author: Chief Judge Cooke. Kaye, J.

text:
    In the Matter of Sheila G.
    Argued January 4, 1984;
    decided March 27, 1984

      POINTS OF COUNSEL

      Barry R. Abbott for appellant.
    I. The foster care agency’s failure to make diligent efforts to unite Sheila and her father precludes an adjudication of permanent neglect. (Matter of Donna Dorene G., 52 NY2d 890; Matter of Sanjivini K., 47 NY2d 374; Matter of Leon RR, 48 NY2d 117; Matter of Michael B., 58 NY2d 71.) II. The father’s consistent contacts with Sheila and reasonable plans for her care preclude an adjudication of permanent neglect. (Matter of Ray A. M., 48 AD2d 161, 37 NY2d 619; Matter of Anita “PP”, 65 AD2d 18; Matter of Donna Dorene G., 52 NY2d 890; Matter of Orlando F., 40 NY2d 103.) III. The court below erred in using a best interests test in finding permanent neglect. (Matter of Bennett v Jeffreys, 40 NY2d 543; Matter of Ricky Ralph M., 56 NY2d 77; Stanley v Illinois, 405 US 645; Matter of Corey L v Martin L, 45 NY2d 383; Matter of Sanjivini K., 47 NY2d 374.)

      Frederick A. O. Schwarz, Jr., Corporation Counsel (Helen P. Brown and Michael Gage of counsel), for Commissioner of Social Services, respondent.
    The decision of the court below should be affirmed. (Matter of Orlando F., 40 NY2d 103; Matter of Ikem B., 73 AD2d 359; Matter of Diana S., 68 AD2d 915; Matter of Roxann Joyce M., 75 AD2d 872.)

      Eleanor J. Ostrow, Gregory F. Hauser and Mary B. Seyferth for foster parents, respondents.
    I. The court below was correct in its unanimous finding of clear and convincing proof that appellant permanently neglected Sheila G. (Matter of Melanie Ruth JJ, 76 AD2d 1008; Matter of Shantal M. K., 68 AD2d 482; Matter of Orlando F., 40 NY2d 103; Matter of Candie Lee W., 91 AD2d 1106; Matter of Diana S., 68 AD2d 915; Matter of Stephen B., 60 Misc 2d 662, affd sub nom. Matter of Behrman, 34 AD2d 527; Matter of Roxann Joyce M., 75 AD2d 872; Matter of Andress, 93 Misc 2d 399; Matter of Davina M., 68 AD2d 531; Matter of James S., 98 Misc 2d 650.) II. The court below was correct in its unanimous decision that Sheila’s best interests require permanent termination of appellant’s parental rights.

      Robert Payne Preuss and Lenore Gittis, Law Guardians for Sheila G.
    I. Appellant’s consent is not needed for Sheila’s adoption, and the only issue which appellant was legally entitled to contest was Sheila’s best interests. (Caban v Mohammed, 441 US 380.) II. Because the agency did not have a duty to make diligent efforts to encourage appellant’s relationship with his child, its alleged failure in this regard cannot provide appellant with a defense to this proceeding. III. Appellant’s failure to maintain the contacts listed in section 111 (subd 1, par [d]) of the Domestic Relations Law is permanent neglect per se. (Matter of Malpica Orsini, 36 NY2d 568.) IV. The finding of the court below that appellant permanently neglected his child is supported by clear and convincing evidence. (Matter of Orlando F., 40 NY2d 103; Matter of Norma Jean K., 81 AD2d 919; Matter of Melanie Ruth JJ, 76 AD2d 1008; Matter of Leon RR, 48 NY2d 117; Caban v Mohammed, 441 US 380; Matter of Anita “PP”, 65 AD2d 18.)
   OPINION OF THE COURT

Chief Judge Cooke.

When a child-care agency has custody of a child and brings a proceeding to terminate parental rights on the ground of permanent neglect, it must affirmatively plead in detail and prove by clear and convincing evidence that it has fulfilled its statutory duty to exercise diligent efforts to strengthen the parent-child relationship and to reunite the family. Only when this duty has been deemed satisfied may a court consider and determine whether the parent has fulfilled his or her duties to maintain contact with and plan for the future of the child. In the instant proceeding, the petitioning agency presented nothing to establish that it had fulfilled its duty with respect to the subject child’s natural father. Consequently, the Family Court properly dismissed the petition insofar as it alleged that the child had been permanently neglected by her father.

_L

Sheila G. was born out of wedlock on August 29, 1977. Soon after her birth, she was placed voluntarily by her mother with the Department of Social Services for the City of New York. The department, in turn, authorized its agent, the Orphan Asylum Society of the City of Brooklyn, commonly known as the Brookwood Child Care Agency, to supervise the child’s care. Sheila was placed in a foster home on September 29, 1977.

On November 7, 1977, Sheila’s natural father, Dennis H., telephoned the Brookwood agency. He acknowledged paternity and requested a meeting with agency officials, which was held two weeks later. At that time, Dennis expressed his desire to visit and financially support the child.

Representatives of Brookwood informed Dennis that the mother had adamantly refused to permit Dennis access to the child. Dennis was instructed that, until such time as he formally established paternity, the agency would be bound by the mother’s instructions and he would not be allowed to see Sheila. Brookwood provided Dennis with the name and the address of the Kings County Family Court.

Over the course of the next year, Dennis regularly contacted Brookwood, inquired about Sheila’s well-being, and related his progress in establishing paternity. Dennis reported a number of visits he had made to the Family Court and discussions he had had with clerks and with a Judge. He also stated that he had been informed that the matter could go no further unless Sheila’s mother participated in the process. The mother’s failure to co-operate was cited by Dennis in explaining why he had been unable to establish paternity.

During this period, Brookwood’s efforts centered on working with Sheila’s mother toward reuniting the two. The mother’s disinterest and her inability to appropriately care for the child or plan for the child’s future soon became apparent to Brookwood. Consequently, it was determined in early 1978 that the agency plan would be to seek a surrender of Sheila for adoption and to place the child in a preadoptive home. In the event that a voluntary surrender by the natural parents was not forthcoming, Brookwood decided that it would initiate a proceeding to terminate the rights of the mother and father.

Sheila was placed in her current foster home in October, 1978, when she was 13 months old. Her foster parents were, at that time, informed by the Brookwood caseworker that the father’s whereabouts were unknown and that Sheila would be available for adoption within six months’ time.

The next month, the mother had a “change of heart” and decided that Dennis should be permitted access to the child. A biweekly visitation schedule was established by which Dennis, his mother, and his sister would visit Sheila at Brookwood’s offices. For the next year and a half, until the instant proceeding was brought, Dennis and his family regularly attended the scheduled visits.

In January, 1979, Dennis came forward with a plan to take custody of Sheila. Dennis, an employee of the Post Office, had adequate income to support himself and Sheila. At that time, however, he lived at a YMCA. Dennis proposed to the Brookwood caseworker that he would move in with his mother who would take care of the child until he returned from work each day. Dennis reiterated this plan to the caseworker in April, 1979.

In July, 1979, Dennis formally established paternity. He then suggested a new plan for taking custody of his daughter. Under this plan, Dennis stated that he preferred independence from his mother and that, rather than moving to his mother’s home, he would find his own apartment. Sheila would be placed in a day-care center while the father was at work. Dennis reiterated this plan in October, 1979 and January, 1980.

This proceeding was commenced in May, 1980. Brookwood brought a petition in Family Court against both of the natural parents for a determination that Sheila was a permanently neglected child, that both parent’s rights be terminated, and that Sheila be made available for adoption (see Family Ct Act, § 614, subd 1; Social Services Law, § 384-b, subd 7, par [a]). The matter was set down for a fact-finding hearing (see Family Ct Act, § 622).

Evidence relating to the allegations against the natural mother was presented at many scheduled hearings held during the latter part of 1980 and the early months of 1981. At the close of the fact-finding hearing, the Family Court found that Sheila had been permanently neglected by her mother. That determination was not appealed to the Appellate Division and is not at issue in this appeal.

The allegations against the natural father were the subject of hearings held on February 18-19, 1981. “The essence of the agency’s case” against Dennis, in the words of Brookwood’s attorney, was “the failure to plan. Not lack of visitation, but failure to plan.” The agency argued that it had, under the circumstances, made a reasonable effort in assisting Dennis. It was noted that the agency repeatedly informed Dennis that he would have to establish paternity and that it had provided Dennis with the name and address of the court in which he could receive an order of filiation. Also cited were two incidents, one in April, 1979, when the agency had offered Dennis counseling, and a second in February, 1980, when Dennis had been offered assistance in finding an apartment. Relying on these efforts and the assertion that Dennis was a well-intentioned and intelligent individual, the agency argued that it nevertheless took Dennis 18 months, from the time of Sheila’s birth, to establish paternity. In the agency’s view, this constituted evidence of a failure to plan for Sheila’s future sufficient to give rise to a determination of permanent neglect.

At the close of the fact-finding hearing, the guardian ad litem for Sheila argued that Dennis’s parental rights should not be terminated. It was noted that, promptly after Sheila’s birth, Dennis had informed Brookwood that he was the child’s father and had since undertaken his own efforts to establish paternity. The guardian also asserted that a finding of a failure to plan should not rest on Dennis’s failure to establish paternity. To this end, it was pointed out that the “morass of coming to court * * * and getting orders of filiation, getting summons [is] something * * * that many attorneys, many attorneys that I have been familiar with, have difficulty with, let alone a lay person.”

In a decision from the Bench on February 19, 1981, the Family Court dismissed the petition brought against Dennis and later explained the reasons for dismissal. The court held that Brookwood failed to exercise diligent efforts on behalf of uniting Sheila and Dennis. It found that “vis-avis Dennis * * * Brookwood did not assess him and his family as a parent and family to whom Sheila could be released. Brookwood did not. identify specific problems preventing discharge of Sheila to [Dennis’s] family, nor plan for provision of services to resolve or ameliorate the identified problems.” The court added that it could not “reconcile with Brookwood’s statutory duty * * * [the] ignoring and rejection of Dennis and his family, as an alternative to the mother, in light of [their] persistent presence, strengths, interest, potential, and natural and legal rights.” Dennis on the other hand, was found to have been “consistent, persistent, and diligent in his contacts, efforts, and expressions of interest with regard to Sheila.”

