from the Appellate Division order affirming the fixing of fees, seeking review of that order and the prior nonfinal order of the Appellate Division directing the allowance of counsel fees. We affirmed the prior nonfinal order, holding that it was not an abuse of discretion as a matter of law for the Appellate Division to direct the allowance of counsel fees, without further specification. (66 NY2d 680.) The appeal from the second Appellate Division determination was, however, dismissed insofar as review of that order was sought without prejudice to a motion for leave to appeal, because that order was not properly before the court for review (CPLR 5501 [b]). Thereafter the court granted appellants’ motion for leave to appeal from that order (Matter of Greatsinger, 67 NY2d 602). The only issue presented by this appeal, therefore, is whether it was an abuse of discretion as a matter of law to award any counsel fees to Edna’s remaindermen. We conclude that it was.

II

Although SCPA 2301 (2) states that, "Any award for costs or an allowance is in all instances discretionary with the court”, and SCPA 2302 (6) authorizes the court in a construction proceeding to "award to a fiduciary or any party to the proceeding * * * counsel fees” (emphasis supplied), those provisions must be read together with SCPA 2301 (4), which provides that, "Except where special provision is otherwise made by law costs or an allowance may be made payable by any party personally or out of the assets of the estate or out of the share or interest of any person or from both in such proportion as directed by the court and justice requires” (emphasis supplied). The phrase "as justice requires” means "that there are no 'as matter of law’ requirements one way or the other as to those matters which are to be dealt with in the discretion of the courts, on all the facts” (Vanderbilt v Vanderbilt, 1 NY2d 342, 353). It grants the court a broad discretion, but not one unrelated to the facts (Johnson v Johnson, 295 NY 477, 481). What it grants is a judicial discretion, which though it "is a phrase of great latitude * * * never means the arbitrary will of the judge” (Tripp v Cook, 26 Wend 143, 152; accord, People v Diaz, 10 AD2d 80, 90; McGurty v Delaware, Lackawanna & W. R. R. Co., 172 App Div 46, 47). Rather, it vests in the court "a discretion which is not to be exercised arbitrarily, and which is subject to review in the Court of Appeals, but only as to whether or not it has been abused and not on its merits” (Cohen and Karger, Powers of the New York Court of Appeals § 149, at 593 [rev ed]; see also, 595; and § 155, at 607). The question we must decide, therefore, is whether in exercising its discretion to allow any fee at all to Edna’s remaindermen, the Appellate Division failed to take into account all of the various factors entitled to consideration (see, H & J Blits v Blits, 65 NY2d 1014; Belachew v Michael, 59 NY2d 1004, 1006).

The factors to be considered in making an award of counsel fees in a will construction proceeding are spelled out by the case law. Prior to the amendment in 1928 of Surrogate’s Ct Act § 278, the predecessor of SCPA 2302 (6), there was no authority to award fees to a party to a construction proceeding other than an executor or trustee, except in cases in which the estate had been enhanced by a surcharge against the executor or trustee, the theory being that the attorneys for individual beneficiaries acted to protect the individual interests of the beneficiaries (Matter of Holden, 126 NY 589; Savage v Sherman, 87 NY 277; Matter of Winburn, 160 Misc 49). Cases decided since that amendment have held an allowance unjustified when the petitioner was not successful and the services rendered were not beneficial to the estate (Matter of Mahlstedt, 234 App Div 891), and when the services were rendered in a proceeding initiated by the trustee, which was represented by its own attorney, and were not required for the protection of any common interest of the party represented by the petitioning attorneys and the trustee (Matter of Wadsworth, 275 NY 590, affg 250 App Div 11, 14). Of interest also, although distinguishable, is Dodd v Anderson (197 NY 466, 472), which characterized as harsh and unjust a rule which "would cast the financial burden of a contest upon those who win it * * * only to realize that [the estate] had been heavily charged or entirely absorbed [by the fees awarded].”

Doubt as to the testator’s intent is a proper basis for the bringing of a construction proceeding and for the allowance of counsel fees to the successful petitioner’s attorneys payable from the general estate rather than by petitioner personally (Matter of Liberman, 6 NY2d 525; Matter of Hedrick, 52 AD2d 1035), or rather than from the trust share of an unsuccessful annuitant (Matter of Fowler, 291 NY 515, affg 265 App Div 617). From this it follows, as held in Matter of James (264 App Div 885), that, "A party instituting a construction proceeding, in good faith, to resolve a justifiable doubt, caused by the language employed in the will, as to the testator’s intent, may be compensated out of the estate for his expenses, although he be unsuccessful in the proceeding”. But, although lack of success does not necessarily bar an award of fees, such fees are generally to be paid out of the principal of all of the trusts rather than out of the trust share of one party, even though the question decided in the construction proceeding concerned the latter’s share, at least where the question was one that had a practical bearing upon other provisions of the will (Matter of Upjohn, 304 NY 366; see, Matter of Fowler, supra). Thus, in Matter of Ablett (3 NY2d 261), we affirmed the Appellate Division’s affirmance of the Surrogate’s award of allowances to attorneys for all parties involved out of the estate, rather than out of that part of the estate passing to the unsuccessful party whose right to receive it gave rise to the construction proceeding, and in so doing noted (3 NY2d, at pp 278-279) that:

"The Surrogate charged the allowances against the entire residuary estate on the theory that the appellants would have gained a substantial amount if their contention had prevailed and that there was no reason to penalize the successful party for the benefit of the unsuccessful parties thereby destroying the legacy by indirection. In affirming the Surrogate’s decree, the Appellate Division wrote: '* * * the appellant charities sought to benefit by a construction that the share of respondent had lapsed, contending vigorously for the entire residuary estate, and it seems inequitable to burden the share of the victorious party with the payment of fees for the losers’ attorneys. He who stands to gain should also stand to lose. The Surrogate has exercised his discretion, which is founded on a good reason and seems to be in accord with the usual practice in construction proceedings, which in a sense are beneficial to the entire estate by clarifying the will [citations omitted].’

"We think nothing more need be said on the subject of allowances.”

None of the above cases is exactly determinative of the issue presented, by this appeal, but from them can be distilled as factors to be considered in determining whether a fee award should be made and from what source it should be paid the following, no one of which is by itself determinative: whether there was a justifiable doubt necessitating construction; who instituted the proceeding; whether the party seeking a fee award acted solely in his own interest or in the common interest of himself and the estate; whether he was successful; whether there was benefit from the attorney’s services to the entire estate or only to the share of the party seeking the award; what the effect of payment of the award will be upon the estate share of the successful party.

The only factor mentioned by the Appellate Division to justify payment from Elsie’s trust alone was that it was the only one of several trusts created by the will that was the subject of the proceeding (107 AD2d, at p 874), and the only factor justifying award of counsel fees at all was that "the instant proceeding has served to resolve a justifiable doubt as to the testator’s intent caused by the language used in the will” (95 AD2d, at p 128). In so doing it ignored the facts that the construction proceeding was begun by the trustee, not by Edna’s remaindermen, that the latter, in arguing, as was their right, that Chauncey’s remainder interest was contingent rather than vested, acted in their own interest rather than in any interest common with the estate, that they had previously received distribution of a trust five times greater than the corpus of Elsie’s trust, that they were unsuccessful, that the fees awarded to the trustee and to Edna’s remaindermen constituted 20% of the corpus of Elsie’s trust, and that the corpus receivable by the successful party, Chauncey’s heirs, would be further reduced by such fees as they may have incurred in connection with the construction proceeding. That Elsie’s trust was the only trust corpus remaining in the trustee’s hands did not require that a fee allowance to the attorney for Edna’s remaindermen be paid out of that trust, for although SCPA 2110 (2) authorizes payment of attorney’s fees only out of the estate, SCPA 2302 (6) makes clear that counsel fees in a construction proceeding constitute an allowance and, as already noted, SCPA 2301 (4) provides that "an allowance may be made payable by any party personally or out of the assets of the estate”.

In sum, it was an abuse of discretion as a matter of law to allow attorney’s fees of Edna’s remaindermen payable from the corpus of Elsie’s trust solely because that was the only corpus in the hands of the trustee when the construction issue ripened, and without taking into consideration that Edna’s remaindermen did not initiate the proceeding, acted in their own rather than any interest common with the trustee, and were unsuccessful, and the substantial detriment (20% plus) to Chauncey’s heirs that would result were the fees awarded Edna’s remaindermen paid from the trust corpus rather than by those remaindermen personally (see, H & J Blits v Blits, 65 NY2d 1014, supra).

For the foregoing reasons, the order of the Appellate Division affirming the Surrogate’s order fixing counsel fees pursuant to the direction of the Appellate Division should be reversed, with costs, and the application of Edna’s remainder-men for an award of counsel fees out of the estate should be denied.

