author: Cooke, J.

text:
    Elinor Guggenheimer, as Commissioner of the Department of Consumer Affairs of the City of New York, Appellant, v Ralph Ginzburg, Doing Business as The Webster’s Dictionary Company, Respondent.
    Argued November 10, 1977;
    decided December 15, 1977

      POINTS OF COUNSEL

      W. Bernard Richland, Corporation Counsel (L. Kevin Sheridan, David B. Saxe and David Ira Blejwas of counsel), for appellant.
    The court below erred in dismissing the complaint. Each of the causes of action pleaded therein is legally sufficient. (Matter of State of New York v Colorado State Christian Coll, of Church of Inner Power, 76 Misc 2d 50; Helbros Watch Co. v Federal Trade Comm., 310 F2d 868, 372 US 976, 374 US 857; People v Volkswagen of Amer., 47 AD2d 868; Baltimore Luggage Co. v Federal Trade Comm., 296 F2d 608, 369 US 860; Federal Trade Comm, v Colgate-Palmolive Co., 380 US 374; Matter of State of New York v Bevis Inds., 63 Misc 2d 1088; Giant Food v Federal Trade Comm., 322 F2d 977, 376 US 967; Murray Space Shoe Corp. v Federal Trade Comm., 304 F2d 270.)

      Gerald P. Halpern, P. C, for respondent.
    I. Respondent’s advertisements are not deceptive. The complaint was properly dismissed as legally insufficient. (Matter of State of New York v Colorado State Christian Coll, of Church of Inner Power, 76 Misc 2d 50; Metropolitan N. Y. Retail Merchants Assn, v City of New York, 60 Misc 2d 805; Helbros Watch Co. v Federal Trade Comm., 310 F2d 868, 372 US 976; Winston Co. v Federal Trade Comm., 3 F2d 961; Ford Motor Co. v Federal Trade Comm., 120 F2d 175; People v Volkswagen of Amer., 47 AD2d 868; Kidder Oil Co. v Federal Trade Comm., 117 F2d 892; Giant Food v Federal Trade Comm., 322 F2d 977, 376 US 967; Myerson v Lentini Bros. Moving & Stor. Co., 33 NY2d 250.) II. Respondent’s advertisement is protected by the First Amendment from regulation or censorship by appellant. (Bigelow v Virginia, 421 US 809; Valentine v Chrestensen, 316 US 52; Ginzburg v United States, 383 US 463; People v Remeny, 40 NY2d 527; New York Times Co. v Sullivan, 376 US 254.) III. The complaint was properly dismissed because it runs counter to the commerce clause of the United States Constitution. (Southern Paciñc Co. v Arizona, 325 US 761; Baldwin v G. A. F. Seelig, 294 US 511; Shafer v Farmers Grain Co., 268 US 189; Hood & Sons v Du Mond, 336 US 525; Allenberg Cotton Co. v Pittman, 419 US 20.) IV. The complaint was properly dismissed because appellant failed to comply with mandatory prelitigation notice requirements. (Matter of People v Alexander’s Dept. Store, 42 AD2d 532.)
   OPINION OF THE COURT

Cooke, J.

Noah Webster, whose name in this country became synonymous with the word dictionary, completed his "American Dictionary of the English Language” about a century and a half before this controversy involving defendant’s advertising of a volume entitled "Webster’s Encyclopedic Dictionary of the English Language”.

In early 1975, defendant filed in the County Clerk’s Office of New York County a certificate of conducting business under the name of "The Webster’s Dictionary Company”. His subsequent commercial announcements in various well-known publications brought forth this suit by the Commissioner of Consumer Affairs of the City of New York, pursuant to the Consumer Protection Law of 1969 (Administrative Code of City of New York, ch 64, tit A), seeking among other things a permanent injunction enjoining the continued advertising that the dictionary is the authentic Webster’s, that its list price is $39.95, that there is any list price for it unless it is genuine within the meaning of said law, that the Webster’s Dictionary Company is the publisher, that the reason for the price of $19.95 is the depressed economy and that $19.95 is an unprecedented low price for this dictionary.

When plaintiff moved for an injunction restraining such advertising during the pendency of the action, Special Term held that "not only has plaintiff failed to show that there is a clear right to relief, but has also totally failed to state a cause of action” and under "such circumstances” the court felt "compelled to exercise its sua sponte powers to dismiss the complaint as hereinafter directed”. The Appellate Division, two Justices dissenting, affirmed. The majority observed that arguably the complaint does state a cause of action but that a pragmatic view indicates only a slight chance of ultimate success. As a matter of discretion, it allowed the condition in Special Term’s order to stand.

It has been stated that a motion for a temporary injunction opens the record and gives the court authority to pass upon the sufficiency of the underlying pleading (see, e.g., Shapiro v City of New York, 67 Misc 2d 1021, 1028, affd 32 NY2d 96, app dsmd 414 US 804, mot for reh den 414 US 1087; Leonard v John Hancock Mut. Life Ins. Co., 118 NYS2d 170, 171, affd 281 App Div 859; Challenger v Household Fin. Corp., 179 Misc 966, affd 266 App Div 844). If it be deemed that Special Term granted summary judgment in favor of defendant, in so doing it disregarded CPLR 3211 (subd [c]), as amended, which so far as pertinent requires that upon a motion for dismissal upon the ground that the pleading fails to state a cause of action, under paragraph 7 of subdivision (a), the court, "after adequate notice to the parties”, may treat the motion as one for summary judgment. Since there was no notice, there could be no conversion to a summary judgment motion, even on the court’s initiative, and the affidavits were received for a limited purpose only, a purpose unconnected with summary judgment (see Rovello v Oroñno Realty Co., 40 NY2d 633, 636). Hence, the proper focus is on whether the complaint states a cause of action.

In this State, the Legislature has declared deceptive acts and practices and false advertising in the conduct of any business to be unlawful (General Business Law, § 349, subd [a]; § 350; see, also, Executive Law, § 63, subd 12), and the City of New York has in its Administrative Code a prohibition against engaging "in any deceptive * * * trade practice in the sale * * * or in the offering for sale * * * of any consumer goods” (§ 2203d-1.0). A deceptive trade practice is defined in part as "[a]ny false * * * or misleading * * * written statement * * * or other representation of any kind made in connection with the sale * * * or in connection with the offering for sale * * * of consumer goods * * * which has the capacity, tendency or effect of deceiving or misleading customers” (§ 2203d-2.0). Whenever any person has engaged in any acts or practices constituting violations of any provision of said title A or any rule or regulation promulgated thereunder, the City of New York is authorized to make application for an order enjoining such acts or practices and for a temporary or permanent injunction, restraining order or other order of enjoinment (§ 2203d-4.0, subd d). To establish such a cause of action, it need not be shown that consumers are being or were actually injured (§ 2203d-4.0, subd e). In weighing a statement’s capacity, tendency or effect in deceiving or misleading customers, we do not look to the average customer but to the vast multitude which the statutes were enacted to safeguard— including the ignorant, the unthinking and the credulous who, in making purchases, do not stop to analyze but are governed by appearances and general impressions (cf. People v Volkswagen of Amer., 47 AD2d 868; Floersheim v Weinburger, 346 F Supp 950, 957).