A cross motion for custody had been made by Dennis, and the court ordered that, in light of this motion and the fact that the petition against Sheila’s mother had been sustained and her parental rights had been terminated, a dispositional hearing (see Family Ct Act, § 623) and custody hearing should be held simultaneously. The foster parents were granted their motion to intervene in the proceedings (see Social Services Law, § 383, subd 3).

Over the course of the next year, hearings were held on the question of custody. Principally, Sheila’s emotional well-being was called into issue. Offered in evidence was the testimony and written reports of a child psychologist employed by Brookwood, a psychiatric consultant to Brookwood, a psychiatrist retained by the Family Court, and a psychiatric social worker retained by the foster parents to prepare a report and to testify in court. All concurred, that in recent months the relationship between Sheila and Dennis and Dennis’s family had deteriorated. The experts related that the girl had developed a strong attachment to her foster parents and that she suffered from acute “separation anxiety disorder.” The prognosis was that an immediate change in custody would cause extreme and, perhaps, irreparable psychological damage to Sheila. It was recommended that she remain in the custody of her foster parents and that she receive psychiatric therapy, special education, and extensive case-work supervision.

Also challenged at the hearing was Dennis’s fitness to assume custody. Dennis testified that he had had problems in the past with alcohol and heroin but he asserted that he was successfully coping with these problems. It was noted that he had been a regular participant in the drug counseling service at work and had voluntarily admitted himself to a hospital for alcohol detoxification.

By an order dated March 11, 1982, the Family Court granted Dennis’s cross petition for custody, but held that the circumstances dictated that the transfer of custody not be immediate. Recognizing “the presence of a compelling reason to except from a natural parent’s long established right, in order to protect the child * * * against possible psychological or emotional harm”, the court found that Sheila “suffers from a ‘separation anxiety disorder’, a pathology suffered by children who have an abnormal fear of separation from their ‘family’.” Consequently, Sheila was ordered to be placed in the continuing custody of the Department of Social Services for an additional one-year period. The department was instructed to formulate a plan that included appropriate counseling, visitation, and supervision “to effectuate the unification of Sheila with her natural father and family, as soon as is feasible, during the course of this placement period.”

The court also commented on the evidence relating to Dennis’s history of alcohol and heroin abuse. It found that the evidence on this issue consisted “entirely of [Dennis’s] own voluntary efforts to deal with his own problems” and that “[t]here is no evidence that [Dennis’s] ability to maintain and function on his job, or otherwise perform as a parent was or is impaired by his problems. The evidence does* not establish that Dennis * * * was or is a drug addict, or that he is unfit.” Nevertheless, the department was ordered to monitor Dennis and to report any evidence of drug dependency to the court every three months.

Finally, the court found that Brookwood had undermined the potential relationship of Dennis and Sheila by, among other things, disingenuously reporting to the foster parents at the outset of the placement that the child would soon become available for adoption, and thereafter demonstrating indifference toward Dennis and his family while encouraging Sheila’s relationship with her foster parents. The court found it necessary to order substitution of Brookwood “with an authorized agency committed to diligently and in good faith implementing” the order of the court.

The department charged the Sheltering Arms Children’s Service with responsibility for developing, implementing, and supervising a plan for Sheila’s unification with Dennis and his family. The plan was submitted to the court on August 5, 1982 and adopted by the court by an order 20 days later. It projected transfer of Sheila’s custody to Dennis and his family by September 25, 1982.

The foster parents appealed from the Family Court orders that dismissed the petition to terminate Dennis’s rights, granted Dennis’s cross petition for custody and approved the plan for reunification. The Appellate Division granted a stay of the transfer of custody pending determination of the appeal, but denied a requested stay of visitation by Dennis.

The Appellate Division modified by holding that the child had been permanently neglected by both of her natural parents. The court determined that Brookwood had satisfied its statutory duty to exercise diligent efforts, finding that the girl had not been placed in her preadoptive home until she had been in the agency’s custody for more than one year. The court also noted that “[t]his is not a case where the agency blocked or interfered with the return of the child to the natural parent.” (94 AD2d, at p 733.)

The court held that, in any event, “[t]he agency’s responsibility should not be considered, in vacuo, without considering the parent’s primary responsibility to assume his own obligations when he is financially and physically able to do so.” (94 AD2d, at p 733.) It found that although Dennis was possessed of sufficient financial means to support Sheila, he had never done so and had not presented a feasible plan for taking custody of her until one and one-half years after her birth. This conduct was held to constitute a breach by Dennis of his responsibility to plan for Sheila’s future, giving rise to a determination of permanent neglect, and was not excused by Dennis’s apparent interest in the child. The court vacated the orders of the Family Court, adjudicated Sheila as permanently neglected by Dennis as well, denied Dennis any visitation rights and placed Sheila under the continuing supervision of the Sheltering Arms Children’s Service without prejudice to an application by the foster parents for adoption of Sheila.

Dennis appealed. He argues in this court that prior to the institution of this proceeding, Brookwood had not exercised diligent efforts in fostering his relationship with Sheila and that this failure precludes a determination of permanent neglect. Sheila’s foster parents, respondents here, argue that Brookwood had exercised diligent efforts and that the efforts of a child-care agency only need be commensurate with and responsive to the efforts undertaken by the parent to retain his or her child.

This court now reverses.

II

The legal standard for “permanent neglect” as a basis for terminating a parent’s right to a child, is codified at subdivision 7 of section 384-b of the Social Services Law. That statute provides, in relevant part, that a “ ‘permanently neglected child’ shall mean a child who is in the care of an authorized agency and whose parent or custodian has failed for a period of more than one year following the date such child came into the care of an authorized agency substantially and continuously or repeatedly to maintain contact with or plan for the future of the child, although physically and financially able to do so, notwithstanding the agency’s diligent efforts to encourage and strengthen the parental relationship when such efforts will not be detrimental to the best interests of the child.”

The questions — whether a parent has maintained contact with the child and adequately planned for the child’s future, and whether a child-care agency has exercised diligent efforts to encourage and strengthen the parental relationship — may appear to be discrete and independent. The foster parents suggest, and the court below held, that an agency’s efforts should be measured only with reference to the ability of the parent to help himself or herself. This court holds that for both practical and policy reasons, it is the agency’s statutory duty that is demonstrably paramount and pervasive. When an authorized child-care agency has brought a proceeding to terminate parental rights, on the ground of permanent neglect, the court must evaluate as a threshold matter whether the agency has exercised diligent efforts to encourage and strengthen the parental relationship.

A

The Temporary State Commission on Child Welfare, whose report “Barriers to the Freeing of Children for Adoption” (1976 Report), and draft legislation were adopted by the Legislature when revamping statutes relating to termination of parental rights (see L 1976, ch 666), acknowledged the interrelationship between an agency’s ability and duty to assist the parent in strengthening the parent-child relationship and the parents’ ability to plan for the child’s future. The commission noted that, to enable a child to return to his or her family, an agency must have “the capability to diagnose the problems of the parent and of the child; access to a host of concrete supportive and rehabilitative services; cooperation with community treatment programs (such as health, alcohol, and drug treatment); and a casework staff that can motivate the parents to avail themselves of services” (1976 Report, at p 100). Lower courts have recognized that an agency is in a superior position to the parent with respect to the planning factor. “The parties are by no means dealing on an equal basis. The parent is by definition saddled with problems: economic, physical, sociological, psychiatric, or any combination thereof. The agency, in contrast is vested with expertise, experience, capital, manpower and prestige. Agency efforts correlative to their superiority [are] obligatory” (Matter of Sydney, 84 Misc 2d 932, 934; accord Matter of Anita “PP”, 65 AD2d 18, 22; Matter of Suzanne N. Y., 102 Misc 2d 215, 218; Matter of Joyce Ann R, 82 Misc 2d 730, 733).

The corollary to the agency’s dominant position is that indifference by the agency may greatly serve to impede a parent’s attempts at reunification. The temporary commission noted that agency indifference was prevalent, when it found:

“A majority of Family Court judges across the State believe that agencies do not make permanent plans for children in foster care, nor try sufficiently to reunite the parent and child. They cite: the failure of agencies to encourage and cooperate in parental visitation; agency failure to assist parents with their problems; the cultural and socio-economic differences between middle-class social workers and under-privileged parents; the bias of some workers against the parents; the conviction of some caseworkers that the interests of children are better served in foster care than in their parents’ home. A few judges reason that the agencies have been given an overwhelming task and insufficient resources to deal with it.

“Some judges allege that agencies deliberately or heedlessly subvert visitation and the restoration of the family. First, they believe some children are placed with foster parents of different values from, and often with antipathy to, those of the natural parents. Second, children are often placed in areas that are inaccessible to their natural parents. In the counties outside New York City, the parents are frequently dependent on the agency for transportation, which is irregularly provided” (1976 Report, at pp 90-91).

Moreover, “[rjesearchers have also found that parents who perceive their child care agency as unhelpful and as opposing their reunification with their child are less frequent visitors and are less likely ever to regain custody” (Garrison, Why Terminate Parental Rights?, 35 Stan L Rev 423, 483). It is evident, therefore, that the efforts undertaken by an agency on behalf of the parents may have a profound practical effect on what later may be viewed as the success or failure of the parents’ efforts to plan for the future of the child.