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

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order reversed, etc.

      . [2] A preliminary question concerning preservation arises because although an affidavit in the record recites that a memorandum in opposition to allowance of counsel fees to Edna’s remaindermen was filed with the Surrogate, neither that memorandum nor any other paper in opposition is reproduced as part of the record. But the counsel fee issue having been reserved by the Surrogate pending outcome of the first appeal, as he was authorized by SCPA 2301 (5) to do, SCPA 2302 (6) contemplates direction as to counsel fees by the Appellate Division in the first instance and, as is evident from the opinion of the Appellate Division on the first appeal, the issue was contested in that court. We conclude, therefore, that it has been preserved for review.

      . Laws of 1928 (ch 702), authorized allowance in such a proceeding in the Surrogate’s Court but not for services on appeal (Matter of Watson, 264 NY 697, affg 241 App Div 842; Matter of Winburn, 160 Misc 49). Laws of 1935 (ch 597) expanded that authority to include services on appeal as well.

      . Involved was not a construction proceeding, but whether a person named as executor in a will, who unsuccessfully sought probate of it, could recover the counsel fees incurred.

      . Chauncey’s heirs argue against that conclusion on the basis of the general rule that costs may be denied a successful party, but he never pays them (Stevens v Central Natl. Bank, 168 NY 560, 567). The cost analogy does not stand up in view of the provisions of SCPA 2301 (4) with respect to source of payment and the authorization in SCPA 2302 (6) to award counsel fees to any party.

      . As Surrogate Foley noted in Matter of Winburn (160 Misc 49, 54): "There is a clear distinction between services rendered for the benefit of an estate and services claimed to have been rendered between individual beneficiaries of an estate.”


author: Kaye, J.

text:
    Van Wagner Advertising Corp., Appellant-Respondent, v S & M Enterprises et al., Respondents-Appellants.
    Argued February 12, 1986;
    decided April 1, 1986

      POINTS OF COUNSEL

      Stephen E. Powers and Mary Jo Reich for appellant-respondent.
    The court below erred in denying Van Wagner’s motion to resettle the judgment to provide for specific performance of the lease. (Guinness-Harp Corp. v Schutz Brewing Co., 613 F2d 468; Gardens Nursery School v Columbia Univ., 94 Misc 2d 376; Leasco Corp. v Taussig, 473 F2d 777; Brand v 15 W. 72nd St. Owners Corp., 117 Misc 2d 652; Shapiro v Cohn, 14 Misc 2d 999; Powderly v Colonial Inn, 74 Misc 2d 278; Newburger v American Sur. Co., 242 NY 134.)

      Richard N. Runes and Lauri Cohen for respondents-appellants.
    I. The unambiguous language of section 1.05 gives S & M the right to terminate Van Wagner’s tenancy absent a sale by S & M of the demised premises. (West, Weir & Bartel v Carter Paint Co., 25 NY2d 535; Teitelbaum Holdings v Gold, 48 NY2d 51; Morlee Sales Corp. v Manufacturers Trust Co., 9 NY2d 16; Indovision Enters. v Cardinal Export Corp., 44 AD2d 228, 36 NY2d 811; Tougher Heating & Plumbing Co. v State of New York, 73 AD2d 732; 112 E. 36th St. Holding Corp. v Daffos, 273 App Div 447, 298 NY 763; Sitt v Fifth Ave. Realty Co., 31 Misc 2d 803; Scheele v Waldman, 136 App Div 679; Reeder v Sayre, 70 NY 180.) II. In addition to the clear language of section 1.05, the overwhelming paroi evidence makes it clear that the parties intended that S & M have the right to terminate Van Wagner’s tenancy absent a sale by S & M of the demised premises. (College Auxiliary Servs. v Slater Corp., 90 AD2d 893; Shapiro v Shapiro, 116 Misc 2d 40; Record v Royal Globe Ins. Co., 83 AD2d 154; Chemical Bank v Puro, 106 Misc 2d 363; Creative Foods Corp. v Chef Francisco, 92 AD2d 462.) III. Even if Van Wagner was entitled to damages, the court below erred as to the amount it awarded. (Berley Indus. v City of New York, 45 NY2d 683; Manshul Constr. Corp. v Dormitory Auth., 79 AD2d 383; Fiederlein v New York City Health & Hosps. Corp., 56 NY2d 573.) IV. Van Wagner is not entitled to an award of specific performance, since money damages will suffice. Accordingly, the court below did not err in denying the motion to resettle the judgment. (Schwartz v Church & Commerce Corp., 184 Misc 200; Gardens Nursery School v Columbia Univ., 94 Misc 2d 376; Gilbert v Bunnell, 92 App Div 284; J. N. A. Realty Corp. v Cross Bay Chelsea, 42 NY2d 392; Gordon v Mazur, 284 App Div 289.)
   OPINION OF THE COURT

Kaye, J.

Specific performance of a contract to lease "unique” billboard space is properly denied when damages are an adequate remedy to compensate the tenant and equitable relief would impose a disproportionate burden on the defaulting landlord. However, owing to an error in the assessment of damages, the order of the Appellate Division should be modified so as to remit the matter to Supreme Court, New York County, for further proceedings with respect to damages.

By agreement dated December 16, 1981, Barbara Michaels leased to plaintiff, Van Wagner Advertising, for an initial period of three years plus option periods totaling seven additional years space on the eastern exterior wall of a building on East 36th Street in Manhattan. Van Wagner was in the business of erecting and leasing billboards, and the parties anticipated that Van Wagner would erect a sign on the leased space, which faced an exit ramp of the Midtown Tunnel and was therefore visible to vehicles entering Manhattan from that tunnel.

In early 1982 Van Wagner erected an illuminated sign and leased it to Asch Advertising, Inc. for a three-year period commencing March 1, 1982. However, by agreement dated January 22, 1982, Michaels sold the building to defendant S & M Enterprises. Michaels informed Van Wagner of the sale in early August 1982, and on August 19, 1982 S&M sent Van Wagner a letter purporting to cancel the lease as of October 18 pursuant to section 1.05, which provided:

"Notwithstanding anything contained in the foregoing provisions to the contrary, Lessor (or its successor) may terminate and cancel this lease on not less than 60 days prior written notice in the event and only in the event of:

"a) a bona fide sale of the building to a third party unrelated to Lessor”.

Van Wagner abandoned the space under protest and in November 1982 commenced this action for declarations that the purported cancellation was ineffective and the lease still in existence, and for specific performance and damages.

In the litigation the parties differed sharply on the meaning of section 1.05 of the lease. Van Wagner contended that the lease granted a right to cancel only to the owner as it was about to sell the building — not to the new purchaser — so that the building could be conveyed without the encumbrance of the lease. S & M, in contrast, contended that the provision clearly gave it, as Michaels’ successor by virtue of a bona fide sale, the right to cancel the lease on 60 days’ notice. Special Term denied Van Wagner’s motion for a preliminary injunction, concluding that the lease by its terms gave S & M the authority to cancel and that Van Wagner was therefore not likely to succeed on the merits.

At a nonjury trial, both parties introduced paroi evidence, in the form of testimony about negotiations, to explain the meaning of section 1.05. Additionally, one of S & M’s two partners testified without contradiction that, having already acquired other real estate on the block, S & M purchased the subject building in 1982 for the ultimate purpose of demolishing existing buildings and constructing a mixed residential-commercial development. The project is to begin upon expiration of a lease of the subject building in 1987, if not sooner.

Trial Term concluded that Van Wagner’s position on the issue of contract interpretation was correct, either because the lease provision unambiguously so provided or, if the provision were ambiguous, because the paroi evidence showed that the "parties to the lease intended that only an owner making a bona fide sale could terminate the lease. They did not intend that once a sale had been made that any future purchaser could terminate the lease at will.” Trial Term declared the lease "valid and subsisting” and found that the "demised space is unique as to location for the particular advertising purpose intended by Van Wagner and Michaels, the original parties to the Lease.” However, the court declined to order specific performance in light of its finding that Van Wagner "has an adequate remedy at law for damages”. Moreover, the court noted that specific performance "would be inequitable in that its effect would be disproportionate in its harm to the defendant and its assistance to plaintiff.” Concluding that "[t]he value of the unique qualities of the demised space has been fixed by the contract Van Wagner has with its advertising client, Asch for the period of the contract”, the court awarded Van Wagner the lost revenues on the Asch sublease for the period through trial, without prejudice to a new action by Van Wagner for subsequent damages if S & M did not permit Van Wagner to reoccupy the space. On Van Wagner’s motion to resettle the judgment to provide for specific performance, the court adhered to its judgment.

On cross appeals the Appellate Division affirmed, without opinion. We granted both parties leave to appeal.