The complaint basically states that plaintiff is the Commissioner of the Department of Consumer Affairs of the City of New York, that the action is instituted pursuant to the Administrative Code (ch 64, tit A), that defendant has filed a certificate of conducting business under the name of the Webster Dictionary Company with a principal place of business at 1775 Broadway, New York, New York, and that defendant is in the business of selling Webster’s Encyclopedic Dictionary of the English Language through the mails, orders being obtained through the use of mass newspaper advertising in the City of New York. Copies of defendant’s advertisements are annexed. Four causes of action are declared, in the first of which it is asserted that defendant advertises said dictionary as "The Authentic Webster’s”, that there is no authentic Webster’s dictionary in existence, and that this representation of authenticity constitutes a violation of section 2203d-2.0 (subd a, par [1]) of the Consumer Protection Law in that defendant makes claim that the dictionary he sells is of a particular standard, quality, grade or model which is not true.

In the second, plaintiff alleges that defendant advertises that he is selling a $39.95 list price dictionary for only $19.95, that plaintiff’s department has found upon investigation that no retailer of books in New York City who was questioned sold said volume for $39.95, and that this representation as to a list of $39.95 violates subdivision (3) of regulation 13.7 of the Consumer Protection Law Regulations in that the list price is not genuine because the price is not one at which substantial quantities of the identical merchandise have been sold to the public within the recent regular course of business by the advertiser or principal retail outlets within the New York City trading area.

For the third cause of action, it is averred that defendant represents in his advertising that "Because of the depressed economy, most book publishers are in financial trouble. The Webster’s Dictionary Company is no exception. And just as the major auto companies have taken drastic steps to improve sales, we hereby announce an incredible price slash on our * * * Webster’s Encyclopedic Dictionary of the English Language: ONLY $19.95 !!” It is further asserted that defendant is not in the publishing business, that defendant did not print these dictionaries but purchased them from the Consolidated Book Publishers, that said concern sells these books to any supplier or retailer at a price substantially less than $19.95 and that these representations constitute a violation of section 2203d-2.0 (subd a, par [6]) of the Administrative Code since defendant made a false and misleading representation of fact concerning the reasons for price reductions.

The complaint’s fourth and final cause alleges that defendant has advertised and continues to advertise that $19.95 is an unprecedented low price for this dictionary and adds new meaning to the word "bargain”, that the only major seller of said work in New York City sells same for $14.98, and that said representation by defendant constitutes a violation of section 2203d-2.0 (subd a, par [6]) of the Administrative Code in that it is a false and misleading representation of fact concerning defendant’s price in relation to competitors’ prices.

Aside from a summary judgment approach, whether the pleading was weighed without evidentiary material or tested in the light of it, the complaint should not have been dismissed. Initially, the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law a motion for dismissal will fail (see Foley v D'Agostino, 21 AD2d 60, 64-65; Siegel, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 3211:24, p 31; 4 Weinstein-Korn-Miller, NY Civ Prac, par 3211.36). When evidentiary material is considered, the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one, and, unless it has been shown that a material fact as claimed by the pleader to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it, again dismissal should not eventuate (see Rappaport v International Playtex Corp., 43 AD2d 393, 394-395; 4 Weinstein-Korn-Miller, NY Civ Prac, par 3211.36; Siegel, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 3211:25, p 31). Each of the complaint’s causes of action embraces a forbidden type of deception set forth with sufficient factual specificity and fullness, so as to identify the transaction and indicate the theory of redress to enable the court to control the matter and the adversary to prepare (see Foley v D'Agostino, 21 AD2d 60, 62-63, supra), and the essential facts have not been negated beyond substantial question by the affidavits submitted in respect to the temporary injunction application so that it might be ruled that the pleader does not have the causes of action (see Kelly v Bank of Buffalo, 32 AD2d 875).

With respect to the denial of the application for a preliminary injunction, this court will not review that denial since no abuse of discretion has been claimed or shown (see Cohen and Karger, Powers of the New York Court of Appeals, §§ 153, 158; see, also, Rosemont Enterprises v Irving, 41 NY2d 829). Of course, the court does not pass upon such applications for temporary provisional relief as may in the future be made. Accordingly, the order of the Appellate Division should be reversed and the complaint reinstated.

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

Order reversed, with costs, and the complaint reinstated.

      . The order of Special Term provided, however, that, if defendant failed to advertise the correct title of the dictionary ("The Living Webster’s Encyclopedic Dictionary of the English Language”) within 10 days from service of a copy thereof with notice of entry, plaintiif may reinstitute the action and renew the application for a preliminary injunction. It is obvious from the briefs of both parties that the order in this respect was complied with and thus "finalized”.

      . Under section 2203d-2.0, deceptive trade practices include "(1) representations that goods * * * are of a particular standard, quality, grade, style or model, if they are of another”.

      . Under section 2203d-3.0, the Commissioner of Consumer Affairs is empowered to "adopt such rules and regulations as may be necessary to effectuate the purposes of this title [ch 64, tit A], including regulations defining specific deceptive or unconscionable trade practices.” Under regulation 13.7, "[a]ny 'list’ price * * * must be genuine”; and under subdivision (2) of regulation 13.1, "genuine”, when used in regulation 13 with phrases such as "list price”, "shall mean that the price is one at which substantial quantities of the identical merchandise have actually been sold to the public within the recent regular course of business by the advertiser or principal retail outlets within the New York City trading area”.

      . Under section 2203d-2.0 (subd a, par [6]), deceptive trade practices include: "(6) making false or misleading representations of fact concerning the reasons for, existence of, or amounts of price reductions, or price in comparison to prices of competitors”.


source: Caselaw Access Project

author: Gabrielli, J.

license: Public Domain

text:
    Mobil Oil Indonesia Inc., Appellant, v Asamera Oil (Indonesia) Ltd. et al., Respondents.
    Argued November 17, 1977;
    decided December 19, 1977

      POINTS OF COUNSEL

      William E. Jackson, Adlai S. Hardin, Jr., Richard C. Tufaro and Edward G. Williams for appellant.
    I. The court below erred in holding not subject to judicial review, except for complete irrationality, the arbitrators’ construction of the arbitration clause to determine their own powers to fashion the arbitral rules. (Matter of Granite Worsted Mills [Aaronson Cowen, Ltd.], 25 NY2d 451; Matter of Lipschutz [Gutwirth], 304 NY 58; Matter of Di Stasio [Avallone], 27 AD2d 726, 21 NY2d 665; Matter of Siegel [Lewis], 40 NY2d 687; Matter of Orange Pulp & Paper Mills [Pulp Sales Corp.], 261 App Div 840, 285 NY 752; Matter of Kingsbrook Jewish Med. Center v Katz, Waisman, Weber, Strauss, Blumenkrans, Bernhard, 37 AD2d 518, 29 NY2d 854; Matter of Laboratorios Grossman, S. A. [Forest Labs.], 31 AD2d 628; Reisfeld & Son Import Co. v S. A. Eteco, 530 F2d 679; Lawn v Franklin, 328 F Supp 791; United States v American Employers Ins. Co. of Mass., 290 F Supp 139.) II. The arbitrators exceeded their powers by compelling arbitration under the 1975 rules, contrary to the parties’ agreement. (Green v Doniger, 300 NY 238; O’Neil Supply Co. v Petroleum Heat & Power Co., 280 NY 50; Matter of Zim Israel Nav. Co. [Sealanes Int.], 17 AD2d 393, 13 NY2d 714; Rottkamp v Eger, 74 Misc 2d 858; Hartford Acc. & Ind. Co. v Wesolowski, 33 NY2d 169; Madawick Contr. Co. v Travelers Ins. Co., 307 NY 111; Matter of Board of Comrs. of Washington Park of City of Albany, 52 NY 131; Jones v Cunard S. S. Co., 238 App Div 172; Lowry & Co. v S. S. Le Moyne D’Iberville, 253 F Supp 396, 372 F2d 123.) III. Neither the 1955 rules, New York law nor Federal law conferred upon the arbitrators authority to order prehearing discovery. (De Sapio v Kohlmeyer, 35 NY2d 402; Penn Tanker Co. of Del. v C. H. Z. Rolimpex, Warszawa, 199 F Supp 716; Porter Co., Connors Steel Div., W. Va. Works v Local 37, United Steelworkers of Amer., AFL-CIO, 400 F2d 691; Bigge Crane & Rigging Co. v Docutel Corp., 371 F Supp 240; Matter of Unicon. Mgt. Corp. [Pavcrete Constr. Corp.], 23 AD2d 837; Graig Shipping Co. v Midland Overseas Shipping Corp., 259 F Supp 929; Liggett & Meyers v Bloomfield, 380 F Supp 1044.)