Of course, transcending the practical reasons for providing a threshold requirement that an agency exercise diligent efforts toward reuniting parent and child is the strong public policy that before the State may terminate parents’ rights it must first attempt to strengthen familial ties (see Matter of Leon RR, 48 NY2d 117, 126). The temporary commission’s stated purpose was to review statutes governing foster care and termination of parental rights with a view towards removing obstacles inhibiting the permanent placement of children (see 1976 Report, at pp i-iv). The commission found that “[t]he prevailing view among judges and agencies is that the diligent effort requirement should be maintained” (id,, at p 23). It noted, however, that “[i]t is the view of a small minority that this requirement should be eliminated because it is a stumbling block to freeing the child, thereby penalizing him. This minority viewpoint maintains that the diligent effort requirement focuses on what the agency has done rather than on the child’s needs” (id., at p 24). Notwithstanding its over-all goal and this dissenting viewpoint, the commission recommended “retention of the diligent effort requirement reflecting a sound societal value in addition to considerations of fundamental equity, if not constitutional rights, that the State should exercise reasonable efforts to restore familial relationships before seeking to terminate them” (id., at p 25 [emphasis in original]).

The Legislature, in enacting section 384-b of the Social Services Law, went further on this issue than did the temporary commission’s original proposed statement of legislative findings and intent. Added to the legislation, when enacted, was the specific statement of intent that “the state’s first obligation is to help the family with services to prevent its break-up or to reunite it if the child has already left home” (Social Services Law, § 384-b, subd 1, par [a], cl [iii]).

Consistent with this legislative intent, the threshold nature of the diligent-efforts requirement is evinced by the language of the statutes defining “permanent neglect” and governing the procedure for an adjudication of permanent neglect. Subdivision 7 of section 384-b of the Social Services Law defines permanent neglect as a failure by the parent to maintain contact with or to adequately plan for the child “notwithstanding” diligent efforts undertaken by the agency. Similarly, under section 614 of the Family Court Act an agency’s petition initiating a proceeding for termination of parental rights based on permanent neglect must first allege in detail the agency’s efforts to strengthen the parent-child relationship. Only then may it assert that the parent has failed in maintaining contact with the child or has failed to adequately plan for the child’s future.

The Legislature also added guidelines to measure whether the agency has complied with its duty to exercise diligent efforts. These guidelines provide that “ ‘diligent efforts’ shall mean reasonable attempts by an authorized agency to assist, develop and encourage a meaningful relationship between the parent and child, including but not limited to: (1) consultation and cooperation with the parents in developing a plan for appropriate services to the child and his family; (2) making suitable arrangements for the parents to visit the child * * * (3) provision of services and other assistance to the parents * * * so that problems preventing the discharge of the child from care may be resolved or ameliorated; [and] (4) informing the parents at appropriate intervals of the child’s progress, development and health” (Social Services Law, § 384-b, subd 7, par [f]).

Thus, when an agency has assisted a parent through meaningful efforts to provide counseling with respect to a problem (psychological, physiological, financial, and the like) that impedes the return of the child, to assist in the planning for the child’s future, to aid in the procurement of housing or employment, and to schedule regular and meaningful visits with the child, it will be found that the agency has satisfied its statutory duty (see, e.g., Matter of Roderick W., 96 AD2d 746; Matter of Jamie Y., 92 AD2d 696; Matter of Janet AA., 88 AD2d 670; Matter of Lisa Ann U., 75 AD2d 944; Matter of Seith SS, 66 AD2d 914; cf. Matter of Star A., 55 NY2d 560 [agency’s failure to direct parents to counseling constitutes breach of statutory duty]; Matter of Leon RR, 48 NY2d 117, supra [agency held to have breached duty by encouraging child’s relationship with foster parents while displaying hostility towards natural parents by unduly restricting visitation]; Matter of Thomas TT., 67 AD2d 788 [failure to give natural parents advice on how to gain custody of child held to violate statutory duty]; Matter of Anita “PP”, 65 AD2d 18, supra [advising parents that failure to plan will give rise to termination of their rights held not to constitute diligent efforts in absence of “viable suggestions” as to how the particular problem may be ameliorated]). An agency must always determine the particular problems facing a parent with respect to the return of his or her child and make affirmative, repeated, and meaningful efforts to assist the parent in overcoming these handicaps. In evaluating the over-all efforts undertaken by the agency, the courts should always refer to the statutory guidelines,

Of course, the agency is not charged with a guarantee that the parent succeed in overcoming his or her predicaments. Indeed, an agency that has embarked on a diligent course but faces an utterly un-co-operative or indifferent parent should nevertheless be deemed to have fulfilled its duty. The statute itself speaks of “reasonable attempts” to foster the parent-child relationship, and a diligent undertaking will serve to fulfill this requirement (see Social Services Law, § 384-b, subd 7, par [f]; see, also, Matter of Star A., 55 NY2d 560, 564, n 2, and at pp 566-567, supra [Meyer, J., dissenting]).

In sum, the Legislature has charged child-care agencies with a specific obligation to assist parents in regaining custody of children committed to foster care. It has recognized that the degree to which a parent has upheld his or her obligations to such children cannot be meaningfully measured when the agency itself has not undertaken diligent efforts on behalf of reuniting parent and child. It has declared as a matter of public policy that the State may not intervene to terminate a parent’s rights when assistance in strengthening the family has not been forthcoming. Therefore, proof by the child-care agency that it has satisfied its statutory obligation is a threshold consideration and a necessary prerequisite to any determination of permanent neglect.

JB

The findings of the Family Court and the Appellate Division, with respect to Brookwood’s efforts undertaken in fostering a relationship between Dennis and Sheila and uniting the two, are in conflict. The Family Court found that Brookwood’s efforts were woefully inadequate. The Appellate Division found that, under the circumstances, Brookwood had satisfied its statutory duty. When there is a “disagreement between the courts below, this court reviews the record to determine which findings conform to the weight of the evidence” (Matter of Hime Y., 54 NY2d 282, 286). Upon review of the record, this court holds that the findings of the Family Court comport with the weight of the evidence.

It is noted that, in support of their contention on this appeal that Sheila was properly adjudicated by the Appellate Division as permanently neglected, the foster parents rely on evidence presented at the dispositional hearing which relates to Dennis’s fitness to be a parent and Sheila’s emotional problems. For two reasons, this evidence is irrelevant to the issue of permanent neglect. First, the evidence cited was presented after the proceeding held on the question of permanent neglect had terminated and the petition had been dismissed as against Dennis. The evidence relied on was presented at the dispositional hearings, at which a completely different standard of review is employed; namely, the best interest of the child. It was not offered by Brookwood in attempting to prove that Sheila had been permanently neglected by Dennis. Second, and more importantly, termination of parental rights may be based only on a specific ground provided for by statute; unlike a custody determination, parental rights may not be terminated solely because it is perceived to be in the best interest of the child (see Matter of Ricky Ralph M., 56 NY2d 77, 80; Matter of Sanjivini K., 47 NY2d 374, 382; Matter of Corey L v Martin L, 45 NY2d 383, 389-391). Therefore, only the evidence presented at the fact-finding hearing, upon which the Family Court’s dismissal of the petition against Dennis was based, may be considered on this appeal.

The record is devoid of evidence that Brookwood engaged in “consultation and cooperation” with Dennis “in developing a plan for appropriate services” for Sheila and Dennis’s family (see Social Services Law, § 384-b, subd 7, par [f], cl [1]). During the child’s first year under Brookwood’s supervision, its “agency plan” called for no affirmative effort to contact Dennis. All contact between Dennis and Brookwood was due to Dennis’s efforts to apprise the agency of the progress he was making to establish paternity, and the only meeting with Dennis was scheduled at his request. Although Sheila’s mother was clearly indifferent towards and incapable of assuming custody, no steps were taken by Brookwood to review Dennis’s background or to determine what services would be necessary and appropriate in fostering a relationship between Dennis and Sheila. Indeed, within six months of the time Dennis initially contacted Brookwood, the agency had decided that its plan would be to terminate Dennis’s parental rights.

During the next 18 months, up to the time that the instant proceeding was commenced, Brookwood made no attempt to assist Dennis, who presented two separate plans, to gain custody of his daughter. When Dennis suggested, and later reiterated, his original plan to return to his mother’s home, the caseworker suggested only that Dennis give Sheila up for adoption. Indeed, at the hearing, Brookwood’s director conceded that the agency had done nothing to encourage a parental relationship and had offered Dennis no assistance in following through with this admittedly feasible plan. Dennis’s second plan was met with neither encouragement nor criticism. Again, the director admitted that no assistance was offered to Dennis in following through on this plan and that no alternatives were suggested.

Finally, Brookwood’s director of placement was asked at the hearing: “From what you just testified, and from the case record, would you say that [the caseworker’s] handling * * * of encouragement of the parental relationship with [Dennis] was done according to good social work rules?” The director responded, “No.”

With respect to the question whether there was “provision of services and other assistance to the parents * * * so that problems preventing the discharge of the child from care may be resolved or ameliorated” (see Social Services Law, § 384-b, subd 7, par [f], cl [3]), the record indicates that no such effort was forthcoming from Brookwood. During Sheila’s first year of placement with Brookwood, the apparent problem preventing her discharge to Dennis was the absence of a formal adjudication of paternity. Brookwood did nothing more than to provide Dennis with the name and address of the Kings County Family Court. Notwithstanding Dennis’s repeated conversations with the agency, a year and a half passed before the caseworker explained to him that he did not necessarily need the mother’s co-operation to establish his paternity, that the court could do so in her absence. Less than three weeks later Dennis had established paternity. During the following 18 months, the agency continued this pattern of conduct. Although Dennis and his family regularly attended their scheduled visits with Sheila and Dennis had suggested two plans for taking custody, Brookwood identified no problem that prevented Sheila’s discharge to Dennis.

Brookwood also failed in its obligation to make “suitable arrangements for the parents to visit the child” (Social Services Law, § 384-b, subd 7, par [f], cl [2]). In light of the mother’s refusal to permit Dennis visitation and the absence of an adjudication of paternity, Brookwood may not be held solely responsible for not permitting Dennis visitation. Once permitted, however, Dennis’s visits with Sheila were scheduled for one hour every other week at 5:00 p.m. at Brookwood’s offices. Sheila’s caseworker was aware that Dennis worked until at least 5:00 p.m. and that for some visits, due to Dennis’s working late and travel time, he was only able to visit for a short time. Brookwood’s placement director noted that, during this period, Dennis’s relationship with Sheila had gone from a lack of friendship to one of friendship, but that the caseworker never recommended that the frequency of visitation be increased or the timing of visits be changed or lengthened. This was admitted to be a bad policy and contrary to good social work rules.