Whether or not a contract provision is ambiguous is a question of law to be resolved by a court (Sutton v East Riv. Sav. Bank, 55 NY2d 550, 554). In our view, section 1.05 is ambiguous. Reasonable minds could differ as to whether the lease granted a purchaser of the property a right to cancel the lease, or limited that right to successive sellers of the property (see, Chimart Assoc, v Paul, 66 NY2d 570, 573). However, Trial Term’s alternate finding — that the paroi evidence supported Van Wagner’s interpretation of the provision — was one of fact. That finding, having been affirmed by the Appellate Division and having support in the record, is beyond the scope of our review (see, Huntley v State of New York, 62 NY2d 134, 137). Thus, S & M’s cancellation of Van Wagner’s lease constituted a breach of contract.

Given defendant’s unexcused failure to perform its contract, we next turn to a consideration of remedy for the breach: Van Wagner seeks specific performance of the contract, S&M urges that money damages are adequate but that the amount of the award was improper.

Whether or not to award specific performance is a decision that rests in the sound discretion of the trial court, and here that discretion was not abused. Considering first the nature of the transaction, specific performance has been imposed as the remedy for breach of contracts for the sale of real property (Judnick Realty Corp. v 32 W. 32nd St. Corp., 61 NY2d 819, 823; Da Silva v Musso, 53 NY2d 543, 545; S.E.S. Importers v Pappalardo, 53 NY2d 455), but the contract here is to lease rather than sell an interest in real property. While specific performance is available, in appropriate circumstances, for breach of a commercial or residential lease, specific performance of real property leases is not in this State awarded as a matter of course (see, Gardens Nursery School v Columbia Univ., 94 Misc 2d 376, 378).

Van Wagner argues that specific performance must be granted in light of the trial court’s finding that the "demised space is unique as to location for the particular advertising purpose intended”. The word "uniqueness” is not, however, a magic door to specific performance. A distinction must be drawn between physical difference and economic interchangeability. The trial court found that the leased property is physically unique, but so is every parcel of real property and so are many consumer goods. Putting aside contracts for the sale of real property, where specific performance has traditionally been the remedy for breach, uniqueness in the sense of physical difference does not itself dictate the propriety of equitable relief.

By the same token, at some level all property may be interchangeable with money. Economic theory is concerned with the degree to which consumers are willing to substitute the use of one good for another (see, Kronman, Specific Performance, 45 U Chi L Rev 351, 359), the underlying assumption being that "every good has substitutes, even if only very poor ones”, and that "all goods are ultimately commensurable” (id.). Such a view, however, could strip all meaning from uniqueness, for if all goods are ultimately exchangeable for a price, then all goods may be valued. Even a rare manuscript has an economic substitute in that there is a price for which any purchaser would likely agree to give up a right to buy it, but a court would in all probability order specific performance of such a contract on the ground that the subject matter of the contract is unique.

The point at which breach of a contract will be redressable by specific performance thus must lie not in any inherent physical uniqueness of the property but instead in the uncertainty of valuing it: "What matters, in measuring money damages, is the volume, refinement, and reliability of the available information about substitutes for the subject matter of the breached contract. When the relevant information is thin and unreliable, there is a substantial risk that an award of money damages will either exceed or fall short of the promisee’s actual loss. Of course this risk can always be reduced — but only at great cost when reliable information is difficult to obtain. Conversely, when there is a great deal of consumer behavior generating abundant and highly dependable information about substitutes, the risk of error in measuring the promisee’s loss may be reduced at much smaller cost. In asserting that the subject matter of a particular contract is unique and has no established market value, a court is really saying that it cannot obtain, at reasonable cost, enough information about substitutes to permit it to calculate an award of money damages without imposing an unacceptably high risk of undercompensation on the injured promisee. Conceived in this way, the uniqueness test seems economically sound.” (45 U Chi L Rev, at 362.) This principle is reflected in the case law (see, e.g., Erie R. R. Co. v City of Buffalo, 180 NY 192, 200; St. Regis Paper Co. v Santa Clara Lbr. Co., 173 NY 149, 160; Dailey v City of New York, 170 App Div 267, 276-277, affd 218 NY 665), and is essentially the position of the Restatement (Second) of Contracts, which lists "the difficulty of proving damages with reasonable certainty” as the first factor affecting adequacy of damages (Restatement [Second] of Contracts § 360 [a]).

Thus, the fact that the subject of the contract may be "unique as to location for the particular advertising purpose intended” by the parties does not entitle a plaintiff to the remedy of specific performance.

Here, the trial court correctly concluded that the value of the "unique qualities” of the demised space could be fixed with reasonable certainty and without imposing an unacceptably high risk of undercompensating the injured tenant. Both parties complain: Van Wagner asserts that while lost revenues on the Asch contract may be adequate compensation, that contract expired February 28, 1985, its lease with S & M continues until 1992, and the value of the demised space cannot reasonably be fixed for the balance of the term. S & M urges that future rents and continuing damages are necessarily conjectural, both during and after the Asch contract, and that Van Wagner’s damages must be limited to 60 days — the period during which Van Wagner could cancel Asch’s contract without consequence in the event Van Wagner lost the demised space. S & M points out that Van Wagner’s lease could remain in effect for the full 10-year term, or it could legitimately be extinguished immediately, either in conjunction with a bona fide sale of the property by S & M, or by a reletting of the building if the new tenant required use of the billboard space for its own purposes. Both parties’ contentions were properly rejected.

First, it is hardly novel in the law for damages to be projected into the future. Particularly where the value of commercial billboard space can be readily determined by comparisons with similar uses — Van Wagner itself has more than 400 leases — the value of this property between 1985 and 1992 cannot be regarded as speculative. Second, S & M having successfully resisted specific performance on the ground that there is an adequate remedy at law, cannot at the same time be heard to contend that damages beyond 60 days must be denied because they are conjectural. If damages for breach of this lease are indeed conjectural, and cannot be calculated with reasonable certainty, then S & M should be compelled to perform its contractual obligation by restoring Van Wagner to the premises. Moreover, the contingencies to which S & M points do not, as a practical matter, render the calculation of damages speculative. While S & M could terminate the Van Wagner lease in the event of a sale of the building, this building has been sold only once in 40 years; S & M paid several million dollars, and purchased the building in connection with its plan for major development of the block. The theoretical termination right of a future tenant of the existing building also must be viewed in light of these circumstances. If any uncertainty is generated by the two contingencies, then the benefit of that doubt must go to Van Wagner and not the contract violator. Neither contingency allegedly affecting Van Wagner’s continued contractual right to the space for the balance of the lease term is within its own control; on the contrary, both are in the interest of S & M (see, by analogy, Amerman v Deane, 132 NY 355). Thus, neither the need to project into the future nor the contingencies allegedly affecting the length of Van Wagner’s term render inadequate the remedy of damages for S & M’s breach of its lease with Van Wagner.

The trial court, additionally, correctly concluded that specific performance should be denied on the ground that such relief "would be inequitable in that its effect would be disproportionate in its harm to defendant and its assistance to plaintiff” (see, Matter of Burke v Bowen, 40 NY2d 264, 267; Cox v City of New York, 265 NY 411; Restatement [Second] of Contracts § 364 [1] [b]). It is well settled that the imposition of an equitable remedy must not itself work an inequity, and that specific performance should not be an undue hardship (see, Pomeroy and Mann, Specific Performance of Contracts § 185 [3d ed 1926]). This conclusion is "not within the absolute discretion of the Supreme Court” (McClure v Leaycraft, 183 NY 36, 42; see, Trustees of Columbia Col. v Thacker, 87 NY 311; cf. Forstmann v Joray Holding Co., 244 NY 22). Here, however, there was no abuse of discretion; the finding that specific performance would disproportionately harm S&M and benefit Van Wagner has been affirmed by the Appellate Division and has support in the proof regarding S & M’s projected development of the property.

While specific performance was properly denied, the court erred in its assessment of damages. Our attention is drawn to two alleged errors.

First, both parties are dissatisfied with the award of lost profits on the Asch contract: Van Wagner contends that the award was too low because it failed to take into account incidental damages such as sign construction, and S&M asserts that it was too high because it failed to take into account offsets against alleged lost profits such as painting costs. Both arguments are precluded. Although the trial was not bifurcated or limited to the issue of liability, the Asch contract was placed in evidence and neither party chose to submit additional proof of incidental damages or other expenses for that period. Nor — as is evident from the judgment — did the trial court understand that any separate presentations would be made as to damages for that period. Based on the Asch contract indicating revenues, and the lease indicating expenses, the trial court properly calculated Van Wagner’s lost profits. Having found that the value of the space was fixed by the Asch contract for the entire period of that contract, however, the court erred in awarding the lost revenues only through November 23, 1983. Damages should have been awarded for the duration of the Asch contract.