      C. MacNeil Mitchell, Stephen R. Lang and Paul J. Weiner for respondents.
    I. Mobil’s suggested basis for the court’s statutory jurisdiction to review the arbitrators’ interlocutory award—to "compel arbitration”—is wholly inapplicable here. (Mobil Oil Indonesia v Asamera Oil [Indonesia], 41 NY2d 1103; Matter of Lipschutz [Gutwirth], 304 NY 58; Matter of Di Stasio [Avallone], 21 AD2d 726, 21 NY2d 665; Matter of Orange Pulp & Paper Mills [Pulp Sales Corp.], 261 App Div 840, 285 NY 752; Matter of Kingsbrook Jewish Med. Center v Katz, Waisman, Weber, Strauss, Blumenkrans, Bernhard, 37 AD2d 518, 29 NY2d 854; Matter of Laboratorios Grossman, S. A. [Forest Labs.], 31 AD2d 628; Dresdner v Czeisler, 33 Misc 2d 578; United Servs. Auto. Assn, v Cutrona, 42 AD2d 1033; Matter of Koreska [Perry-Sherwood Corp.], 253 F Supp 830, 360 F2d 212.) II. The arbitrators did not exceed their powers by rationally construing the agreement at the urging of both parties. (Matter of D. M. C. Constr. Corp. v Nash Steel Corp., 51 AD2d 1040, 41 NY2d 855; Aerojet-General Corp. v American Arbitration Assn., 478 F2d 248; Pearl St. Dev. Corp. v Conduit & Foundation Corp., 41 NY2d 167; Matter of Motor Vehicle Acc. Ind. Corp. [McCabe], 19 AD2d 349; Matter of Welsted & Son [Hawkins], 18 AD2d 869; World Brilliance Corp. v Bethlehem Steel Co., 342 F2d 362; Boston & Maine Corp. v Illinois Cent. R. R. Co., 396 F2d 425; Rochester Tel. Corp. v Communication Workers of Amer., 340 F2d 237; Tobacco Workers Int. Union, Local 317 v Lorillard Corp., 448 F2d 949; Matter of Professional Staff Congress/City Univ. of N. Y. v Board of Higher Educ., 39 NY2d 319.) III. Nor did the arbitrators’ ruling demonstrate "complete irrationality”, the only other conceivably relevant ground upon which it could have been challenged. (Lentine v Fundaro, 29 NY2d 382; Matter of Schine Enterprises [Real Estate Portfolio of N. Y], 26 NY2d 799; Gramling v Food Mach. & Chem. Corp., 151 F Supp 853; Aerojet-General Corp. v American Arbitration Assn., 478 F2d 248; I/S Stavborg [O. H. Meling, Manager] v National Metal Converters, 500 F2d 424; Parsons & Whittemore Overseas Co. v Societe Generale De L’Industrie Du Papier [RAKTA], 508 F2d 969.) IV. In any event, and as the court below held, in construing the parties’ intent the arbitrators’ interlocutory award was both "rational beyond peradventure” and indeed correct as a matter of law. (Matter of Berkovitz v Arbib & Houlberg, 230 NY 261; Fotochrome, Inc. v Copal Co., 517 F2d 512; Matter of Level Export Corp. [Wolz, Aiken & Co.], 305 NY 82; Matter of Riverdale Fabrics Corp. [Tillinghast-Stiles Co.], 306 NY 288.) V. The arbitrators acted well within their power in offering both parties a limited prehearing exchange of documents. (Reynolds Jamaica Mines v La Societe Navale Caennaise, 239 F2d 689; Weight Watchers of Quebec v Weight Watchers Int., 398 F Supp 1057; Matter of Omnium Freighting Corp. [United S. S. Corp.], 15 Misc 2d 800; Prima Paint v Flood & Conklin, 388 US 395; Matter of Rederi [Dow Chem. Co.], 25 NY2d 576, 398 US 939; Scherk v AlbertoCulver Co., 417 US 506; Commonwealth Edison Co. v Gulf Oil Corp., 541 F2d 1263; Hilti v Oldach, 392 F2d 368; Matter of Katz [Burkin], 3 AD2d 238; Bigge Crane & Rigging Co. v Docutel Corp., 371 F Supp 240.)
   OPINION OF THE COURT

Gabrielli, J.

In this proceeding, petitioner seeks to vacate "the interlocutory award of the arbitral tribunal” on the ground that the arbitrators exceeded their authority in determining the applicable procedural rules to be used during the course of the arbitration. We decline to do so and hold that the courts have no authority to review an interlocutory ruling made by the arbitrators.

On July 16, 1968 the appellant entered into a contract with respondents involving rights to exploration and production of vast petroleum reserves in Sumatra, Republic of Indonesia. The contract contained a broad arbitration clause providing that "[a]ny dispute arising out of or relating to this Agreement shall be settled by arbitration in accordance with the Rules of the International Chamber of Commerce” (hereinafter rules). A dispute arose over the payment of certain royalties due under the agreement and the respondents then caused the International Chamber of Commerce to serve a request for arbitration on appellants. At the time the agreement was executed and indeed at the time of the institution of this arbitration proceeding, the rules promulgated June 1, 1955 were in effect. Article 13 of the 1955 rules provided that "[w]hen the parties agree to submit their case to arbitration by the International Chamber of Commerce, they shall be deemed to submit to arbitration in a accordance with the present Rules.” Under the 1955 rules the arbitrators were directed to apply the procedural law of "the country” where the arbitration was to be held.

On June 1, 1975 new rules became effective, providing, inter alia, that "[w]here the parties have agreed to submit to arbitration by the International Chamber of Commerce, they shall be deemed thereby to have submitted ipso facto to the present Rules.” The 1975 rules differ from the old rules by providing that in the absence of an agreement to the contrary and where the rules are otherwise silent, the procedural law to be applied is to be determined by the arbitrators which, of course, would not necessarily be the procedural law of the country where the arbitration was to be held.