Finally, for at least the first-year period, Brookwood made no effort in “informing the parents at appropriate intervals of the child’s progress, development and health” (Social Services Law, § 384-b, subd 7, par [f], cl [4]). As is noted above, Brookwood made no affirmative contact with Dennis during the first year. Dennis learned of Sheila’s well-being only through his own efforts.

In sum, the record indicates that Brookwood proceeded with utter indifference to Dennis’s rights. Brookwood failed to satisfy its statutory duty. This, in itself, precludes a finding of permanent neglect.

The foster parents suggest that, in view of Dennis’s admission of drug and alcohol abuse, Brookwood was not obligated to make diligent efforts, as such would have been contrary to Sheila’s best interest. This argument has no merit. Although an agency need not exercise diligent efforts when the efforts would be against the best interest of the child, Brookwood did not rely on this exception in its petition or at the fact-finding hearing. Indeed, the record indicates that, prior to the dispositional hearings, Brookwood had made no effort to learn of Dennis’s problems and at the fact-finding hearing the agency argued that it had exercised diligent efforts. Moreover, it is doubtful that suspected drug abuse by a parent would serve to entirely relieve an agency of its duty to exercise diligent efforts. This is precisely the type of problem that child-care agencies are designed to help ameliorate. The exception is not complete, and such an agency would be justified in relying on the exception only to the extent that, under the circumstances, a particular effort would be demonstrably contrary to the child’s best interest.

Ill

Once a child has been voluntarily placed with an authorized child-care agency, and is under foster care, the Family Court is vested with continuing jurisdiction over the child until there has been a final disposition of custody (see, generally, Social Services Law, § 392). A decision by that court to maintain the status quo or to return the child to his or her natural parent requires consideration of the child’s best interest (see Social Services Law, § 392, subd 7). In view of this court’s decision that Sheila was improperly held to be permanently neglected by her natural father, it is necessary to remit this matter to the Family Court for a custody determination in Sheila’s best interest.

This court has had occasion to comment in a similar context that “it is doubtful whether it could be found to be in the child’s best interest to deny her [parent’s] persistent demands for custody simply because it took so long for her to obtain it legally” (Matter of Sanjivini K., 47 NY2d 374, 382, supra). We do not disavow that principle by remitting this matter to the Family Court. Rather, in view of the evidence offered concerning Sheila’s emotional well-being and unanswered questions concerning Dennis’s problems with drugs, further review is both desirable and required. It may be that immediate transfer of custody would be manifestly improvident and that an indeterminate period of continued custody by Sheila’s foster parents is required. This should be left to the sound discretion of the Family Court.

We would only add that in the event Sheila’s custody is continued with her foster parents, Dennis, as in the case of all parents whose children have been placed in the foster care system, is entitled to affirmative, repeated, and meaningful assistance in gaining custody of his daughter, with supervision of the agency’s efforts by the Family Court.

Accordingly, the order of the Appellate Division should be reversed, without costs, and the matter remitted to Family Court, Kings County, for further proceedings in accordance with this opinion.

Kaye, J.

(concurring). While joining in the court’s opinion, I wish separately to record my understanding that remittal to the Family Court for a custody determination in Sheila’s best interest invites consideration of all available options, including continued and long-term custody with Sheila’s foster family. (See Matter of Bennett v Jeffreys. 40 NY2d 543; and Matter of Bennett v Marrow, 59 AD2d 492.)

The Legislature in subdivision 1 of section 384-b of the Social Services Law has placed a priority on the rights of a natural parent, and has by statute prescribed specific grounds for the extraordinary measure of forever severing a parent’s rights on account of permanent neglect. (Social Services Law, § 384-b, subd 7.) The specific grounds for terminating a parent’s rights for permanent neglect do not include evaluation by the court of whether or not termination would serve the best interest of the child. (Matter of Sanjivini K., 47 NY2d 374.) Because of the requirements of the statute I join in reversing the order below, which rested on the court’s perception of the best interest of the child without following the statutory prescription. The record does not establish that the agency had made “diligent efforts to encourage and strengthen the parental relationship,” or had, before deciding not to exercise such efforts, reached the conclusion that any such efforts would be detrimental to the best interest of the child.

But custody is a different matter from termination of parental ties.

The court’s opinion, in its dispositional section, calls particular attention to language in Matter of Sanjivini K. (supra), to the effect that a long delay in obtaining custody is not to be counted against the natural parent in determining the child’s best interest. Neither is the lapse of time necessarily without significance in determining custody. For five and one-half of her tender years, having been born with heroin withdrawal symptoms and lived briefly elsewhere, Sheila has made her home with her foster family. She has never lived with her natural father, or his mother or sister, who would care for Sheila. Expert testimony established that the child suffers severe separation anxiety, and is deeply attached to her foster parents. As we wrote in another connection in Matter of Bennett v Jeffreys (40 NY2d 543, 550, supra), “the child may be so long in the custody of the nonparent that, even though there has been no abandonment or persisting neglect by the parent, the psychological trauma of removal is grave enough to threaten destruction of the child.”

The child-care agency is rightly taken to task for its failure to exercise diligent efforts to encourage and strengthen the parental relationship. However, the child should not now suffer in any way for the agency’s failures. The natural father’s prolonged drug and alcohol abuse and unsuccessful efforts to rid himself of both, his lack of candor about these problems, and his lethargy (despite a college education and a regular job) in establishing filiation and planning for Sheila’s future may not, because of the agency’s failure to fulfill its statutory duty, constitute permanent neglect under subdivision 7 of section 384-b of the Social Services Law. But they are surely among the relevant factors to be considered in determining with whom Sheila should live. Given that Sheila is nearly seven years old, together with all the other circumstances, the biological fortuity of having fathered a child cannot be placed above the child’s best interest in determining her custody.

Judges Jasen, Jones, Wachtler, Meyer and Kaye concur with Chief Judge Cooke; Judge Kaye concurs in a separate opinion; Judge Simons taking no part.

Order reversed, etc.

      . The court noted that the foster parents had provided a stable and loving home and that it was Brookwood’s conduct that served to falsely raise their expectation of adoption. Notwithstanding this, the court also found that the foster parents had notice of Dennis’s efforts to gain custody of his daughter and that, “though motivated by an authentic desire to adopt a child to whom they could give their love, [they] persisted in the developing and nurturing of an inappropriate parent-child relationship with Sheila.” This was deemed a causative factor in Sheila’s development of a “separation anxiety disorder” and the court held that, being partially responsible for the problem, Sheila’s foster parents owed a duty of co-operation towards the uniting of Sheila and Dennis.

      . Prior to the argument of that appeal, Sheila’s foster parents moved in Family Court to vacate its prior order and reopen the dispositional hearing or, in the alternative, stay the court’s order, on the ground of newly discovered evidence. The proffered evidence consisted of a hearsay statement that Dennis was reported to be attending a methadone maintenance clinic and was experiencing drug dependency, and an affidavit by Sheila’s foster mother stating that Sheila, upon her return from a visit at Dennis’s home, had reported that Dennis’s mother had “strapped” her and that strange people were occupying Dennis’s home. Also provided was a psychiatric report that indicated that permanent placement of Sheila away from her foster parents would have serious repercussions on Sheila’s emotional well-being. The court declined to vacate its prior orders but, due to the nature of the allegations, stayed its order of discharge pending a report by the Commissioner of Social Services.

      . The practice analogue to this provision (Family Ct Act, § 614, subd 1, pars [c], [d]), sets forth that any petition for a determination of permanent neglect must allege, inter alia, that: (1) “the authorized agency has made diligent efforts to encourage and strengthen the parental relationship and specifying the efforts made or that such efforts would be detrimental” to the best interests of the child; and, that (2) “the parent or custodian, notwithstanding the agency’s efforts, had failed for a period of more than one year following the date such child came into the care of an authorized agency substantially and continuously or repeatedly to maintain contact with or plan for the future of the child although physically and financially able to do so”.

      . One commentator recently concurred with this view, with support from regional and national surveys, stating that:
      “Typically *** agencies do little to help parents regain custody of their children. The family problems that necessitated removal usually receive only perfunctory agency attention. In most cases, the agency caseworker contacts the natural parent infrequently and does not follow up referrals of the parent to other agencies * * * Contacts between agency and parent also tend to decrease markedly after the first year of placement, and services necessary to enable the child’s return home are rarely made available.
      “Moreover, agencies often discourage parents from maintaining ties with their children. Agencies seldom involve natural parents in decision making regarding their children’s care. And they frequently frustrate parental contact with the child by, for example, placing children in locations which make parental visitation difficult, allowing visits only at agency offices under the eye of a social worker, and inflexibly restricting visiting hours” (Garrison, Why Terminate Parental Rights?, 35 Stan L Rev 423,428-429 [nn omitted]).

      . In only two limited instances may an agency be deemed excused from its obligation to undertake diligent efforts to reunite parent and child. The first arises “when such efforts will * * * be detrimental to the best interest of the child” (Social Services Law, § 384-b, subd 7, par [a]). The second arises “when the parent has failed for a period of six months to keep the agency apprised of his or her location” (Social Services Law, § 384-b, subd 7, par [e]), although there is an indication that this exception will not apply when the agency could, without a “diligent search,” determine the parent’s location (see 1976 Report, at p 25).