Second, the court fashioned relief for S & M’s breach of contract only to the time of trial, and expressly contemplated that "[i]f defendant continues to exclude plaintiff from the leased space action for continuing damages may be brought.” In requiring Van Wagner to bring a multiplicity of suits to recover its damages the court erred. Damages should have been awarded through the expiration of Van Wagner’s lease.

Accordingly, the order of the Appellate Division should be modified, with costs to plaintiff, and the case remitted to Supreme Court, New York County, for further proceedings in accordance with this opinion and, as so modified, affirmed.

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

Order modified, etc.

      . Contrary to the assertion of S & M, denial of a motion for a preliminary injunction does not "constitute the law of the case or an adjudication on the merits” (Walker Mem. Baptist Church v Saunders, 285 NY 462, 474).

      . We note that the parties’ contentions regarding the remedy of specific performance in general, mirror a scholarly debate that has persisted throughout our judicial history, reflecting fundamentally divergent views about the quality of a bargained-for promise. While the usual remedy in Anglo-American law has been damages, rather than compensation "in kind” (see, Holmes, The Path of the Law, 10 Harv L Rev 457, 462 [1897]; Holmes, The Common Law, at 299-301 [1881]; and Gilmore, The Death of Contract, at 14-15), the current trend among commentators appears to favor the remedy of specific performance (see, Farnsworth, Legal Remedies for Breach of Contract, 70 Colum L Rev 1145, 1156 [1970]; Linzer, On the Amorality of Contract Remedies — Efficiency, Equity, and the Second Restatement, 81 Colum L Rev 111 [1981]; and Schwartz, The Case for Specific Performance, 89 Yale LJ 271 [1979]), but the view is not unanimous (see, Posner, Economic Analysis of Law § 4.9, at 89-90 [2d ed 1977]; Yorio, In Defense of Money Damages for Breach of Contract, 82 Colum L Rev 1365 [1982]).

      . But see, 5A Corbin, Contracts § 1143, at 131; at 7, n 62 [1971 Pocket Part]; 11 Williston, Contracts § 1418A [3d ed]; Pomeroy and Mann, Specific Performance of Contracts § 9, at 18-19 [3d ed 1926]; Restatement [Second] of Contracts § 360 comment a, illustration 2; Restatement [Second] of Contracts § 360 comment e; cf. City Stores Co. v Ammerman, 266 F Supp 766, affd Per Curiam 394 F2d 950.


text:
    The People of the State of New York ex rel. Reginald Robertson, Appellant, v New York State Division of Parole et al., Respondents.
    Decided April 3, 1986

      APPEARANCES OF COUNSEL

      Victor Knapp for appellant.

      Robert Abrams, Attorney-General (Charles C. Davis, Jr., and Robert Hermann of counsel), for respondents.
   OPINION OF THE COURT

Meyer, J.

Issues of fact in a habeas corpus proceeding on which depend the legality of the continued detention of an alleged parole violator are to be tried by the court issuing the writ, not by the Parole Board. The effect of an order transferring such issues to the Parole Board for hearing is to terminate the habeas corpus proceeding. That order was, therefore, final and appealable to the Appellate Division, but a second order entered in the proceeding denying relator’s application for the issuance of subpoenas duces tecum was intermediate and not appealable. The order of the Appellate Division dismissing relator’s appeal from the transfer order (treated as an order of affirmance for the purposes of this court’s jurisdiction) should, therefore, be reversed by vacating the dismissal and remitting the matter to Supreme Court for trial forthwith of the issues of fact. The appeal, insofar as is from so much of the nonfinal order of the Appellate Division, should be dismissed.

I

Relator, Reginald Robertson, was paroled from State prison in October 1977, after having served over five years of a maximum 20-year sentence for manslaughter in the first degree. On January 9, 1981, while on parole, he was arrested and the following day was arraigned on a felony complaint charging two counts each of reckless endangerment in the first degree, criminal possession of a weapon in the second degree and menacing. Relator promptly notified the Division of Parole of his arrest. He was indicted on February 23, 1981 on the weapons charges only. In March 1981, he served a notice of claim on the City of New York as a predicate to a civil action against it and the arresting police officers.

On May 4, 1981, the Division issued a parole violation warrant based upon relator’s felony arrest and subsequent indictment and relator was arrested and incarcerated the following day. He immediately waived his right under Executive Law § 259-i (3) (c) (i) to a preliminary probable cause hearing. On March 30, 1983, a jury acquitted relator of the weapons charges. However, he remains incarcerated under the warrant to this day.

In January 1984, relator, pro se, by verified petition, sought the issuance from Supreme Court at Special Term, Queens County, of a writ of habeas corpus. Although the thrust of the petition is that the four-month delay between relator’s felony arrest and the issuance of the warrant prejudiced relator and deprived him of procedural due process (an argument since abandoned), the petition also challenges the legality of his detention on a number of other grounds: that the warrant was issued in bad faith in retribution for his civil suit; that his waiver of a preliminary hearing was involuntary because based upon a parole officer’s false statement that relator’s then attorney had given instructions that relator should do so; that the final revocation hearing required by Executive Law § 259-i (3) (f) (i) had not been held although more than 90 days had passed since his waiver of a preliminary hearing. The Division’s answering papers raised issues of fact, and relator, having meanwhile obtained the representation of the attorney who represents him on this appeal, requested a fact-finding hearing.

A different attorney was, however, appointed to represent relator at a final parole revocation hearing. Because 33 months had passed since relator’s waiver of a preliminary hearing without a final revocation hearing, that attorney obtained issuance of a second habeas corpus writ. The petition on which the writ was based was supported by Division of Parole documents indicating that hearings had been scheduled but adjourned at the Division’s request and alleged that at least 199 days of delay were chargeable to the Division. The Division’s response was that relator’s then attorney had requested by letter dated May 21, 1981 that the final hearing be postponed until the felony charges had been tried and that the adjournments after relator was acquitted on those charges were at his request.

The two writs were consolidated and the Criminal Term Justice before whom the proceeding came on for hearing, noting the existence of fact issues, set the matter down for further Criminal Term hearing to determine whether relator was being illegally detained. Within a few days after that order, however, the Appellate Division decided People ex rel. Diamond v Flood (100 AD2d 604, 605), in which it remitted to the Parole Board a prompt hearing question and noted "that, in the future, parolees will not be permitted to obtain judicial review of claims of a denial of a prompt hearing unless the matter has been raised in the administrative process”. On the Division’s motion for reconsideration of the order setting the proceeding for hearing at Criminal Term, that order was modified, on the basis of the Diamond holding, to transfer the matter to the Parole Board for a hearing to be held within 30 days (124 Misc 2d 61). In a separate order, Criminal Term denied relator’s request for the issuance of subpoenas duces tecum, without prejudice to renewal before the Parole Board. On relator’s appeal to the Appellate Division from both orders, that court, characterizing both orders as intermediate and not appealable in a habeas corpus proceeding, dismissed the appeals (112 AD2d 333). We granted relator leave to appeal (66 NY2d 602) and now modify as above set forth.

II

The purpose of habeas corpus is to test the legality of the detention of the person who is the subject of the writ (CPLR 7002 [a]; People ex rel. Shapiro v Keeper of City Prison, 290 NY 393, 399). The summary and exigent nature of the proceeding is evidenced by the requirement of CPLR 7003 (a) that the court "issue the writ without delay on any day,” the provision of CPLR 7005 authorizing service of a writ on any day notwithstanding that service of other process on a Sunday is void (General Business Law § 11), and the direction of CPLR 7009 (c) that "[t]he court shall proceed in a summary manner”. Thus, in holding an order setting a child custody petition for hearing before the court not appealable, we noted in People ex rel. Duryee v Duryee (188 NY 440, 445-446) that: "The writ of habeas corpus, as its history shows, is a summary proceeding to secure personal liberty. It strikes at unlawful imprisonment or restraint of the person by state or citizen, and by the most direct method known to the law learns the truth and applies the remedy. It tolerates no delay except of necessity, and is hindered by no obstacle except the limits set by the law of its creation. Hence the legislature commanded that no appeal should be taken from incidental orders made in the course of the proceeding, as that might cause delay and prolong the injustice. Even the evil of a wrong order, if not vital, was preferred to the danger of delay caused by an appeal therefrom.” (See also, People ex rel. Glendening v Glendening, 281 NY 602, on further appeal after remand 284 NY 598; People ex rel. Woodbury v Hendricks, 215 NY 339, 344.)