The arbitrators were asked to determine which set of rules would govern the proceeding. The question arose in the context of a request for discovery. As noted, if the 1955 rules were applicable then the arbitrators would determine procedural rules on the basis of the law of the country where the arbitration was to be held. Under these rules the arbitrators would have to look to the law of New York (or Federal law) to determine whether they had the power to order discovery. However, if the 1975 rules were applicable then the arbitrators would have the authority under the agreement to determine whatever procedural rules they deemed appropriate and to order discovery aside and apart from the State or Federal policy regarding this subject.

The majority of the arbitrators decided that the arbitration clause reference to the Rules of the International Chamber of Commerce must be construed as a reference "to those Rules as they are from time to time”, and concluded that the 1975 rules were applicable. Consequently discovery was ordered. The dissenting arbitrator found that the parties intended the 1955 rules to apply. After the International Chamber of Commerce Court of Arbitration refused to interfere, the arbitrators formalized their decision in an interlocutory award declaring the applicability of the 1975 rules.

Appellant moved to vacate the interlocutory award pursuant to CPLR 7511 (subd [b], par 1, cl [iii]) which provides that an "award shall be vacated” when "an arbitrator * * * [has] exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made” (emphasis added). No one contests the fact that there was a valid arbitration agreement and that the royalty dispute was covered by the agreement. The only contention made by appellant is that the arbitrators, in declaring the applicability of the 1975 rules, exceeded their authority.

There is no authority for this court or any court to intervene at this state of the progression of the arbitration proceeding. Early in the conduct of the arbitration proceeding, but well after the expiration of the time when there might have been judicial examination of one of the so-called threshold questions under CPLR 7503 (subd [b]), the arbitrators made what in judicial proceedings might be described as an interlocutory order; they decided under which of two alternative sets of arbitration rules the particular arbitration proceeding should thereafter be conducted. It is this intermediate procedural determination which petitioner asks the courts to overturn.

The only authority for judicial review of arbitration awards is found in CPLR 7510 and 7511 (Matter of Granite Worsted Mills [Aaronson Cowen, Ltd.] 25 NY2d 451, 454), and petitioners rely only on CPLR 7511 in this instance. But before the court may intervene or even entertain a suit seeking court intervention, there must be an "award” within the meaning of the statute. The "awards” of arbitrators which are subject to judicial examination under the statute—and then only to a very limited extent—are the final determinations made at the conclusion of the arbitration proceedings. Generally, the award is the arbitrators’ decision and final determination upon the matters submitted (23 Carmody-Wait, NY Prac, § 141:120) and must be coextensive with the submission (see Jones v Welwood, 71 NY 208, 212). The award here sought to be reviewed is "interlocutory”, involving only a very limited procedural question. It in no way constitutes a final determination on the matters submitted and therefore there is no authority for judicial intervention and the case should be remitted to Supreme Court with directions to dismiss the petition.

There can be no doubt that the State favors and encourages arbitration "as a means of conserving the time and resources of the courts and the contracting parties” (Matter of Nationwide Gen. Ins. Co. v Investors Ins. Co. of Amer., 37 NY2d 91, 95; Matter of Weinrott [Carp], 32 NY2d 190); and for the court to entertain review of intermediary arbitration decisions involving procedure or any other interlocutory matter, would disjoint and unduly delay the proceedings, thereby thwarting the very purpose of conservation. Not only the limitations of the statute, but policy considerations as well, dictate that the courts refrain from entertaining such interlocutory determinations made by arbitrators.

Accordingly, the order of the Appellant Division should be reversed and the matter remitted to Supreme Court with directions to dismiss the petition, without costs.

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

Order reversed, without costs, and the matter remitted to Supreme Court, New York County, with directions to dismiss the petition. Question certified answered in the negative.


author: Fuchsberg, J.

text:
    The People of the State of New York, Respondent, v William Alfred Glass, Appellant.
    Argued November 17, 1977;
    decided December 19, 1977

      POINTS OF COUNSEL

      Edward J. Nowak, Public Defender, for appellant.
    I. In view of the fact that the minutes containing the summations of both counsel and the court’s charge to the jury have been lost by the court reporter, appellant is being deprived of his right to an adequate and effective review of his judgment of conviction. A new trial should be ordered. (People v Giles, 152 NY 136; People v Schenkel, 256 NY 539; Griffin v Illinois, 351 US 12; People v Pride, 3 NY2d 545; People v Juhl, 38 AD2d 889; People v Mininni, 21 AD2d 811; People v Poole, 41 AD2d 699; People v Rivera, 47 AD2d 864; People v Strollo, 191 NY 42;
      People v Buford, 37 AD2d 38.) II. The prosecution failed to sustain their heavy burden of proof in showing that appellant voluntarily consented to a search of his apartment. The admission into evidence at trial of the goods seized at the apartment constitutes reversible error. (People v Gonzalez, 39 NY2d 122; Johnson v Zerbst, 304 US 458; People v Kuhn, 33 NY2d 203; People v Whitehurst, 25 NY2d 389; People v Gorsline, 47 AD2d 273; People v Jackson, 46 AD2d 816, 38 NY2d 772; People v Leonti, 18 NY2d 384; Higgins v United States, 209 F2d 819; People v Massiah, 47 AD2d 931; People v Valerius, 31 NY2d 51.)

      Lawrence T. Kurlander, District Attorney (Stephen M. Brent of counsel), for respondent.
    I. The loss of the summations of counsel and the court’s charge does not, without a showing of prejudice, deprive defendant of an adequate review of his conviction. (People v Pride, 3 NY2d 545; Griffin v Illinois, 351 US 12; Eskridge v Washington Prison Bd., 357 US 214; People v Rivera, 39 NY2d 519; People v Auth, 43 AD2d 790; People v Richetti, 302 NY 290; People v Bell, 36 AD2d 406.) II. It cannot be said as a matter of law that the police seizure of contraband from defendant’s apartment was not pursuant to a valid consent. (People v Leonti, 18 NY2d 384; People v Gonzalez, 39 NY2d 122; People v Anderson, 42 NY2d 35; Schneckloth v Bustamonte, 412 US 218; People v Carter, 30 NY2d 279; People v Jackson, 41 NY2d 146; People v Mortimer, 46 AD2d 275; People v Litwin, 44 AD2d 492; People v Potter, 35 AD2d 1044.)
   OPINION OF THE COURT

Fuchsberg, J.

The defendant was convicted of burglary and grand larceny after a jury trial. Subsequent to the filing of a notice of appeal, it was discovered that the stenographer who recorded the proceedings could not find the untranscribed stenographic notes covering the summations and the Judge’s charge to the jury. They have never been found. Defendant’s primary contention on this appeal is that he was thus effectively deprived of his "fundamental right” to appellate review (People v Montgomery, 24 NY2d 130, 132) and therefore is entitled to summary reversal and a new trial.

It is not too long since we have had occasion to point out that, unless minutes "have become unavailable because of any active fault on the part of the People, it does not necessarily follow from the fact that their absence compels resort to a less perfect record, that the right to appeal must be deemed to be frustrated” (People v Rivera, 39 NY2d 519, 523).

This is not to say that the loss of minutes is not deplorable. Needless to say, to safeguard the right to appeal, practices which assure their preservation must be instituted and enforced. However, the mere fact that minutes are not obtainable does not necessarily mean that alternative methods to provide an adequate record are not available. Though not precisely duplicating the missing minutes, they may suffice to satisfactorily demonstrate whether genuine appealable and reviewable issues do or do not exist. It is only upon an appropriate showing that this cannot be accomplished that a defendant is entitled to automatic reversal (People v Rivera, supra; see People v Flynn, 53 AD2d 816; People v Johnson, 53 AD2d 589; cf. People v Fearon, 13 NY2d 59; People v Strollo, 191 NY 42, 65-68).