      . Although the Department of Social Services was directed by the Family Court in March, 1982 to monitor Dennis, it never complied with this order. Consequently, the degree, if any, of Dennis’s past or current drug dependence can in no way be determined by this record.


source: Caselaw Access Project

author: Meyer, J.

license: Public Domain

text:
    In the Matter of American Telephone and Telegraph Company, Appellant-Respondent, v State Tax Commission, Respondent-Appellant.
    Argued February 15, 1984;
    decided March 29, 1984

      POINTS OF COUNSEL

      Edward N. Costikyan, Alan Pfeffer, Howard J. Trienens, Martin J. Eisen and Clarín S. Schwartz for appellant-respondent.
    I. Advances to subsidiaries for use outside New York are not employed in New York. (People ex rel. Chicago Junc. Rys. v Roberts, 154 NY 1; People ex rel. New York Cent. & Hudson Riv. R. R. Co. v Knight, 173 NY 255; People ex rel. Manhattan Silk Co. v Miller, 125 App Div 296, 197 NY 577; People ex rel. Manila Elec. R. R. & Light. Corp. v Knapp, 229 NY 502; People ex rel. Texas Co. v Gilchrist, 252 NY 19; People ex rel. Tobacco & Allied Stocks v Graves, 250 App Div 149, 277 NY 723; People ex rel. North Amer. Co. v Miller, 90 App Div 560, 182 NY 521; People ex rel. New England Loan & Trust Co. v Roberts, 25 App Div 16, 156 NY 688.) II. Temporary cash investments of money used for construction outside New York are not employed in New York. (People ex rel. Texas Co. v Gilchrist, 252 NY 19.) III. Interest and dividends receivable but not yet due or paid are not assets employed in business. (People ex rel. Union Ferry Co. v Roberts, 66 App Div 157.) IV. The commission’s determination violates basic principles of statutory construction. (Matter of Quotron Systems v Irizarry, 48 NY2d 795; Quotron Systems v Gallman, 39 NY2d 428; Matter of New York Life Ins. Co. v State Tax Comm., 80 AD2d 675, 55 NY2d 758; People ex rel. Texas Co. v Gilchrist, 252 NY 19; Matter of Consolidated Edison Co. v State Tax Comm., 24 NY2d 114; Matter of Marx v Goodrich, 286 App Div 913; Anderson, Clayton & Co. v United States, 562 F2d 972, 436 US 944.)

      Robert Abrams, Attorney-General (Wayne L. Benjamin and Peter H. Schiff of counsel), for respondent-appellant.
    I. The court below erred in holding that petitioner’s interest income on its advances to its affiliated corporations and on its short-term investments did not constitute gross earnings from sources within New York State within the meaning and intent of section 184 of the Tax Law. (People ex rel. New York Cent. & Hudson R. R. Co. v Roberts, 32 App Div 113, 157 NY 677; Compañia General v Collector, 279 US 306; Ajax Trucking Co. v Browne, 298 NY 736, 337 US 951; Greyhound Lines v Mealey, 296 NY 18, 334 US 653.) II. The court below correctly confirmed the State Tax Commission’s determination that petitioner’s advances, temporary investments, interest and dividends receivable in New York State constituted assets employed in any business in New York within the meaning and intent of section 183 of the Tax Law. (People ex rel. Edison Elec. Light Co. v Campbell, 138 NY 543; Burke v Wells, 184 NY 275, 208 US 14; People ex rel. Williams Co. v Sohmer, 151 App Div 764; People ex rel. International Banking Corp. v Raymond, 117 App Div 62, 188 NY 551; People ex rel. North Amer. Co. v Miller, 90 App Div 560, 182 NY 521; People v American Bell Tel. Co., 117 NY 241; People ex rel. New England Loan & Trust Co. v Roberts, 25 App Div 16, 156 NY 688; People ex rel. Tobacco & Allied Stocks v Graves, 250 App Div 149, 277 NY 723; People ex rel. Brooklyn R. T. Co. v Miller, 85 App Div 178, 181 NY 582.) III. No principle of statutory construction prohibits the present assessments under section 183 of the Tax Law. (Matter of Howard v Wyman, 28 NY2d 434; Matter of Long Is. Light. Co. v State Tax Comm., 45 NY2d 529; Matter of Lezette v Board of Educ., 35 NY2d 272; Matter of Liberty Coaches v State Tax Comm., 79 AD2d 775; Matter of Sachs N. Y. v Tully, 79 AD2d 1056; Matter of Consolidated Edison Co. v State Tax Comm., 24 NY2d 114; Matter of National Elevator Ind. v New York State Tax Comm., 49 NY2d 538; Matter of Petrie Stores Corp. v Tully, 80 AD2d 328; Illinois Cent. R. R. Co. v Minnesota, 309 US 157; Matter of Inter-County Tit. Guar. & Mtge. Co. v State Tax Comm., 33 AD2d 251, 28 NY2d 179.)
   OPINION OF THE COURT

Meyer, J.

A New York transmission company which provides telephone and other communication service throughout the continental United States through subsidiary corporations but carries on in New York the financial studies necessary to meet the capital requirements of the subsidiaries, is subject to the franchise tax imposed by section 183 of the Tax Law on capital stock measured by “gross assets * * * employed in any business within this state” on money advanced to subsidiaries and on cash temporarily invested pending such advances. It is, however, not taxable under that section on interest or dividends receivable from, but not yet paid by, the subsidiaries. Nor is the company subject to the franchise tax imposed by section 184 of the Tax Law on “gross earnings from all sources within this state” on interest received by it from out-of-State subsidiaries or out-of-State obligors on such temporary investments, notwithstanding its financial operations in New York. The judgment of the Appellate Division should, therefore, be modified to annul so much of the State Tax Commission’s determination as imposed section 183 capital stock tax upon interest and dividends receivable from, but not yet paid by, subsidiaries and, as so modified, should be affirmed, without costs.

I

Involved in this appeal are the tax returns under sections 183 and 184 of the Tax Law of American Telephone and Telegraph (AT&T) for the years 1969 through 1972. The facts have been stipulated. AT&T is incorporated in New York as a transmission company and maintains its principal offices in New York City in a building owned by 195 Broadway Corporation, a wholly owned subsidiary. It does no intrastate communication business in New York, but through some 23 subsidiaries, in 21 of which it owns either the entire stock or a majority interest, it operates a communications network throughout the continental United States which interconnects with communication systems in most other countries throughout the world.

Under its license agreement with the various subsidiaries in effect during the period in question AT&T agreed, in return for 1% of the subsidiary’s gross earnings, to conduct research in telephony and make the results available to the subsidiary, to furnish advice and assistance to it in general engineering, plant, traffic, operating, commercial, accounting, patent, legal, administrative and other matters, and with respect to finances of the subsidiary to furnish advice and assistance, to aid in securing funds on fair terms, to assist actively in marketing the subsidiary’s securities, and to give other necessary financial support and assistance.

To support its own and the subsidiaries’ need for funds, AT&T offered its own securities in the financial market. The funds raised, to the extent not immediately required by the needs of the system, were temporarily invested by AT&T in short-term securities, the turnover in the temporary cash investment account in each of the years in question being in excess of $5,000,000,000 and the year-end balance in all but one of the years approximating $1,000,000,000. Management of these funds was carried out by a full-time AT&T treasury department staff, which prepared and reviewed investment plans, maintained day-to-day contact with the subsidiaries with regard to funds needed or to be repaid, and made all required decisions. A portion of the temporary investment account was segregated for use outside New York State. Advances to or investments in subsidiaries outside New York in 1970, 1971 and 1972 were between $1,500,000,000 and $2,000,000,000.

AT&T advanced money to all of its subsidiaries other than New York Telephone Company. Advances were all interest bearing and, with two open account exceptions, were evidenced by demand notes, custody of which was maintained by AT&T’s treasury department in New York. Advances were also made to 195 Broadway Corporation, which used the advances principally in New Jersey. The subsidiaries sold stock either to AT&T or to others and from the proceeds of such sales repaid the advances received from AT&T.

AT&T’s capital stock tax returns have since 1923 or before treated advances to subsidiaries as assets employed in New York only to the extent that a subsidiary’s assets were allocated to New York and have treated temporary investments as pre-employment capital rather than assets employed in New York. Its capital stock tax return for 1924 has had annexed a statement reading as follows: “The company operates long distance telephone lines throughout the United States, connecting the lines of local telephone companies. Its principal activity however consists in the financing of its subsidiary companies constituting part of the system, the securities of which are owned or controlled by it. This activity involves the advance to system companies of large amounts of capital to be permanently used by them to construct plants. These advances constitute a permanent employment of capital by this company represented by securities of such system companies. These large sums must frequently be provided in advance of the actual needs of the system companies and in such cases this company temporarily holds them through the acquisition of short term marketable securities, such as federal securities or certificates of deposit.” Similar statements were attached to all subsequent returns. Not until the audit of capital stock tax reports for the years in issue had such reports been questioned. Likewise it had since 1908 excluded from its gross earnings tax reports interest on obligations issued by debtors located outside New York and its doing so had never been questioned until the audit for the years in issue.

The State Tax Commission determined advances to subsidiaries for use outside New York, the temporary cash investments and interest and dividends receivable from, but not yet payable by, subsidiaries to be assets employed in New York within the meaning of section 183 of the Tax Law and interest income from advances to out-of-State subsidiaries and from obligations of out-of-State obligors held in the temporary cash investment account to be earnings from sources within New York within the meaning of section 184 of the Tax Law. The article 78 proceeding begun by AT&T to review the commission’s determination having been transferred to the Appellate Division, that court modified by annulling so much of it as held the gross earnings tax applicable to income from out-of-State obligors and otherwise confirmed. One Justice dissented as to the capital stock tax on the ground that in view of the longstanding contrary interpretation by the commission and by the Attorney-General (1909 Opns Atty Gen 357), with which AT&T had complied without challenge, the ruling of the commission could not be applied retroactively. AT&T appeals, on dissent grounds, so much of the Appellate Division judgment as relates to the capital stock tax and the State appeals from the annulment of the gross earnings tax determination. We modify, as above stated, and affirm.