That the evidentiary hearing concerning legality of detention is to be before the habeas court rather than the detaining agency is likewise pellucidly clear. Thus, what CPLR 7009 (c) directs the court to do in a summary manner is "to hear the evidence produced in support of and against detention and to dispose of the proceeding as justice requires” (emphasis supplied). And that direction is underscored by the designation of habeas corpus as "a special proceeding” (CPLR 7001), for that brings into play the parallel provision of CPLR 410 that "[i]f triable issues of fact are raised they shall be tried forthwith and the court shall make a final determination thereon” (emphasis supplied). Indeed, a hearing at Special Term appears to have been the uniform practice prior to the Appellate Division’s decision in Diamond (see, People ex rel. Posada-Osorio v Hammock, 58 NY2d 978, 980, rearg denied 58 NY2d 1114; Matter of Vasquez v New York State Bd. of Parole, 58 NY2d 981, 982, rearg denied 58 NY2d 1114; People ex rel. Marvin v McDonnell, 280 App Div 367; People ex rel Zangrillo v Doherty, 40 Mise 2d 505, 512; cf People ex rel. Lee v Smith, 58 AD2d 987). The Diamond procedure is, moreover, inconsistent with our holding in People ex rel. Levy v Dalsheim (48 NY2d 1019), affirming for the reasons stated by the Appellate Division (66 AD2d 827, 828), its holding that delay of a final revocation hearing for more than 90 days after the determination of probable cause required vacatur of the warrant and reinstatement of parole because "[t]o merely order a hearing within a specified time would render the 90-day limit a nullity.”

The delegation to the Parole Board of the fact-finding function on which turns release on habeas corpus or dismissal and further detention was, thus, improper for at least three reasons. First, it was contrary to the statutory directions that "[t]he court * * * hear the evidence” and "proceed in a summary manner” (CPLR 7009 [c] [emphasis supplied]). Second, it injects a procedure neither contemplated by the statute, which calls for either judgment of discharge (CPLR 7010 [a]) or remand of the person detained (CPLR 7010 [c]), nor recognized by prior precedent. Third, and most importantly, it changes the process from one in which the factual determination is made by a Trial Judge, reviewable as to the weight of the evidence by the Appellate Division and, when that body disagrees with the trial court, by this court as well, to one in which the only questions to be decided by any of the courts are whether there was substantial evidence before the Parole Board to support its determination and whether required procedural rules were followed (Executive Law § 259-i [5]; People ex rel. Von Fossen v Dillon, 72 AD2d 166).

The issues presented by Robertson’s petitions are, moreover, properly cognizable in habeas corpus: see, as to denial of a final revocation hearing, Matter of Soto v New York State Bd. of Parole (66 NY2d 817, affg 107 AD2d 693); as to voluntariness of waiver of preliminary hearing, People ex rel. Herrera v Schager (88 AD2d 983); People ex rel. Griffin v Walters (83 AD2d 618); cf. People ex rel. Miller v Walters (60 NY2d 899); as to issuance of the warrant in bad faith, People ex rel. Freeman v Mancusi (27 AD2d 634); People ex rel. Miller v Silberglitt (19 Misc 2d 152). Of course, the fact that those issues are cognizable in habeas corpus does not necessarily entitle relator to an evidentiary hearing before Supreme Court. Such a hearing is not required if "upon the pleadings, papers and admissions * * * no triable issues of fact are raised” (CPLR 409 [b]), a determination analogous to that made on a motion for summary judgment (Matter of Trustees of Sailors’ Snug Harbor v Tax Commn., 26 NY2d 444, 449-450; see, Siegel, NY Prac § 556, at 773; cf. Matter of Nassau BOCES Cent. Council of Teachers v Board of Coop. Educ. Servs., 63 NY2d 100, 103). But whether the determination be made summarily on papers or only after an evidentiary hearing, it will in either case be made by Supreme Court, not by the Parole Board. Here, it is not clear from Supreme Court’s original order whether the hearing ordered was for summary consideration on the papers or for a trial of issues of fact. Accordingly, there should be a remittal to Supreme Court for consideration under CPLR 409 (b) and for trial if it determines that there are triable issues of fact.

For the foregoing reasons, the order of the Appellate Division dismissing the appeal from the transfer order should be reversed and the matter remitted to Supreme Court for further proceedings consistent with this opinion, and the appeal from the order of the Appellate Division insofar as it dismissed the appeal from the order as to applications for subpoenas should be dismissed for nonfinality.

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

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order of the Appellate Division insofar as it dismissed relator’s appeal from the order of Supreme Court transferring the proceeding to the Parole Board reversed, with costs, and matter remitted to Supreme Court, Queens County, for further proceedings in accordance with the opinion herein. Appeal from the order of the Appellate Division insofar as it dismissed relator’s appeal from the order denying relator’s applications for subpoenas dismissed, without costs.

      . That dismissal, of course, does not constitute an adjudication on the merits concerning the right to the issuance of subpoenas upon remission.

      . That hearing, however, has not been held, relator having received a stay from the Appellate Division which, under CPLR 5519 (e), continues pending our disposition of his appeal (People ex rel. Robertson v New York State Div. of Parole, 67 NY2d 756).

      . The legislative history of the section is to the same effect. Thus, in explaining the deletion of an additional sentence contained in the original version of the section, the Fifth Preliminary Report of the Senate and Assembly Committees to the Legislature on Practice and Procedure (NY Legis Doc, 1961, No. 15, at 169) stated: "The 1960 bill provision has been amended as follows: The sentence, 'Evidence may be taken orally, by deposition, by affidavit, or by certificate of a judge who presided at a trial resulting in a judgment pursuant to which the detention took place,’ has been omitted. It was suggested that this language might be interpreted to reduce the present right of the person detained to be actually tried in open court and to cross examine witnesses where there is a factual issue to be resolved, and that it might seriously reduce the protection to the person detained now provided by the hearsay rules. Although the language was intended merely to restate the present law, in order to avoid any possibility that its adoption would reduce the protection of the writ to persons allegedly illegally detained, the committees have deleted it.” (Emphasis supplied.)

      . People ex rel. Diamond v Flood (100 AD2d 604) relied upon the Second Department’s prior holding in People ex rel. Walker v New York State Bd. of Parole (98 AD2d 33; accord, People ex rel. Medina v Superintendent, 101 AD2d 871), but Walker concerned not whether a final revocation hearing had been scheduled within 90 days as required by Executive Law § 259-i (3) (f) (i), but whether relator had been served with statutorily required notices before an otherwise timely scheduled administrative hearing. We need not consider and do not now reach the propriety of remittal to the Board in a case such as Walker.


author: Hancock, Jr., J.

text:
    In the Matter of Robert Abrams, as Attorney-General of the State of New York, Appellant, v Public Service Commission of the State of New York et al., Respondents.
    Argued February 3, 1986;
    decided March 25, 1986

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General (Alfred L. Nardelli, Robert Hermann, Peter H. Schiff, Peter Beinstock, John W. Corwin, Richard W. Golden and Samuel Cherniak of counsel), appellant pro se.

    I. It is not “just and reasonable” for consumers to pay the Cornwall Project’s costs because the project is not, and never will be, of any benefit to them. (Power Commn. v Hope Gas Co., 320 US 591; Permian Basin Area Rate Cases, 390 US 747; Smyth v Ames, 169 US 466; San Diego Land & Town Co. v Jaspar, 189 US 439; People ex rel. Kings County Light. Co. v Willcox, 210 NY 479; Southwestern Tel. Co. v Public Serv. Commn., 262 US 276; Wabash Val. Elec. Co. v Young, 287 US 488; Los Angeles Gas Corp. v Railroad Commn., 289 US 287; Denver Stock Yard Co. v United States, 304 US 470; Market St. Ry. Co. v Commission, 324 US 548.) II. Allowing Con Ed recovery of its Cornwall investment and a profit on that investment is not "just and reasonable”, because it would permit the company to earn as much on a failed investment as on a successful investment. (Power Commn. v Hope Gas Co., 320 US 591; Permian Basin Area Rate Cases, 390 US 747; Smyth v Ames, 169 US 466; Tennessee Gas Pipeline Co. v Federal Energy Regulatory Commn., 606 F2d 1094, 445 US 920; NEPCO Mun. Rate Comm. v Federal Energy Regulatory Commn., 668 F2d 1327, cert denied sub nom. New England Power Co. v Federal Energy Regulatory Commn., 457 US 1117; Union Elec. Co. v Federal Energy Regulatory Commn., 668 F2d 389; Jersey Cent. Power & Light Co. v Federal Energy Regulatory Commn., 730 F2d 816.) III. The court below erred by applying the rational basis test in this case, which involves solely a question of law and not an allegation of arbitrary or capricious conduct. (Matter of New York State Council of Retail Merchants v Public Serv. Commn., 45 NY2d 661; Matter of Consolidated Edison Co. v New York State Public Serv. Commn., 53 AD2d 131; Matter of New York Tel. Co. v Public Serv. Commn., 64 AD2d 232, 46 NY2d 710; Matter of General Motors v Public Serv. Commn., 95 AD2d 876, 60 NY2d 557.)