The defendant completely failed to indicate that such means were not at hand. He was available to proffer his own recollection; indeed, the record before us reveals that, on a pro se application for leave to appeal, he had in fact exhibited a detailed and sophisticated awareness of what had transpired at his trial, even quoting the language in which he claimed specific alleged errors were committed in the charge and in the prosecutor’s summation. Significantly, neither there—nor on the appeal before us—is there an assertion that exception was taken either to the charge or summation, absent which these claimed errors would ordinarily not be reviewable (see Henderson v Kibbe, 431 US 145, 154; People v Patterson, 39 NY2d 288, 294-296, affd 432 US 197).

Nor does defendant as much as suggest that he, his trial counsel, the prosecutor, court personnel, others present during trial, or, for that matter, the Trial Judge were not willing and capable of aiding in the reconstruction of a substitute record from which any existing reviewable issues could be presented. Defendant goes no further than to state that inquiry at the Judge’s chambers revealed that no written copy of the charge was extant. Moreover, the interval between the time of trial and the discovery of the loss of the minutes was a matter of months, hardly long enough for it to be assumed that the memories of counsel, the court, or the others had dimmed. And, on argument of this appeal, opposing counsel agreed that the dramatis personae at trial are still readily available. This contrasts sharply with the situation in Rivera (supra), where the defendant’s ignorance of spoken English apparently had prevented him from understanding personally, and therefore being able to recount, what had been said at trial. There too the intervening 23 years between the trial and appeal had taken their toll of Judge, prosecutor and defense attorney, so they had become, respectively, deceased, disabled and unbeatable.

We are therefore compelled to conclude that the defendant has not met his burden of overcoming the presumption of regularity that attaches to his trial (see People v Bell, 36 AD2d 406, 408, affd 29 NY2d 882). He made no serious attempt to show that there were inadequate means from which it could be determined whether appealable and reviewable issues were present.

That the charge is part of the portion of the minutes which is missing does not require any deviation from this disposition. While the existence of harmful error in a charge may at times turn on words of art or the exact phrasing in which it occurred, trial court and counsel, especially if the latter preserve the point by exception, most often will well remember it. The charge is, after all, a stage of the trial usually characterized by a maximum of attentiveness to the Judge’s words and a minimum of diverting interruptions. In any event, there is nothing to show that such a turn of language was involved in the case before us. As to the reconstruction of more general portions of a charge, including even its tone, by and large these present no greater or lesser challenge to one’s ability to describe them or to recall that exception to them was indicated than do other phases of a trial.

Finally, as to a second issue tendered by defendant—that the police seizure of contraband from his apartment was not conducted pursuant to a valid consent—since there is relevant proof in the record to support the factual findings, we are powerless to disturb them (see People v Gonzalez, 39 NY2d 122; cf. People v Rizzo, 40 NY2d 425, 430).

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

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

Order affirmed.


author: Jones, J.

text:
    John Cardinale et al., Appellants, v Frank Golinello, Respondent, et al., Defendants.
    Argued November 16, 1977;
    decided December 19, 1977

      POINTS OF COUNSEL

      Charles P. Schiller for appellants.
    I. It was an abuse of discretion as a matter of law to disqualify Schiller without a finding that it was "reasonably” probable that Schiller gained knowledge of the Golinello confidences. (United States v Standard Oil Co., 136 F Supp 345; Waters v Western Co. of North Amer., 436 F2d 1072; T. C. Theatre Corp. v Warner Bros. Pictures, 113 F Supp 265; Woods v Covington County Bank, 537 F2d 804; Silver Chrysler Plymouth v Chrysler Motors Corp., 518 F2d 751; Gas-A-Tron of Ariz. v Union Oil Co. of Cal., 534 F2d 1322; United States ex rel. Sheldon Elec. Co. v Blackhawk Heating & Plumbing Co., 423 F Supp 486; International Electronics Corp. v Flanzer, 527 F2d 1288; Ernie Inds. v Patentex, 478 F2d 562.) II. Any "presumption” that Schiller obtained confidential information solely by reason of his prior employment with respondent’s attorney is rebuttable. (Laskey Bros, of W. Va. v Warner Bros. Pictures, 224 F2d 824, 350 US 931; Silver Chrysler Plymouth v Chrysler Motors Corp., 518 F2d 751; United States v Standard Oil Co., 136 F Supp 345; Gas-A-Tron of Ariz. v Union Oil Co. of Cal., 534 F2d 1322.) III. Even if Schiller was properly disqualified it was an abuse of discretion as a matter of law to disqualify the King firm. (T. C. Theatre Corp. v Warner Bros. Pictures, 113 F Supp 265; Rotante v Lawrence Hosp., 46 AD2d 199; American Can Co. v

      Citrus Feed Co., 436 F2d 1125.) IV. It was an abuse of discretion as a matter of law to disqualify Schiller and King as to all defendants. (Croff v Kearns, 29 AD2d 703, 22 NY2d 718; Roma v Blaustein, 44 AD2d 576; People v Jelke, 308 NY 56; Konopka v La Purka, 11 Misc 2d 895; Fisher Studio v Loew% 232 F2d 199, 352 US 836; Hull v Celanese Corp., 513 F2d 568.)

      Steven A. Green wold and Peter A. Tavolacci for respondent.
    I. The Court of Appeals lacks jurisdiction to grant the relief sought by appellant. II. Respondent has met his burden of proof. (T. C. Theatre Corp. v Warner Bros. Pictures, 113 F Supp 265; Porter v Huber, 68 F Supp 132; Watson v Watson, 171 Misc 175; Emle Inds. v Patentex, 478 F2d 562; Richardson v Hamilton Int. Corp., 469 F2d 1382; United States v Standard Oil Co., 136 F Supp 345; Chugach Elec. Assn, v United States Dist. Ct. for Dist. of Alaska at Anchorage, 370 F2d 441.) III. Complainant does not bear the additional burden of proving the existence of a "reasonable probability”, that the attorney received actual confidential information. (T. C. Theatre Corp. v Warner Bros. Pictures, 113 F Supp 265; Chugach Elec. Assn, v United States Dist. Ct. for Dist. of Alaska at Anchorage, 370 F2d 441; Consolidated Theatres v Warner Bros. Circuit Mgt. Corp., 216 F2d 920; Richardson v Hamilton Int. Corp., 469 F2d 1382; United States v Standard Oil Co., 136 F Supp 345; Ernie Inds. v Patentex, 478 F2d 562.) IV. An attorney must avoid not only the fact but the appearance of representing conflicting interests. (Emle Inds. v Patentex, 478 F2d 562; United States v Standard Oil Co., 136 F Supp 345; Edelman v Levy, 42 AD2d 758; Matter of Kelly, 23 NY2d 368.) V. The inference that confidential information was reposed cannot, and has not, been rebutted. (Laskey Bros, of W. Va. v Warner Bros. Pictures, 130 F Supp 514; United States v Standard Oil Co., 136 F Supp 345; Silver Chrysler Plymouth v Chrysler Motors Corp., 518 F2d 751; Hull v Celanese Corp., 513 F2d 568.) VI. Disqualification rules are not limited to former partners, but apply to law clerks and law associates as well. (United States v Standard Oil Co., 136 F Supp 345; Consolidated Theatres v Warner Bros. Circuit Mgt. Corp., 216 F2d 920.) VII. The firm of King & King was properly disqualified. (United States v Standard Oil Co., 136 F Supp 345; Edelman v Levy, 42 AD2d 758; Rotante v Lawrence Hosp., 46 AD2d 199; Chugach Elec. Assn, v United States Dist. Ct. for Dist. of Alaska at Anchorage, 370 F2d 441.)
   OPINION OF THE COURT

Jones, J.