II

Whether assets are “employed” in business within this State, although a matter of statutory interpretation, is governed by the rule that “where the question is one of specific application of a broad statutory term in a proceeding in which the agency administering the statute must determine it initially, the reviewing court’s function is limited” (National Labor Relations Bd. v Hearst Pub., 322 US 111, 131 [whether newsboys are “employees”]). That rule has been applied by us a number of times with respect to the construction of tax statutes (Matter of Koner v Procaccino, 39 NY2d 258, 264 [whether freelance photographers “practice” a “profession”]; Matter of Young v Bragalini, 3 NY2d 602, 605 [where insurance partnership is “carrying on” business]; Matter of Colgate-Palmolive-Peet Co. v Joseph, 308 NY 333, 338 [whether cartons in which goods sold for resale are delivered are subject to sales tax]; Matter of Mounting & Finishing Co. v McGoldrick, 294 NY 104, 108 [whether materials purchased for production of displays into which are incorporated items received by the manufacturer from its customers are purchased “for resale in the form of tangible personal property”]). If the agency’s determination is not supported by substantial evidence or it constitutes a clearly erroneous interpretation of the law or the facts, it will be annulled (Matter of Koner v Procaccino, 39 NY2d, at p 264), but if it is supported by facts or reasonable inferences that can be drawn from the record and has a rational basis in the law, it must be confirmed (Matter of Young v Bragalini, 3 NY2d, at p 605; Matter of Colgate-Palmolive-Peet Co. v Joseph, 308 NY, at p 338). Applying those rules we conclude that moneys advanced to subsidiaries and cash temporarily invested pending such advances are assets employed in New York, but that interest and dividends receivable from, but not yet paid by, subsidiaries are not.

A

AT&T argues that it is a transmission company, not an investment company, that in effect the commission has held assets taxable by New York “if the bookkeeping functions connected with them are located in New York,” and that advances to subsidiaries are employed in New York to no greater extent than are the funds invested by it in its subsidiaries’ capital stock, which is not taxed. It is, of course, true that funds received by a subsidiary and used by it out of State are not employed by the subsidiary in New York, whether received as advances or for the purchase of the subsidiary’s stock. It is, however, an oversimplification to conclude that because the subsidiary employs the funds out of State AT&T has not in making the advances employed its funds in New York.

The commission’s interpretation of the statute is neither without rational basis nor clearly erroneous. The distinction between advances to, and investments in the stock of, subsidiaries follows, as the Appellate Division noted, from the explicit exclusion of stock provided for in the last sentence of subdivision 2 of section 183 of the Tax Law. Moreover, the fact that AT&T is not an investment company does not require the conclusion that investment activity carried on by it in New York as a function of its transmission business is not the employment by it of assets in New York. The governing criteria is not that the debtor to which advances are made is a subsidiary of the creditor (Commonwealth v Gulf Oil Corp., 359 Pa 583, 587; Union Pacific R.R. Co. v Commissioner of Internal Revenue, 69 F2d 67, 69, affd 293 US 282) or the location in which the funds advanced are expended by the subsidiary, but whether the parent corporation carries on sufficient activity in New York with respect to the advances made to the subsidiary that it can be said to employ in New York the funds advanced. The past decisions of this court, although not entirely reconcilable among themselves, are not to the contrary. People ex rel. Texas Co. v Gilchrist (252 NY 19) held the New York activity involved in purchasing out-of-State oil to constitute taxable employment of assets in New York, but recognized that the passive holding in New York of bank deposits for use by the corporation out of State would not be. The latter principle is now incorporated in the exclusion from subdivision 2 of section 183 of the Tax Law of “cash on hand and on deposit”, but the Texas Co. holdings clearly turn on the extent of New York activity. Similarly, the absence of activity in New York of a foreign corporation which had invested its entire capital in the stock of Philippine corporations (People ex rel. Manila Elec. R.R. & Light. Co. v Knapp, 229 NY 502) and the wholly incidental nature of the New York activity of a foreign corporation which had invested its entire capital in the stock of an Illinois corporation (People ex rel. Chicago June. Rys. Co. v Roberts, 154 NY 1) resulted in holdings of nontaxability, but the extensive and sustained investment activities in New York of corporations whose purposes, like those of AT&T, encompassed investment in relation to its business (People ex rel. Brooklyn R. T. Co. v Miller, 85 App Div 178, affd 181 NY 582 [railroad business]; People ex rel. Manhattan Silk Co. v Miller, 125 App Div 296, affd 197 NY 577 [purchasing agent]; People ex rel. New England Loan & Trust Co. v Roberts, 25 App Div 16, affd 156 NY 688 [mortgage loans]; see, also, People ex rel. Tobacco & Allied Stocks v Graves, 250 App Div 149, affd 277 NY 723; People ex rel. North Amer. Co. v Miller, 90 App Div 560, affd 182 NY 521) have been held subject to tax because employing assets in New York through investment activity.

Finally, there can be no question in view of the facts stipulated with respect to the management of the investments by “a full-time staff of people” and the dollar volume and number of transactions involved and of the concession in the statement annexed to the company’s returns that “Its principal activity * * * consists in the financing of its subsidiary companies constituting part of the system” that there is substantial evidence to support the determination that AT&T’s advances to subsidiaries are taxable.

On like reasoning, the temporary cash investment account constitutes taxable assets employed in New York. The securities in the account belong wholly to AT&T, earn substantial income for it, involve multitudinous purchases and sales all of which occur in New York, and require constant monitoring by AT&T’s treasury department personnel. To conclude that because money from the sale of securities in the account is intended for ultimate transmission as advance to or stock purchase from out-of-State subsidiaries, those securities are not assets employed in New York is to ignore reality.

B

The same cannot be said, however, with respect to interest and dividends receivable by, but not yet payable to, AT&T from its subsidiaries. The simple fact is that although interest accrued and dividends declared but not yet payable at the end of a month may properly be counted as an asset of a corporation, there is nothing in the stipulated facts to support the Appellate Division’s conclusion, nor did the commission determine, that the asset was in fact used in New York. That AT&T’s financial position was bettered by inclusion of the asset on its balance sheet can establish that the asset was employed in New York only if one speculates that the receivable was in fact used as a pledge for moneys borrowed by AT&T or that absent the appearance of that asset on the balance sheet the loans made to AT&T would not have been made, or that the interest rates on the loans would have been higher. There is no evidence to support any of those hypotheses. AT&T is taxable not on assets held but only on assets used or employed in New York (cf. People ex rel. Chicago Junc. Rys. Co. v Roberts, 154 NY 1, 6, supra).

C

AT&T argues, nevertheless, and the dissenting Justice at the Appellate Division would have held, that in view of the long-standing contrary practice of the commission in accepting AT&T’s returns as filed, and of an opinion of the Attorney-General (1909 Opns Atty Gen 357) advising the State Comptroller that capital loaned to nonresidents for use in business in other States is not employed in business in New York, the commission’s determination cannot be applied retroactively. We disagree.

First, the opinion of the Attorney-General contains no details from which it can be ascertained whether the Woolworth Co., there involved, engaged in activities in New York similar to those of AT&T or in only formal or incidental activity, such as was held in the Manila Elec. and Chicago Junc. cases (supra), not to constitute taxable employment of assets. Moreover, the opinion made no mention of, but would appear to have been inconsistent with People ex rel. Edison Elec. Light Co. v Campbell (138 NY 543, 547) and People ex rel. Burke v Wells (184 NY 275, affd 208 US 14), which held that bonds or notes of out-of-State corporations situated in New York were employed in New York. Further, there is nothing to suggest that, as in Matter of Stupack (274 NY 198, 211-212), the Legislature, though it has amended the Tax Law sections involved many times since 1909, ever had the Attorney-General’s opinion brought to its attention. Finally, an opinion of the Attorney-General is an element to be considered but is not binding on the courts (Ferraiolo v O’Dwyer, 302 NY 371, 376; Matter of Fertig v Caso, 49 AD2d 573; McKinney’s Cons Laws of NY, Book 1, Statutes, § 129, subd b).

Second, retroactive change in the interpretation of a tax statute is not per se invalid (Matter of Irish Int. Airlines [Levine], 41 NY2d 819, affg for reasons stated below 48 AD2d 202; Automobile Club v Commissioner of Internal Revenue, 353 US 180, 183), at least if not carried so far back as to be palpably unjust (see People ex rel. Beck v Graves, 280 NY 405). Such proscription of retroactive change in administrative interpretation as exists rests upon a presumption of legislative acquiescence in a long-continued practice (Matter of Consolidated Edison Co. v State Tax Comm., 24 NY2d 114, 119). Yet the Legislature is charged with knowledge of the practical construction of a statute only where it is well known (Engle v Talarico, 33 NY2d 237, 242). The academic authorities upon which AT&T relies are primarily concerned with interpretative regulations (Griswold, A Summary of the Regulations Problem, 54 Harv L Rev 398; 2 Davis, Administrative Law [2d ed], § 7:23), whereas we here deal with administrative action of no greater formality than the acceptance of a tax return as filed, not with a regulation or even with a formal ruling (see Matter of Petrie Stores Corp. v Tully, 80 AD2d 328, 330). This is not to say that nothing less than a formal regulation or ruling can ever be accorded the significance for which AT&T argues, but rather that the less formal the action or failure to act said to constitute an interpretation foreclosing retroactive change, the clearer should it be that it was in fact a considered position of the agency (Griswold, op. cit., at pp 417-418).

Third, although the Consolidated Edison case involved such a situation, the present case, so far as the record reveals, does not. Thus, as Consolidated Edison’s brief before this court shows, the “unrefuted assertion” to which the Edison opinion refers (24 NY2d, at p 119) was that “During these 53 years the Tax Commission was obviously aware that public utility companies frequently sold real property, machinery and equipment which was no longer employable in their business. It can only be assumed, therefore, that taxes were not assessed on the receipts from such sales because the Commission — when the statute was amended and for more than fifty years thereafter — believed that the Legislature did not intend to tax receipts from the disposition of capital assets no longer employed in the utility business” (pp 11-12 [emphasis supplied]). Here, we are told by the stipulation of fact nothing about the position of the commission with respect to other companies engaged in activity similar to that in which AT&T engages in New York. So far as pertinent the stipulation sets forth that since 1910 AT&T’s advances to subsidiaries have been treated on its returns as assets employed in New York only to the extent that the debtor’s assets have been allocated to New York and since 1923 its temporary cash investments have been treated as pre-employment capital and not as assets employed in New York. Nothing in the stipulation, other than the somewhat equivocal statement, quoted above, annexed to the returns, suggests that the taxing authorities were necessarily aware that possible taxable “employed assets” had not been included. Nor, of course, is there any basis for assuming legislative awareness. Under such circumstances the balance between administrative flexibility and possible unfairness to a taxpayer weighs in favor of the public interest in enforcement of the Tax Law (see Matter of National Elevator Ind. v State Tax Comm., 49 NY2d 538, 548-549; Matter of Turner Constr. Co. v State Tax Comm., 57 AD2d 201, 203).