      David E. Blabey and Lawrence G. Malone for New York State Public Service Commission, respondent.
    I. Under Public Service Law §72 the Commission has broad discretion in setting "just and reasonable” rates. (Meltzer v Koenigsberg, 302 NY 523; Opp Cotton Mills v Administrator, 312 US 126; United States ex rel. Maine Potato Growers & Shippers Assn. v Interstate Commerce Commn., 88 F2d 780, 300 US 64; Washington Gas & Light Co. v Baker, 188 F2d 11, 340 US 952; Matter of Consumer Protection Bd. v Public Serv. Commn., 78 AD2d 65.) II. The courts have consistently found that the "just and reasonable” standard permits rate recovery of extraordinary property losses. (Colorado Interstate Co. v Commission, 324 US 581; Wisconsin v Federal Power Commn., 373 US 294; Matter of Consolidated Edison Co. v New York State Public Serv. Commn., 53 AD2d 131; Matter of City of New York v Public Serv. Commn., 17 AD2d 581, 13 NY2d 594; Matter of Consumer Protection Bd. v Public Serv. Commn., 78 AD2d 65, 53 NY2d 607; Matter of Cohalan v Gioia, 88 AD2d 722; Matter of Abrams v Public Serv. Commn., 91 AD2d 795, 60 NY2d 557; Matter of Abrams v Public Serv. Commn., 95 AD2d 906, 60 NY2d 557.) III. The Commission’s decision was rational and fully responsive to petitioner’s arguments. (Persky v Bank of Am. Natl. Assn., 261 NY 212; Matter of Seitelman v Lavine, 36 NY2d 165; Matter of New York City Horn. Auth. v Public Serv. Commn., 23 AD2d 277, 17 NY2d 246; Matter of Colton v Berman, 21 NY2d 322; Matter of New York Tel. Co. v Public Serv. Commn., 64 AD2d 232; Bowman Transp. v Arkansas-Best Frgt. Sys., 419 US 281; Colorado Interstate Co. v Commission, 324 US 581; Matter of Pell v Board of Educ., 34 NY2d 222; Matter of Niagara Mohawk Power Corp. v Public Serv. Commn., 67 AD2d 802.)

      Chanoch Lubling, Joy Tannian and Bernard L. Sanoff for Consolidated Edison Company of New York, Inc., respondent.
    I. The court below correctly held that the Commission’s longstanding policy allowing full recovery of prudent investments in abandoned projects is rational and is thus entitled to judicial deference. (Matter of Abrams v Public Serv. Commn., 61 NY2d 718; Young Men’s Christian Assn. v Rochester Pure Waters Dist., 37 NY2d 371; Lyons & Co. v Corsi, 3 NY2d 60, appeal dismissed sub nom. Lyons & Co. v Lubin, 355 US 284; Fusco v New York Prop. Underwriters Assn., 70 AD2d 895, 48 NY2d 603; Rice v Ritz Assoc., 58 NY2d 923; Lefkowitz v Lebensfeld, 51 NY2d 442; Farr v Newman, 14 NY2d 183; Matter of New York State Council of Retail Merchants v Public Serv. Commn., 45 NY2d 661.) II. There is nothing in the Public Service Law or in judicial holdings that can be rationally taken as support for the Attorney-General’s contentions. (Matter of New York Tel. Co. v Public Serv. Commn., 309 NY 569; Matter of Fineway Supermarkets v State Liq. Auth., 48 NY2d 464; Red Lion Broadcasting Co. v FCC, 395 US 367; Matter of Abrams v Consolidated Edison Co., 87 AD2d 708; People ex rel. Public Serv. Commn., v New York Tel. Co., 262 App Div 440, 287 NY 803; RKO-Keith-Orpheum Theatres v City of New York, 308 NY 493; Engle v Talarico, 33 NY2d 237; United States v Bergh, 352 US 40; Alstate Constr. Co. v Durkin, 345 US 13; Matter of County of Erie v Hoch, 47 Misc 2d 452, 26 AD2d 4, 19 NY2d 854.) III. The decisions by the Court of Appeals for the District of Columbia cited by the Attorney-General do not support his contentions. (Tennessee Gas Pipeline Co. v Federal Energy Regulatory Comma., 606 F2d 1094, 445 US 920; NEPCO Mun. Rate Comm. v Federal Energy Regulatory Commn., 668 F2d 1327, cert denied sub nom. New England Power Co. v Federal Energy Regulatory Comma., 457 US 1117; Jersey Cent. Power & Light Co. v Federal Energy Regulatory Comma., 730 F2d 816, 768 F2d 1500; Washington Gas Light Co. v Baker, 188 F2d 11, 340 US 952.)
   OPINION OF THE COURT

Hancock, Jr., J.

Consolidated Edison (Con Ed) formally abandoned its unfinished Cornwall Pump Storage Facility on May 8, 1981. It had invested $41 million. On March 9, 1983 the Public Service Commission (PSC) approved an increase in electric rates for Con Ed amounting to $267 million per year. In permitting the rate increase, the PSC determined that Con Ed should be allowed full recovery for its investment by, (1) writing off the investment as an extraordinary expense to be amortized over an eight-year period, and (2) earning a return on the unamortized portion of the investment by including it in the rate base. This determination of the PSC is challenged by the Attorney-General in the instant CPLR article 78 proceeding. Upon transfer of the proceeding to the Appellate Division, that court unanimously confirmed the PSC’s determination in an opinion and dismissed the petition (see, Matter of Abrams v Public Serv. Comma., 104 AD2d 135). We granted leave to appeal.

The Attorney-General contends that the determination of the PSC is unlawful and should be vacated entirely, or, failing that, at least in part. In essence, he argues:

1. That, as a matter of law, the Commission was prohibited from allowing Con Ed to recover any part of its investment in the abandoned project, even though prudently incurred, because the commission could not make the assertedly required threshold determination that the investment was "used and useful” in providing electrical service to the ratepayers.

2. That, even assuming the Commission had legal authority to permit Con Ed to recover the actual cost of the project by writing it off and amortizing it over eight years, its determination permitting Con Ed to include the expenditures in the rate base was, nonetheless, unlawful because it was based on a "mechanical” application of the "prudent investment” test which did not balance the interests of ratepayers and investors; and, therefore, the Commission should, at least be directed to modify its order by removing the $41 million investment from the rate base, and Con Ed should be compelled by the Commission to make appropriate refunds to the ratepayers.

For reasons stated hereafter, we reject these contentions and conclude that the judgment of the Appellate Division should be affirmed.

I

In the early 1960’s Con Ed decided to construct a pumped storage generating plant on a portion of Storm King Mountain in Orange County. The plan, known as the Cornwall Project, was to build a hydroelectric facility which would use conventional electrical power to pump water, during periods of slack demand, to a reservoir on the mountain approximately 1,000 feet above the Hudson River. During periods of peak demand, the water stored in the reservoir would be permitted to fall through the facility’s turbines to the river below in order to generate needed power. The decision to proceed with the Cornwall Project was made amidst forecasts of a continuing increase in demand for electrical power.

The Federal Power Commission (FPC) granted a license for the Cornwall Project in 1965 but, because it was to be located in an area of historical significance and would use Hudson River water, various civic and environmental groups opposed the project and, in efforts to block it, engaged Con Ed in protracted litigation. In December 1965 the United States Court of Appeals for the Second Circuit vacated the license and remanded the matter to the FPC for further consideration (Scenic Hudson Preservation Conference v Federal Power Commn., 354 F2d 608, cert denied 384 US 941). After additional administrative proceedings, including extensive environmental impact hearings requested by the State of Connecticut and New York City, the proposed project was modified in minor respects and, in August 1970, the FPC again granted Con Ed a license to begin construction. Once more review was sought in the Second Circuit Court of Appeals and, in Scenic Hudson II (453 F2d 463, cert denied 407 US 926), the court upheld the FPC’s action in granting the license. Con Ed finally began construction at Cornwall in March 1974. Less than two months later, the Second Circuit Court of Appeals directed the FPC to reconsider the license application on the ground that the agency had earlier relied on inaccurate data concerning fish conservation (Scenic Hudson III [Hudson Riv. Fishermen’s Assn. v Federal Power Commn.], 498 F2d 827). Con Ed suspended construction in July 1974 and in August of that year the United States Court of Appeals enjoined any further operations.

The project was ultimately abandoned under a stipulation settling the litigation. Con Ed agreed to surrender its FPC license and to transfer certain Cornwall properties to the Palisades Interstate Park Commission and to the Village of Cornwall. In return, the project’s opponents agreed to drop their petition to have the EPA require Con Ed to install six cooling towers on four of its existing Hudson River generating facilities.