There was no abuse of discretion when the courts below held that appellants’ counsel were disqualified from further representing appellants because of an impermissible conflict of interest.

The question of attorney disqualification which is the subject of the present appeal was raised by defendant Golinello’s motion to disqualify plaintiffs’ attorneys from representing them in this action. The underlying litigation between the clients had its genesis in the purchase by defendant Golinello of the capital stock of Cross County Sanitation Corp., a company engaged in the refuse hauling business. The contract of sale was signed on January 21, 1972, and the closing took place on February 4, 1972. Golinello was represented in the transaction by John Somers, Esq., of Halperin, Somers & Goldstick, P. C.

Charles P. Schiller, an attorney, was thereafter employed by Halperin, Somers & Goldstick, P. C., from February 14 to December 29, 1972. During this period Mr. Somers and Halperin, Somers & Goldstick, P. C., continued to do legal work for Golinello. It is not asserted that at any time Mr. Schiller personally rendered legal services on Golinello’s behalf. It does appear, however, that Halperin, Somers & Goldstick, P. C., was a small firm whose activities were characterized by an understandable informality and in which it is asserted that there was a "constant cross-pollination going on” and a "cross current of discussion and ideas” among all attorneys on all matters which the firm handled. Separate offices were not physically isolated; the conference room and all firm files were open and available to all lawyers in the firm, including Mr. Schiller.

On April 10, 1975 plaintiffs retained the firm of King & King to represent them in connection with claims against Golinello, Somers, and Somers, Goldstick & Weinberger, P. C. (successor to Halperin, Somers & Goldstick, P. C.), arising out of the 1972 sale of the Cross County stock and transactions subsequent thereto. In July, 1975 Mr. Schiller rented space in the office of King & King which firm thereafter referred legal matters to Mr. Schiller on an "of counsel” basis. In August, King & King, "with the knowledge and consent of the plaintiffs”, requested Mr. Schiller to handle the litigation of plaintiffs’ claims against defendants.

In the fall of 1975 Mr. Schiller appears to have participated in the preparation of the summons and complaint in the present action which were served on December 11, 1975. Defendants promptly served a demand for a bill of particulars. They first learned of Mr. Schiller’s participation in the litigation when the papers on plaintiffs’ motion for a protective order were forwarded by Mr. Schiller to defendants’ counsel on December 23, 1975 and it appeared that the affidavit in support of the motion had been made by him. On January 22, 1976 defendant Golinello moved to disqualify Mr. Schiller and the firm of King & King from further representation of plaintiffs. Mr. Schiller and Martin J. King submitted affidavits in opposition to the motion for disqualification. It appears that Mr. Schiller requested a formal opinion from the Westchester County Bar Association as to the ethical propriety of his continued representation of plaintiffs, but that such request was properly denied on the ground that the issue was then in litigation.

On June 15, 1976 Special Term granted defendant’s motion and ordered that Mr. Schiller and King & King be disqualified from further representation of plaintiffs in this action. On January 3, 1977 the Appellate Division affirmed, by a divided court. An appeal from the order of the Appellate Division is now before us pursuant to leave granted by that court on a certified question. Mr. Schiller has appeared for appellants.

The order of the Appellate Division should be affirmed. While defendant has not established that Mr. Schiller personally rendered legal services to Golinello during the period of his employment by Halperin, Somers & Goldstick, P. C. in 1972, and indeed his employment with that firm commenced after the February 4, 1972 closing of Golinello’s purchase of the Cross County stock and was terminated prior to the alleged divestiture of Cross County, there is such a conflict of interest in violation of the Code of Professional Responsibility, at least as the courts below were entitled to conclude, as to call for the disqualification of Mr. Schiller and the firm of King & King.

As to the conflict of interest we note that the amended complaint alleges transactions and activities on the part of defendants in connection with the sale in early 1972 of the Cross County stock and that the claimed conspiracy is alleged to have been commenced in 1971 and to have been pursued in the years subsequent thereto and during the time when Mr. Schiller was associated with the law firm which was then representing defendant Golinello. It is of no moment for present purposes that Mr. Schiller claims that he did not personally render any legal services to Golinello; it suffices that he was associated with the firm that did.

It is significant to observe that in this instance there is not presented for resolution the potentially difficult problem of balancing the interests of a client desirous of retaining an attorney of his personal choice and preference against the interests of the opposing litigant to be free from the risks of opposition by a lawyer once privy to that litigant’s confidences. In this case Mr. Schiller’s representation of plaintiffs was undertaken at the instance of the law firm of King & King. While such representation is asserted to have been with the knowledge and consent of plaintiffs, other than as might be inferred from such conclusory assertion there is no tender of evidentiary proof that plaintiffs in fact knew of Mr. Schiller’s involvement. There is not even a suggestion, much less any proof, that either plaintiff desired or sought Mr. Schiller’s professional services. Thus, this record is entirely devoid of any evidence of an interest of substance on the part of plaintiffs that they be represented by Mr. Schiller. His participation was only at the instance of King & King, plaintiffs’ retained counsel. Whatever might be the degree of risk of conflict or the quantum of possible conflict which might be necessary to call for disqualification of an attorney or law firm selectively retained by a client, at least when there is no such purposeful retainer any substantial evidence of possible conflict of interest warrants disqualification of the lawyer.

The disposition in this case is dictated by long-established ethical standards in the practice of law. The constraints imposed by ethical precepts apply equally to all lawyers in a firm such as that which originally represented Golinello; if one lawyer would be disqualified from undertaking a subsequent representation, then all the attorneys in the firm are likewise precluded from such representation. (Cf. Seaward v Tasker, 143 NYS 257, revd on other grounds 171 App Div 964.) Thus, in this instance, if John Somers would be precluded from representing plaintiffs in this action so would Mr. Schiller. No one would seriously contend that Mr. Somers, having once represented Golinello in connection with the purchase of the Cross County stock, would now be free to represent plaintiffs in their assertion of claims against Golinello arising out of the same transaction. "Both the fiduciary relationship existing between lawyer and client and the proper functioning of the legal system require the preservation by the lawyer of confidences and secrets of one who has employed or sought to employ him” (Code of Professional Responsibility, EC 4-1). "The obligation of a lawyer to preserve the confidences and secrets of his client continue after the termination of his employment” (op. tit., EC 4-6). "The obligation [of an attorney] to represent the client with undivided fidelity and not to divulge his secrets or confidences forbids also the subsequent acceptance of retainers or employment from others in matters adversely affecting any interest of the client with respect to which confidence has been reposed” (former canon 6 of the Canons of Professional Ethics). The proscription against taking a case against a former client is predicated, however, on more than the possibility of use in the second representation of information confidentially obtained from the former client in the first representation. The limitation arises simply from the fact that the lawyer, or the firm with which he was then associated, represented the former client in matters related to the subject matter of the second representation. Accordingly, it is no answer that the lawyer did not in fact obtain any confidential information in connection with the first employment, or even that it was only other members of his firm who rendered the services to the client. Irrespective of any actual detriment, the first client is entitled to freedom from apprehension and to certainty that his interests will not be prejudiced in consequence of representation of the opposing litigant by the client’s former attorney. (Drinker, Legal Ethics, pp 109, 115.) The standards of the profession exist for the protection and assurance of the clients and are demanding; an attorney must avoid not only the fact, but even the appearance, of representing conflicting interests (Rotante v Lawrence Hosp., 46 AD2d 199; Edelman v Levy, 42 AD2d 758). "[W]ith rare and conditional exceptions, the lawyer may not place himself in a position where a conflicting interest may, even inadvertently, affect, or give the appearance of affecting, the obligations of the professional relationship” (Matter of Kelly, 23 NY2d 368, 376).