We find no error, therefore, in the Appellate Division’s conclusion that what is here involved is no more than a permissible correction of a prior, albeit long-standing, oversight.

Ill

That its advances to subsidiaries and temporary cash investment account are assets “employed” in New York within the meaning of section 183 of the Tax Law, does not, however, support the conclusion drawn by the commission that the interest income received by AT&T on those advances and from obligations of out-of-State obligors held in that account are earnings from a “source” within the State within the meaning of section 184 of the Tax Law. Only in the most metaphysical sense can it be said that moneys paid to AT&T by out-of-State obligors, subsidiary or unaffiliated, has its source in the activities of AT&T within New York.

The contrary view ignores not only the commonly accepted meaning of the word “source,” upon which the Appellate Division relied, but also the difference in language used in section 184 from that used in section 183, and the fact that the Legislature when, as with respect to the income tax on nonresident individuals (Tax Law, § 632, subd [b], par [2]), it sought to limit the meaning of “source” by the concept that the income be derived “from property employed * * * in this state,” knew how to do so.

Nor is People ex rel. New York Cent. & Hudson Riv. R. R. Co. v Roberts (157 NY 677, affg on opn below 32 App Div 113) authority to the contrary. Although, as the State points out, it held “gross earnings” as used in section 184 of the Tax Law to include receipts arising from employment of capital whether in the transportation business or otherwise and the relator’s earnings to be separate and distinct from the earnings of the companies in whose securities it had invested, the statute as it then read spoke only to “gross earnings” and made no mention of the “source” from which those earnings derived (see 32 App Div, at p 114). Furthermore, the fact that the earnings of the out-of-State obligors and subsidiaries are separate from those of AT&T enhances rather than detracts from the conclusion that income received from them by AT&T comes from an out-of-State source, for it emphasizes the intervening out-of-State activity as the source from which the income springs. In short, although AT&T’s New York activity in relation to advances to subsidiaries and its temporary cash investments constitutes employment of assets in New York within the meaning of section 183 of the Tax Law, there is no rational basis for the conclusion that section 184 of the Tax Law, in its use of the word “source” was intended to encompass income received from such advances and investments in out-of-State subsidiaries and obligors.

For the foregoing reasons, the judgment of the Appellate Division should be modified as above set forth and, as so modified, affirmed, without costs.

Chief Judge Cooke and Judges Jasen, Jones, Wachtler, Simons and Kaye concur.

Judgment modified in accordance with the opinion herein and, as so modified, affirmed, without costs.


text:
    The People of the State of New York, Respondent, v Richard Dodt, Appellant.
    Argued February 23, 1984;
    decided March 29, 1984

      POINTS OF COUNSEL

      Peter R. Porco for appellant.
    I. The trial evidence failed to prove beyond a reasonable doubt defendant-appellant’s guilt as to the charge of kidnapping in the second degree. (Matter of Winship, 397 US 358; Coffin v United States, 156 US 432; Davis v United States, 160 US 469; Speiser v Randall, 357 US 513; Leland v Oregon, 343 US 790; Brinegar v United States, 338 US 160; Wilson v United States, 232 US 563; Holt v United States, 218 US 245; Miles v United States, 103 US 304.) II. Defendant-appellant was denied a fair trial since the trial court’s charge to the jury failed to adequately set forth the material legal principles applicable to the instant case. (People v Fraczak, 103 Misc 2d 388; People v Hope, 257 NY 147; People v Cassidy, 40 NY2d 763; People v Geaslen, 54 NY2d 510; People v Dolan, 40 NY2d 763; People v Usher, 40 NY2d 763; People v Lombardi, 20 NY2d 266; People v Levy, 15 NY2d 159; People v Stoesser, 92 AD2d 650; People v Tillman, 69 AD2d 975.) III. The trial court committed reversible error by failing to suppress and exclude the complainant’s identification testimony which was obtained as a direct result of the unlawful arrest and detention of defendant-appellant. (Wong Sun v United States, 371 US 471; People v Malinsky, 15 NY2d 86; Terry v Ohio, 392 US 1; People v West, 44 NY2d 656; People v Loewel, 41 NY2d 609; People v Oden, 36 NY2d 382; People v Davis, 36 NY2d 280, 423 US 876; People v Brown, 24 NY2d 421; People v Arthurs, 24 NY2d 688; People v Bouton, 50 NY2d 130.) IV. The trial court’s erroneous Sandoval ruling deprived defendant-appellant of a fair trial since it effectively prevented him from testifying on his own behalf. (People v Mayrant, 43 NY2d 236; People v Dickman, 42 NY2d 294; People v Wright, 41 NY2d 172; People v Duffy, 36 NY2d 258, 423 US 861; People v Schwartzman, 24 NY2d 241; People v Russell, 266 NY 147; People v Zackowitz, 254 NY 192; People v Molineux, 168 NY 264; People v Johnson, 31 AD2d 842; People v Castillo, 47 NY2d 270.)

      Sol Greenberg, District Attorney (F. Patrick Jeffers of counsel), for respondent.
    I. The evidence proved beyond a reasonable doubt defendant’s guilt on the charge of kidnapping in the second degree. (People v Hope, 257 NY 147; People v Fraczak, 103 Misc 2d 388; People v Locke, 70 AD2d 686; People v Bercume, 38 AD2d 356; People v Cassidy, 40 NY2d 763; People v Rios, 88 AD2d 1056; People v Smith, 47 NY2d 83.) II. The court’s charge to the jury with respect to kidnapping in the second degree set forth the applicable legal principles. (People v Radcliffe, 232 NY 249; People v Katz, 209 NY 311.) III. There was no illegal arrest or detention of defendant and the identification was in all respects proper. (People v Spivey, 46 NY2d 1014; People v Benjamin, 51 NY2d 267; People v Lypka, 36 NY2d 210; People v Jenkins, 47 NY2d 722; People v Ward, 95 AD2d 233; People v Bowdoin, 89 AD2d 986; People v Sobotker, 43 NY2d 559; People v Rosario, 94 AD2d 329; People v Clarke, 60 NY2d 568; People v Baker, 119 Misc 2d 636.) IV. The court’s Sandoval ruling was proper. (People v Sandoval, 34 NY2d 371; People v Vidal, 26 NY2d 249; People v Duffy, 36 NY2d 258, 423 US 861; People v Cridelle, 72 AD2d 859; People v Poole, 52 AD2d 1010; People v Brown, 48 NY2d 921; People v Santarelli, 49 NY2d 241; People v Shields, 46 NY2d 764.)
   OPINION OF THE COURT

Meyer, J.

Proof in a kidnapping prosecution that defendant threatened the use of a gun is sufficient to establish abduction by the threatened use of deadly physical force, even though there is no evidence that in fact he possessed an operable firearm. There must, nevertheless, be a reversal and a new trial. The lineup identification that followed immediately after defendant’s arrest should have been suppressed, the prosecution having failed to offer evidence at the pretrial suppression hearing concerning the content of the teletype communication on the basis of which the arrest was made and, therefore, having failed to establish probable cause for arrest.

I

Shortly after midnight on February 20, 1981, Theresa Culp finished her shift as a nurse at the Albany Medical Center. As she approached her car in the parking lot, she heard the footsteps of a person running behind her. A man, identified at trial as defendant, caught up to her and then fell down by her car. Seeking to be helpful, Mrs. Culp talked to the man for about two minutes. As she turned to enter her car, however, the man grabbed her from behind and pushed her across the parking lot toward another car the passenger door of which was open.

The assailant held his right hand over Mrs. Culp’s mouth and used his body to push her, while repeatedly warning, “Don’t scream lady, I’ve got a gun in my pocket.” After moving about 40 feet in this fashion, the man placed his left hand on Mrs. Culp’s head to prevent her from struggling, and that caused the fingers of his right hand to slip into her mouth. She then bit down on one of his fingers hard enough to loosen several of her teeth, causing the attacker to release his grip. When Mrs. Culp then began screaming, the man fled in the car.

Defendant was arrested the following day and was identified by Mrs. Culp in a lineup. He was charged in a one-count indictment with kidnapping in the second degree in that he abducted Mrs. Culp by restraining her and dragging her to his car and while doing so threatening her that he was armed with a gun.

Defendant moved to suppress Mrs. Culp’s identification as the fruit of an arrest made without probable cause. At the suppression hearing, the arresting officer testified that he stopped defendant’s car at about 5:00 a.m. on the day after the incident because the car matched a teletype description the officer had received. That teletype did not contain any information about the crime to which it related. Although the officer testified that the teletype included a “general physical description of the subject,” neither he nor anyone else testified what that description was, nor was any evidence presented of the description Mrs. Culp had offered when reporting the crime or of the extent to which defendant’s appearance matched Mrs. Culp’s report or the teletype description. The only further evidence offered was Mrs. Culp’s testimony that when she was called to the police station for the lineup, another officer told her that a suspect had been picked up “that matched the description of the person that I had said assaulted me.”

After being stopped, defendant’s car was impounded and he was taken to a police station, where Mrs. Culp identified him in a lineup. Mrs. Culp’s testimony at the suppression hearing related solely to the circumstances of that identification proceeding, which is challenged before us not for suggestiveness or unfairness, but as the product of an arrest without probable cause.

The hearing Judge ruled that suppression of the lineup identification was not required because the police had probable cause for the arrest, a conclusion he supported by finding that the arresting officer “testified that the defendant matched the description of the suspect in the assault.” In fact, the only hearing testimony of the officer concerning his observation of the occupant of the car was that there was a laceration of his right index finger.