In the proceedings below, the Attorney-General relied primarily on Smyth v Ames (169 US 466) and argued, as he does here, that Con Ed is not entitled to any recovery of its investment inasmuch as the Cornwall Project cannot be said to be "used and useful” in providing electric service. The Administrative Law Judge, however, ruled that the appropriate test was to be found in Justice Brandeis’s concurring opinion in Southwestern Tel. Co. v Public Serv. Commn. (262 US 276) — i.e., whether Con Ed’s expenditures had been "prudently undertaken”. Reviewing the history of the Cornwall Project and concluding that Con Ed had acted reasonably in the belief that the project was sound, the Administrative Law Judge recommended that Con Ed be permitted full recovery of its investment.

The PSC adopted the conclusions of the Administrative Law Judge and approved the increase in electric rates. The Appellate Division, holding that under the rule enunciated in Power Commn. v Hope Gas Co. (320 US 591) the PSC was not obligated to use any particular formula or combination of formulae to determine rates, found that the PSC’s application of the "prudent investment” test was fair and reasonable, and confirmed the determination.

II

Setting utility rates presents "problems of a highly technical nature, the solutions to which in general have been left by the Legislature to the expertise of the Public Service Commission” (Matter of New York State Council of Retail Merchants v Public Serv. Commn., 45 NY2d 661, 672). Thus, Public Service Law § 72 empowers the PSC to consider all factors "which in its judgment” are relevant "with due regard among other things to a reasonable average return upon capital actually expended”. The PSC is free to entertain or ignore any particular factor, or to assign whatever weight it deems appropriate (see, Matter of Cohalan v Gioia, 88 AD2d 722; Matter of New York Tel. Co. v Public Serv. Commn., 64 AD2d 232, 239, lv denied 46 NY2d 710). Section 72 mandates only that the rates fixed by the PSC be "just and reasonable” and, consequently, unless it is shown that the judgment of the PSC was exercised "without any rational basis or without any reasonable support in the record”, its determination is not to be set aside (Matter of New York State Council of Retail Merchants v Public Serv. Commn., supra, at p 672; see also, Matter of Campo Corp. v Feinberg, 279 App Div 302, 307, affd 303 NY 995).

The Attorney-General, while not disputing the extent of discretionary authority accorded the PSC, asserts that such authority is limited under both Federal and State law whenever a utility seeks to pass to the customers the costs of its investment in an unused and abandoned project. This is so, he contends, because the investment cannot be characterized as being "used and useful” in providing service to the public. The Attorney-General founds his argument on the 1898 decision of the United States Supreme Court in Smyth v Ames (169 US 466, supra). That case is generally recognized as the source of the "fair value” approach in determining the value of utility property (see, Rose, The Hope Case and Public Utility Valuation in the States, 54 Colum L Rev 188).

In Smyth v Ames (supra), the court held that a utility — a railroad in that case — was entitled to a fair return on the present fair value of the property being employed for the public convenience. The court went on to explain that, in determining fair value, several factors could be considered, including the reproduction cost of the property. The decision in Smyth v Ames came at a time of marked deflation following a long depression. The court’s adoption of the present value approach, and of replacement cost as one method of valuing the rate base, was "as a protection against inflated claims based on what were then deemed inflated prices of the past” (Southwestern Tel. Co. v Public Serv. Commn., 262 US 276, 298, supra [concurring opn of Justice Brandeis]). Notably, Smyth v Ames did not involve abandoned utility property. The question of whether such property could be included in the rate base was, consequently, not addressed. Clearly, the court’s decision does not stand for the bald proposition, urged by the Attorney-General, that the cost of abandoned property which is not "used and useful” in providing service may not be reflected in the rates, either by amortizing the costs or including them in the rate base. Rather, the Supreme Court in Smyth v Ames simply held that rates must reflect, at a constitutional minimum, the present "fair value of the property being used by [the utility] for the convenience of the public” (Smyth v Ames, 169 US 466, 546, supra).

Even assuming, however, that Smyth v Ames could be read as establishing the rule suggested by the Attorney-General, it is clear that such a rule does not prevail today. In 1942 in its decision in Power Commn. v Pipeline Co. (315 US 575), the Supreme Court overruled so much of Smyth v Ames as prescribed a requirement for valuation based on "fair value”. The court held that "[t]he Constitution does not bind the rate-making bodies to the service of any single formula or combination of formulas” (id., at p 586). Two years later, in the landmark decision of Power Commn. v Hope Gas Co. (320 US 591, supra), the court reaffirmed the rules stated in Power Commn. v Pipeline Co. (supra), and added that "it is the result reached not the method employed which is controlling” (id., at p 602). Unless shown to be "unjust and unreasonable”, the rates are valid.

Accordingly, since Hope Gas Co., the courts and regulatory commissions in the several States have employed a variety of methods in valuing utility property including "fair value” (Smyth v Ames, supra), "prudent investment” (see, Justice Brandeis’s concurring opn in Southwestern Tel. Co. v Public Serv. Commn., 262 US 276, 292-295, supra), and original cost (see, Rose, op. cit, 54 Colum L Rev 188). Similarly, in their treatment of investments in abandoned facilities, courts and commissions have applied both the "used and useful” and "prudent investment” tests with results ranging from total disallowance of costs to full recovery (see, Pierce, Regulatory Treatment of Mistakes in Retrospect: Canceled Plants and Excess Capacity, 132 U Pa L Rev 497, 517-520; see generally, The Proper Regulatory Treatment of Investment in Cancelled Utility Plants, 13 Hofstra L Rev 469; Rodgers and Gray, State Commission Treatment of Nuclear Plant Cancellation Costs, 13 Hofstra L Rev 443).

In New York, the courts and the PSC have availed themselves of the latitude afforded by Hope Gas. Co. (supra) and have not insisted upon a rigid approach (see, e.g., Matter of Cohalan v Gioia, 88 AD2d 722, supra [approving inclusion in the rate base of construction costs of uncompleted nuclear plants]; Matter of Rochester Gas & Elec. Corp. v Public Serv. Commn., 85 AD2d 486 [denying rate base inclusion as "land held for future use” of property acquired for siting of canceled nuclear plants]; Matter of Consumer Protection Bd. v Public Serv. Commn., 78 AD2d 65, lv denied 53 NY2d 607 [permitting inclusion in the rate base of $200 million of expenditures by LILCO for work in progress on nuclear plants under construction]). We note, however, that the PSC has characterized as "long standing” its own policy of generally favoring the recovcry of whatever expenditures a utility can demonstrate to have been prudently incurred.

It is evident, then, contrary to the Attorney-General’s position, that there is no Federal proscription against the use of the "prudent investment” test in the regulatory treatment of abandoned plants. Of course, the New York Public Service Commission is not bound under Hope Gas Co. (supra) to use the "prudent investment” approach and, indeed, it has not always done so (see, Matter of Rochester Gas & Elec. Corp. v Public Serv. Commn., 108 AD2d 35, 37; Matter of Rochester Gas & Elec. Corp. v Public Serv. Commn., 85 AD2d 486, supra). But if the end result is a just and reasonable balancing of consumer and investor interests, the PSC may employ the "prudent investment” test or any other formula or combination of formulae without offending the Federal Constitution or decisional law.

Ill

The Attorney-General argues, however, that notwithstanding the latitude permitted in the Federal cases, the recovery of any part of the costs of an abandoned project, even if prudently undertaken, contravenes the law of New York. He notes that this court has never addressed the issue. We now address briefly, each of his two points.

First, he maintains that the legislative history of Public Service Law § 72 compels an interpretation precluding recovery of utility investments which are not actually used and useful. He contends that the Legislature adopted the "just and reasonable” criterion for fixing electrical rates (see, L 1910, ch 480) in order to incorporate the "used and useful” limitation of Smyth v Ames (169 US 466, supra) into the statute. The short answer to that argument is that Smyth v Ames contains no such limitation (see, Point II, supra). Beyond that, however, there has never been language in section 72 or in any of its prior variants suggesting that the PSC could not, in a proper case, permit recovery for abandoned investments prudently incurred. Clearly, the plain meaning of "just and reasonable” in no way reflects the restrictive import which the Attorney-General urges. Indeed, the statutory language explicitly authorizing the PSC to consider all relevant factors in fixing rates, "with due regard among other things to a reasonable average return upon capital actually expended” (Public Service Law § 72 [emphasis added]) would seem to compel just the opposite conclusion. Absent any legislative history or legal authority to support the Attorney-General’s interpretation of Public Service Law § 72, we decline to adopt it.