The Federal authorities cited by plaintiffs involving questions of the propriety of legal representation by former associates of very large law firms or by former Government lawyers are at best of only tangential interest in the present case; because they present different practical and ethical considerations, they are not persuasive and surely not determinative.

It is urged that even if Mr. Schiller is disqualified, such disqualification should not extend to the firm of King & King or with respect to the defendants other than defendant Golinello. We reject these contentions. Under the principle of attribution, while Mr. Schiller is associated with the King firm his disability extends to the other lawyers in the firm. Although it is alleged that the King firm did not know of Mr. Schiller’s association with Golinello’s former attorneys prior to the commencement of the representation of plaintiffs by King & King in April, 1975, there is no assertion of the firm’s innocence of such awareness when Mr. Schiller rented office space in the King office in July, 1975 or when he was subsequently requested to handle the present litigation. In this circumstance and because for several months Mr. Schiller and the firm of King & King have co-operated in the prosecution of plaintiffs’ claims against Golinello, the disqualification of Mr. Schiller must be deemed to extend to the King firm as well. This is so even though there is no direct proof that King & King have been the recipients of any improper disclosures or breaches of confidence arising out of Mr. Schiller’s former association with Halperin, Somers & Goldstick, P. C. We further note that there is no proof in the record from either plaintiff personally of his desire to continue to be represented by the firm of King & King. Other than the personal affidavit of defendant Golinello in support of the motion for disqualification, the record contains only the affidavits of counsel for defendants in support of the motion and of the lawyers found to be disqualified in opposition thereto.

Similarly, in view of the allegations of conspiracy and joint participation of the other defendants with Golinello in the activities alleged in the complaint, there is no adequate basis for distinguishing between representation against Golinello on the one hand and representation against the remaining defendants on the other, as Mr. Schiller and King & King urge us to do. Additionally, in the absence of any evidence that they proceed in response to the particular importuning of their clients, it approaches the reprehensible for counsel, in an attempt to protect their own engagement, to suggest the imposition on their clients of the burden and expense of double representation.

For the reasons stated, the order of the Appellate Division should be affirmed, with costs to respondent payable by Mr. Schiller and King & King personally.

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

Order affirmed, with costs to respondent payable by Mr. Schiller and King & King personally. Question certified answered in the affirmative.

      . The original complaint is not reproduced in the record. The amended complaint, verified in April, 1976, alleges that Golinello defaulted in payment of the 36th in a series of notes given to evidence his obligation for installment payments of the purchase price for the capital stock of Cross County Sanitation Corp., and then proceeds to set forth five causes of action. The first, against Golinello, charges a breach of fiduciary duty in the disposition by Cross County of all its assets thereby leaving the corporation insolvent, in consequence of which its capital stock which had been pledged as collateral security for the payment of the purchase price of the stock, was rendered worthless. The second, against Meier, the escrow agent holding the Cross County stock, charges failure to protect the escrow. The third, against Somers and Golinello, charges wrongful inducement and participation in the economic divestment of Cross County and in the violation of the escrow agreement. The fourth, against Golinello, defendant Giannettino, Somers, and Somers, Goldstick & Weinberger, P. C., charges a conspiracy among the named defendants (including Mr. Schiller’s former associate and the successor to his former law firm) to defraud plaintiffs. The fifth and final cause of action, against Golinello, states a cause of action for default in payment of the promissory notes evidencing the' balance due on the original purchase price for the Cross County stock.

      . The suggestion in the Kelly case that full disclosure and prior consent by the parties may sometimes obviate the objection to conflicting representation has no application.


author: Jasen, J.

text:
    State-Wide Insurance Company, Respondent, v Virginia Curry et al., Appellants.
    Argued November 15, 1977;
    decided December 19, 1977

      POINTS OF COUNSEL

      William F. Huschle and Bertram Herman, P. C., for appellants.
    I. The rationale of the cases decided under section 167 (subd 2-a) of the Insurance Law where an insurance company had been adjudicated a bankrupt has not been changed by passage of section 334. (Matter of Travis [General Acc. Group], ' 31 AD2d 20; Matter of Taub [MVAIC], 31 AD2d 378; Dutchess & Columbia Coop. Ins. Co. v State of New York, 81 Misc 2d 402, 43 AD2d 769, 36 NY2d 835; Matter of Vanguard Ins. Co. [Polchlopek], 18 NY2d 376.) II. Passage and enactment of section 334 of the Insurance Law does not provide the same insurance fund as that formerly held by the offending motorist. (Matter of Reid [MVAIC], 43 Misc 2d 1020.) III. The passage of section 334 of the Insurance Law merely provided a new remedy for an existing right which did not abrogate the existing remedies then available for enforcing the same right. (People v Newman, 32 NY2d 379; Matter of Borders v Nassau County Dept, of Social Servs., 34 AD2d 805.)

      Bernard Meyerson for respondent.
    I. The cases cited by Special Term did not apply to the facts herein because the situation in this case is that defendants will be defended and appellants will be indemnified as mentioned by the court below. (Matter of Travis [General Acc. Group], 31 AD2d 20; Matter of Taub [MVAIC], 31 AD2d 378.) II. Appellants’ contention that section 334 of the Insurance Law was not intended to repeal section 167 (subd 2-a) is presumptuous. (Matter of Portnoy [MVAIC], 40 AD2d 598.)

      Norman H. Dachs for Superintendent of Insurance and another, amici curiae.

    The vehicle insured by Resources Insurance Company is not an uninsured vehicle within the definition of the New York Automobile Accident Indemnification Endorsement. (Matter of Knickerbocker Agency [Holz], 4 NY2d 245; Bohlinger v Zanger, 306 NY 228; Dutchess & Columbia Coop. Ins. Co. v State of New York, 81 Misc 2d 402, 43 AD2d 769; Matter of Lawyers Mtge. Co., 169 Misc 802, 256 App Div 974; Matter of Neals v Allstate Ins. Co., 34 AD2d 265; Matter of Allcity Ins. Co. [Di Noto], 80 Misc 2d 1022; Olenick v

      Government Employees Ins. Co., 68 Misc 2d 764, 42 AD2d 760; Matter of Travis [General Acc. Group], 31 AD2d 20; Uline v Motor Vehicle Accident Ind. Corp., 28 Misc 2d 1002; Matter of Bendelow [Travelers Ind. Co.], 57 Misc 2d 327.)
   OPINION OF THE COURT

Jasen, J.