Just prior to the commencement of trial, the court ruled, in response to defendant’s motion pursuant to People v Sandoval (34 NY2d 371), that his credibility could be impeached with proof of his prior conviction for sexual abuse and proof of the facts underlying his adjudication as a youthful offender on an assault charge. Thereafter, defendant, who did not testify at trial, was found guilty of kidnapping in the second degree. The primary evidence against him at the trial was Mrs. Culp’s testimony identifying him as her assailant, which was bolstered by her testimony that she had selected him in a lineup on the day after the crime.

On defendant’s appeal to the Appellate Division, the entire court agreed that the evidence was sufficient to establish kidnapping in the second degree by abduction. On the other issues the court was split. The majority, one Justice dissenting, upheld the Trial Judge’s suppression ruling on the alternative theories that defendant consented to accompany the officers to the police station, but that, even if he had not, there was probable cause for his arrest, and rejected defendant’s argument that the Trial Judge’s Sandoval ruling was erroneous.

II

To establish either kidnapping in the first degree (Penal Law, § 135.25) or kidnapping in the second degree (Penal Law, § 135.20), it must be established that the person accused abducted another person. “Abduct” is defined by subdivision 2 of section 135.00 of the Penal Law as “to restrain a person with intent to prevent his liberation by * * * using or threatening to use deadly physical force”, and under subdivision 11 of section 10.00 of the Penal Law “deadly physical force” means “physical force which, under the circumstances in which it is used, is readily capable of causing death or other serious physical injury.”

The theory of the prosecution in the present case is that when defendant stated to the victim that he had a gun in his pocket he thereby threatened the use of deadly physical force. Defendant argues, however, that the proof was insufficient because it must be shown that the threat made was capable of present realization and there was no evidence at trial that he actually possessed a gun, much less an operable gun.

The plain language of the statute requires rejection of defendant’s argument. Depending on how it is used, even a normally innocuous item may constitute “deadly physical force” or may be a “dangerous instrument” (see People v Carter, 53 NY2d 113 [rubber boots]; People v Cwikla, 46 NY2d 434, 442 [handkerchief used as a gag]). In contrast, the threat presented by a gun does not depend to any significant extent on the manner in which it is used. So long as a gun is operable, it constitutes deadly physical force, and a threat to use a gun, such as was made here, can only be understood as a threat that the weapon is operable. In short, on the facts of this case, the evidence was sufficient to establish that defendant restrained Mrs. Culp by “threatening to use deadly physical force.”

Ill

Defendant’s pretrial motion to suppress Mrs. Culp’s lineup identification as the fruit of an unlawful arrest cast the burden on the prosecution to come forward with evidence establishing probable cause for the arrest (People v Berrios, 28 NY2d 361, 367) People v Malinsky, 15 NY2d 86, 91, n 2). The analysis required of a hearing Judge faced with deciding whether the People have met their burden is largely the same as that used by a magistrate in passing on an application for an arrest or search warrant (People v Bouton, 50 NY2d 130,135; People v Boniface, 37 AD2d 728, 729). In either instance, a prime requirement of the Fourth Amendment and the New York Constitution (art I, § 12) is specificity: a particular description of “the place to be searched, and the person or things to be seized” (see United States v Cortez, 449 US 411, 418; Ybarra v Illinois, 444 US 85; People v Nieves, 36 NY2d 396, 400-402).

Thus, an arrest warrant must contain “the name of the defendant to be arrested or, if such be unknown, any name or description by which he can be identified with reasonable certainty” (CPL 120.10, subd 2; see Boose v City of Rochester, 71 AD2d 59, 66), and a search warrant must provide a description “essential to identification with certainty” (CPL 690.45, subd 5). Where an arrest or search is made without a warrant, the reviewing court must be supplied with the description upon which the police acted and sufficient evidence to make its own independent determination of whether the person arrested or the item seized reasonably fit that description (People v Brodie, 87 AD2d 653). In other words, “the court must be presented with facts, not assurances”, and “[sjummary statements that the police had arrived at a conclusion that sufficient cause existed will not do” (People v Bouton, 50 NY2d 130, 135, supra).

It follows that when the police have acted on the basis of a teletype or radio bulletin the prosecution’s burden is not discharged absent proof regarding the contents of the communication received. The reliability of the information conveyed may be assumed by the officer in the field (People v Lypka, 36 NY2d 210, 213-214) and by the suppression court as well so long as defendant raises no specific challenge (People v Jenkins, 47 NY2d 722). But the information conveyed must be proved; there is no presumption of its sufficiency to establish probable cause for an arrest or search. When a proper suppression motion is filed (see CPL 710.60), therefore, the content of the bulletin upon which the police acted, as opposed to its basis or source, must be proved at the hearing.

Here, the prosecutor offered no evidence of the physical description contained in the teletype, or of defendant’s appearance at the time of arrest, on the basis of which the hearing Judge could reach a conclusion that there was probable cause. Nor was this failure of proof cured by the victim’s testimony that a police officer who was not involved in the arrest had asserted that defendant fit the description she had given. It is the responsibility of the suppression Judge, not the police, to make that determination (People v Bouton, 50 NY2d 130, 135, supra).

The Appellate Division’s alternative holding was that defendant consented to go to the police station. There is no indication in the record, however, that the People relied on a consent theory at the suppression hearing and no such theory was discussed in the hearing court’s opinion, which found only that there was probable cause for defendant’s arrest. Accordingly, the People may not on appeal raise for the first time the claim that defendant consented (see People v Evans, 58 NY2d 14, 23-24, n 2; People v Knapp, 52 NY2d 689, 699 [Jasen, J., concurring]; People v Laskaris, 82 AD2d 34, 41-42).

Furthermore, the evidence adduced at the hearing does not support a determination that defendant consented. There is no question that defendant’s car was forcibly stopped and impounded and that Miranda warnings were administered at the scene, all of which is consistent with a custodial situation requiring probable cause, even if a formal arrest had not been announced (see Dunaway v New York, 442 US 200; People v Brnja, 50 NY2d 366, 372). The only suggestion of consent was the officer’s affirmative response to the prosecutor’s question, “And did there come a time that this subject was asked to come down to the Albany Police Department for further investigation?” Read in context, however, the phrasing of the question reflects the prosecutor’s manner of speaking and does not establish that defendant was actually offered a choice. Short of testimony establishing that defendant went willingly to the police station, the evidence is insufficient to meet the People’s heavy burden of showing that defendant freely consented (see People v Gonzalez, 39 NY2d 122,128).

Inasmuch as the lineup identification followed directly from the illegal arrest and detention of defendant, it was error to admit evidence of that identification at trial (United States v Crews, 445 US 463, 472, 477; People v Brnja, 50 NY2d 366, 369, n 1, supra; People v Butler, 90 AD2d 797, 798). Moreover, the victim’s identification having been the primary evidence against defendant at trial, and that identification having been bolstered by evidence regarding the lineup, admission of the lineup identification cannot be deemed harmless error (see People v Crimmins, 36 NY2d 230).

There must, therefore, be a new trial because of the admission of testimony concerning the lineup identification. A further hearing must also be held, unless waived by defendant, with respect to admissibility of the in-court identification. Defendant’s motion was directed to both the lineup and the in-court identification, so his objection to the latter was sufficiently preserved, notwithstanding his failure to object at trial (People v Rahming, 26 NY2d 411, 417). The hearing Judge, having concluded that there was probable cause, made no finding of independent source, and although the Appellate Division did make such a finding, it was improperly based solely upon evidence adduced at trial (People v Gonzalez, 55 NY2d 720, 721-722). Defendant is, therefore, entitled to a hearing concerning whether the improper lineup “affect[ed] the reliability of the in-court identification and rendered] it inadmissible as well” (United States v Crews, 445 US 463, 472-473, supra; see People v Brnja, 50 NY2d 366, 369, n 1, supra).

Defendant is not entitled, however, to dismissal of the indictment on the theory that the People should not be given “ ‘a second chance to succeed where once they had tried and failed’ ” (People v Havelka, 45 NY2d 636, 643; People v Bryant, 37 NY2d 208, 211) and, therefore, cannot prove a prima facie case. The Havelka-Bryant rule, based as it is on the potential for abuse and injustice through the tailoring of testimony to fit the requirements established by an appellate court’s opinion, is a bar to a second hearing on the admissibility of the lineup. It does not, however, foreclose a further hearing as to the in-court identification. The risk that the testimony as to independent source at a further hearing will be distorted is minimal where, as here, the victim has testified as to her source of identification at the trial (cf. People v Havelka, 45 NY2d, at p 644). Nor is there any inconsistency between so holding and refusing to hold the trial testimony sufficient to establish independent source. Defendant was entitled in advance of trial to a determination by a Trial Judge on the question of independent source. Moreover, his attorney may well have handled the issue differently when cross-examining the victim in the presence of the jury than he would have at the suppression hearing had the issue then been litigated by the People (see People v Werner, 55 AD2d 317, 319).

IV

Finally, as to the Trial Judge’s ruling that defendant’s two prior convictions could be used to impeach his credibility, no issue reviewable by this court is presented (People v Williams, 56 NY2d 236, 239; People v Brown, 48 NY2d 921). The record establishes that the Trial Judge’s ruling was made in the exercise of discretion and that it did not constitute an abuse of discretion as a matter of law.

For the foregoing reasons, the order of the Appellate Division should be reversed and a. new trial ordered, to be preceded, if defendant so requests, by a hearing on the admissibility of the in-court identification by Mrs. Culp.

Chief Judge Cooke and Judges Jasen, Jones, Wachtler, Simons and Kaye concur.

Order reversed and case remitted to County Court, Albany County, for a new hearing of defendant’s motion to suppress identification testimony and a new trial in accordance with the opinion herein.

       Compare subdivision 13 of section 10.00 of the Penal Law, defining a dangerous instrument as one “which, under the circumstances in which it is used, attempted to be used or threatened to be used, is readily capable of causing death or other serious physical injury.”