The Attorney-General also insists that the PSC’s policy of using the "prudent investment” approach is wrong. He argues that it insulates investors from the economic consequences of an abandoned investment, removes their incentive to hold management accountable for unsuccessful business decisions and, moreover, does nothing to discourage overinvestment in capital assets. The Attorney-General would have us read into Public Service Law § 72 a prohibition against any recovery for investments in abandoned projects under the "used and useful” test, even if prudently made. Whatever the merits of these contentions, plainly they involve questions of regulatory policy more properly addressed to the Legislature.

IV

The Attorney-General argues alternatively that the PSC erred in its "mechanical” application of the "prudent investment” test and in its failure to balance the interests of the investors and ratepayers. He notes that other regulatory commissions, while allowing recovery of the actual costs of investments in canceled facilities, have, at the same time, disallowed inclusion in the rate base of the unamortized investments in those facilities (see, e.g., Re Bangor HydroElectric Co., 46 PUR 4th 503, 556-558 [Me PUC 1982]; Re Jersey Cent. Power & Light Co., 44 PUR 4th 54 [NJ Bd Pub Util 1981]; see generally, Pierce, op. cit, 132 U Pa L Rev, at 517-520). The Attorney-General contends that the PSC should have followed that course here.

The PSC does have the discretion under Hope Gas Co. to permit no more than partial recovery of investment in a subsequently abandoned facility. As the Appellate Division noted in a recent case: "While it is true that a regulated company is generally entitled to recapture its prudently incurred costs, including a return on its investment (see, Power Cornmn. v Hope Gas Co., 320 US 591, 603), due process does not 'insure values or * * * restore values that have been lost by the operation of economic forces’ (Market St. Ry. Co. v Commission, 324 US 548, 567). Neither justice nor the Constitution obliges consumers to ensure a profitable return on an unprofitable enterprise * * * (see, San Diego Land & Town Co. v Jasper, 189 US 439, 446-447).” (Matter of Rochester Gas & Elec. Corp. v Public Serv. Commn., 108 AD2d 35, 37, supra.) Indeed, the PSC may, when appropriate, even exercise its discretion to deny any recovery at all (see, Matter of Rochester Gas & Elec. Corp. v Public Serv. Commn., 85 AD2d 486, supra).

But that is not to say that the allowance of full recovery here was an abuse of that discretion. As we have noted, the setting of rates presents technical problems which have been left by the Legislature to the expertise of the PSC (see, Matter of New York State Council of Retail Merchants v Public Serv. Commn., 45 NY2d 661, 672, supra). Only when the exercise of the PSC’s judgment can be shown to be without any rational basis or any reasonable support in the record may its determination be set aside (see, Matter of Campo Corp. v Feinberg, 279 App Div 302, 307, affd 303 NY 995, supra). We agree with the court below that such a showing has not been made here.

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

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

Judgment affirmed, with costs.

      . In Southwestern Tel. Co. v Public Serv. Commn. (262 US 276, 290) Justice Brandéis noted, in what has since become an oft-quoted observation, that what is "devoted by the investor to the public use is not specific property, tangible and intangible, but capital embarked in the enterprise”.

      . As the Appellate Division noted, the rule in Power Commn. v Hope Gas Co. (320 US 591) has been previously applied by courts in this State. (See, Matter of Consumer Protection Bd. v Public Serv. Commn., 78 AD2d 65, 67, lv denied 53 NY2d 607, citing Matter of New York Tel. Co. v Public Serv. Commn., 64 AD2d 232, lv denied 46 NY2d 710; see also, Matter of Consolidated Edison Co. v New York State Public Serv. Commn., 53 AD2d 131, lv denied 40 NY2d 803.)

      . In finding that there was a rational basis for the determination, the Appellate Division stated: "The means for generating electricity can only be accomplished by long-range planning and implementation. In 1965, a prudent planner anticipated a progressively greater demand for electricity in the New York City area serviced by Con Ed. The pumped-storage concept was specifically suited for anticipated demands. Con Ed cannot be faulted for not anticipating either the environmental opposition or the oil embargo which caused its customers to become energy conscious and resulted in decreased demands. The decision, when made, was with the reasonable expectation and commitment that the Cornwall project would become a generating plant used and useful in the production of electricity for customers of Con Ed” (104 AD2d 135,138).
      Indeed, in his reply brief to this court, the Attorney-General writes that ”[t]he Cornwall project was a failure, albeit a prudently conceived one” (Attorney-General, Reply Brief, at 1, 2).

      . In their concurring opinion in Power Commn. v Pipeline Co. (315 US 575, 606), Justices Black, Douglas and Murphy stated with respect to the majority opinion: "As we read the opinion of the Court, the Commission is now freed from the compulsion of admitting evidence on reproduction cost or of giving any weight to that element of 'fair value.’ The Commission may now adopt, if it chooses, prudent investment as a rate base — the base long advocated by Mr. Justice Brandéis. And for the reasons stated by Mr. Justice Brandéis in the Southwestern Bell Telephone case, there could be no constitutional objection if the Commission adhered to that formula and rejected all others”.

      . We note with interest the decisions of the United States Court of Appeals (DC Cir) in Jersey Cent. Power & Light Co. v Federal Energy Regulatory Commn. (730 F2d 816, vacated on reh 768 F2d 1500, vacated for en banc hearing 776 F2d 364, reargued Jan. 30, 1986).
      The following remarks, which were made in the court’s second opinion and whose validity does not depend on the ultimate outcome of that case, are particularly relevant to this appeal: "[W]e have long held that the Commission is free to use various methods of computing a rate base so long as the end result of the rate order falls within the zone of reasonableness. Thus, we have previously upheld use of both the so-called 'used and useful’ method, first set out in Smyth v. Ames, 169 U.S. 466, 546, 18 S.Ct. 418, 42 L.Ed. 819 (1898), and the far more sensible 'prudent investment’ method, developed by Justice Brandéis in Southwestern Bell Telephone Co. v. Public Service Commission, 262 U.S. 276, 289, 43 S.Ct. 544, 547, 67 L.Ed. 981 (1923) (Brandéis, J., dissenting), and approved by this court in Washington Gas Light Co. v. Baker, 188 F.2d 11. The 'prudent investment’ method has some advantages over the 'used and useful’ method because it treats utilities more like other businesses by allowing them to start recovering future development costs as they are incurred. Nonetheless, use of either method is certainly permissible so long as a reasonable balancing of consumer and investor interests is achieved as the end result.” (768 F2d, at p 1504, n 4.)

      . In Opinion No. 82-4 in which it allowed Niagara Mohawk to commence recovery of its Sterling investment, the Commission, in rejecting arguments of the Attorney-General similar to those made here, stated (see, at p 75): "DOL argues on exceptions that because the Sterling facility is not 'used and useful’ and never will be, NMP should be precluded from recovering its Sterling investment. According to DOL, an apparently prudent capital expenditure that ultimately turns out to be useless may not lawfully be admitted into rate base, for, it says, 'ratepayers cannot lawfully be required to cover management’s investment error.’ * * * we rejected in the Sterling proceeding arguments similar to those raised by DOL here, finding that our longstanding policy favored the recovery of all prudently incurred expenditures in rates”. (See also, Gary and Roach, supra, at 473-474, 498-499.)

      . It should be noted that in 1984 the Attorney-General sought adoption of an amendment to the Public Service Law which would have prohibited rate recovery of utility investments not "actually used and useful.” (New York Assembly Bill No. 9254.) The amendment was not adopted and section 72 remains unchanged. A few States now have statutes that may be interpreted as disallowing any recovery for investments in canceled plants (see, e.g., Ohio Rev Code Ann § 4909.15 [A] [4]; Pierce, Regulatory Treatment of Mistakes in Retrospect: Canceled Plants and Excess Capacity, 132 U Pa L Rev 497, 519-520).

      . It is significant that the phrase "with due regard among other things to a reasonable average return upon capital actually expended” was added to the statute at the same time as "just and reasonable” which the Attorney-General contends was intended to incorporate the "used and useful” test (Public Service Commissions Law, L 1910, ch 480, Cons Laws 1910, ch 48).

      . It is the PSC’s view that shifting a major cost of prudent investments to the shareholders would have the inevitable effect in the market of raising capital costs and that the cost to the ratepayers would be higher in the long run if such policy were adopted (see, Consolidated Edison Co., 21 NY PSC 673, 691-694, 779-791 [1981]; Sterling Loss Proceeding — Opinion and Order Prescribing Treatment of Sterling Expenditures in Rates, PSC Case No. 27794, Opinion No. 82-1 [Jan. 13, 1982], at 3-35; Recommended Decision— Phase I-A [Sept. 8,1981]).

      . Presumably some or all of these arguments were made in 1984 when the Attorney-General sought amendment of Public Service Law § 72 (see, n 8, supra). For a detailed discussion of various approaches adopted in other States in the treatment of investments in canceled plants see Pierce (supra, n 7, 132 U Pa L Rev 497, 507-520).