On October 29, 1973, the automobile belonging to appellant Virginia Curry, in which appellants Sidney Curry and Ruby Peoples were passengers, collided with an automobile owned by Maria Sanon but operated by Charles Moise. On July 22, 1975, the Resources Insurance Company, insurer of the Sanon vehicle, was adjudicated insolvent and placed in liquidation. Appellants, on February 23, 1976, served a demand for arbitration based on the New York Automobile Accident Indemnification Endorsement (Indemnification Endorsement) in the liability policy of Virginia Curry then in effect with respondent State-Wide Insurance Company. Respondents moved to stay arbitration on the ground that section 334 of the Insurance Law precluded the availability of the remedy afforded by the Indemnification Endorsement. Special Term denied the motion to stay arbitration. The Appellate Division reversed unanimously.

In this proceeding to stay arbitration, we are asked to decide whether a person involved in an automobile accident is an "uninsured motorist” within the meaning of the New York Automobile Accident Indemnification Endorsement where the person is insured by a domestic insurer which becomes insolvent subsequent to the accident.

Resolution of this issue depends not only on subdivision 2-a of section 167 of the Insurance Law which established the Indemnification Endorsement, but also on sections 333 and 334 of the Insurance Law, which provide protection for automobile accident victims where the liable insurer is insolvent. Tracing the history of these statutory provisions serves as an instructive means of gaining a perspective on their interrelationship.

In 1947, the Legislature, by enacting section 333, created the Motor Vehicle Liability Security Fund and thereby secured protection for victims of vehicular accidents where the insolvency of an insurer doing business in New York prevented it from meeting its insurance obligations. The recovery provided by the fund was coextensive with the contractual liability of the defaulting insurer.

Additional protection was afforded automobile accident victims when, in 1958, the Legislature passed subdivision 2-a of section 167, which provided that the Motor Vehicle Accident Indemnification Corporation (MVAIC) would compensate victims of accidents caused by "uninsured motorists”. A 1965 amendment to this section shifted the Indemnification Endorsement obligation from MVAIC to the victim’s insurer.

The enactment of section 334 in 1969 broadened the coverage furnished by section 333 to include various forms of property and liability insurance other than automobile insurance as provided in section 333 and renamed the fund, The New York Property and Liability Insurance Security Fund (Security Fund). Insofar as it is consistent with section 334, the older provision remains in force, and the passage of section 334 has effected little change regarding the protection afforded automobile accident victims by section 333.

Although sections 333 and 334 clearly cover accident victims where insurers due to insolvency are unable to satisfy their insurance obligations, appellant contends that the "uninsured motorist” coverage of subdivision 2-a of section 167 provides an alternative remedy to that prescribed in sections 333 and 334, and that, where insolvency renders an insurer incapable of satisfying its insurance obligations, a claimant may elect between the two remedies.

We disagree. The purpose of the Indemnification Endorsement as required by subdivision 2-a of section 167 of the Insurance Law is to protect persons who are injured by financially irresponsible motorists by making available a $10,-000 fund to which an injured person may look for compensation for his injuries. (Matter of Neals v Allstate Ins. Co., 34 AD2d 265.) This statutory scheme presupposes that no other liability coverage exists to compensate innocent victims of motor vehicle accidents. Where an injured person may look to the Security Fund, created pursuant to sections 333 and 334 of the Insurance Law, for compensation, there is no need to protect such injured person under the Indemnification Endorsement, since compensation is otherwise available. To hold that a claimant may elect between the two statutory remedies would frustrate the purpose behind the Security Fund, which was to guarantee the accident victim a recovery identical to what would have been available but for the responsible motorist’s insurer’s insolvency.

Furthermore, the very languge of subdivision 2-a of section 167 of the Insurance Law precludes application of the Indemnification Endorsement in a case such as this. Subdivision 2-a of section 167 requires that insurers provide an Indemnification Endorsement for injuries resulting from an accident caused by "an owner or operator of an uninsured motor vehicle” or an owner or operator of "an insured motor vehicle where the insurer disclaims liability or denies coverage”. Clearly the vehicle insured by the insolvent Resources Insurance Company fits neither of these categories. While the Resources Insurance Company became insolvent after the accident, the insurance policy itself survived, and the obligations owed its insured were assumed by the Security Fund for the full amount of the policy to a limit of $1,000,000. (Insurance Law, § 334, subd [2].) Hence, we conclude that Sanon’s vehicle was neither "an uninsured motor vehicle” nor "an insured vehicle where the insured disclaimed] liability or denie[d] coverage” within the meaning of subdivision 2-a of section 167 of the Insurance Law.

Our conclusion that the "Uninsured Motorist” endorsement is inapplicable under the facts of this case finds support in the legislative memorandum discussing the purpose sought to be achieved by the 1958 MVAIC legislation which included subdivision 2-a of section 167: "This bill is designed to close the gaps which continue to exist under the Compulsory Insurance Law that was passed in 1956, with respect to assuring payment of compensation to innocent victims of motor vehicle accidents.” (NY Legis Ann, 1958, p 299.) If. the purpose of subdivision 2-a of section 167 was to "close the gaps * * * with respect to assuring payment of compensation to innocent victims of motor vehicle accidents”, surely the Legislature did not intend to provide another remedy for those insured by insolvent domestic insurers, where, due to section 333, no gap had existed as to assuring compensation to such victims for many years. Although subdivision 2-a of section 167 should be liberally applied so that its purpose of protecting accident victims will be accomplished (Matter of Vanguard Ins. Co. [Polchlopek], 18 NY2d 376, 381), where the legislative intent is not frustrated, there is no sound reason for an overly broad construction of the provision.

It should also be recognized that permitting recourse to the Indemnification Endorsement in cases like this would be manifestly unfair to domestic insurers. Having contributed to the Security Fund, they are entitled to be sheltered from insurance obligations where the Security Fund provides an adequate remedy.

In holding as we do today, we are mindful that two Appellate Divisions, when confronted with similar issues, arrived at an interpretation of subdivision 2-a of section 167 contrary to ours. In Matter of Taub (MVAIC) (31 AD2d 378), the First Department found that where an insurer had become insolvent and was liquidated after an automobile accident, the insolvency "was tantamount to a disclaimer of liability, or denial of coverage” (Matter of Taub [MVAIC], supra, at p 381.) A like result was reached by the Third Department in Matter of Travis (General Acc. Group) (31 AD2d 20), wherein an insurer became insolvent prior to the accident. Although both cases expressed an overly broad interpretation of subdivision 2-a of section 167, they were nevertheless correctly decided on their facts. In both cases the insolvent insurer apparently was not licensed to do business in New York and, therefore, had not contributed to the fund created by section 333. As a result, the claimants could not seek compensation from the fund. Under these circumstances, the defendants were "uninsured motorists” and the Indemnification Endorsement was properly held applicable, not as an alternate remedy to the Motor Vehicle Liability Security Fund, but as the exclusive remedy.

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

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

Order affirmed.

      . MVAIC was created in 1958 pursuant to section 602 of the Insurance Law.

      . No mention was made in either Taub (supra) or Travis (supra) of section 333 of the Insurance Law. Section 334 had not yet been enacted when these decisions were rendered.