author: Per Curiam.

text:
    In the Matter of Jerome L. Steinberg, a Judge of the Civil Court of the City of New York, County of Kings, Petitioner. State Commission on Judicial Conduct, Respondent.
    Argued June 2, 1980;
    decided July 1, 1980

      POINTS OF COUNSEL

      Nathan R. Sobel for petitioner.
    There is but a single standard by which Judge Steinberg’s conduct should have been judged by the commission and by which his conduct, respectfully must be judged by the court. (Lanzetta v New Jersey, 306 US 451; Papachristou v City of Jacksonville, 405 US 156; Smith v Goguen, 415 US 566; Matter of Carey v Morton, 297 NY 361; Schuyler v South Mall Constructors, 32 AD2d 454.)

      Raymond S. Hack, Gerald Stern and Jean Savanyu for respondent.
    Petitioner’s misconduct violated established ethical standards and warrants removal from judicial office. (Matter of Kuehnel v State Comm. on Judicial Conduct, 49 NY2d 465; Matter of Spector v State Comm. on Judicial Conduct, 47 NY2d 462; Matter of Dixon v State Comm. on Judicial Conduct, 47 NY2d 523; Friedman v State of New York, 24 NY2d 528, 397 US 317; Matter of Pfingst, 33 NY2d [ii]; Bartlett v Enea, 45 AD2d 471; Sarisohn v Appellate Div., Second Dept., Supreme Ct. of State of N. Y., 265 F Supp 455; Matter of Kane v Rudich, 256 App Div 586; Matter of Droege, 129 App Div 866, 197 NY 44; Matter of Sarisohn, 29 AD2d 91, 22 NY2d 808, 393 US 1116; Bartlett v Flynn, 50 AD2d 401, 39 NY2d 946.)
   OPINION OF THE COURT

Per Curiam.

In this proceeding to review a determination of the State Commission on Judicial Conduct, we are called upon to consider whether the conduct of petitioner, a Judge of the New York City Civil Court, constituted a serious breach of judicial ethics warranting the imposition of the extreme sanction of removal from office. After having reviewed all of the evidence before the commission, we conclude that removal is appropriate.

The essential facts are not disputed. Petitioner took office in January of 1970. Within six months, he was approached by two friends, Jerome Silverman and Toshi Miyazaki, and asked if he would assist in arranging a substantial loan for Miyazaki’s travel business. Petitioner assented and promptly contacted a prospective lender named Ditkowich, who had previously loaned money to Miyazaki at petitioner’s request. Upon petitioner’s urging, Ditkowich agreed to lend Miyazaki $90,000 at a total annual interest rate of 24%, which rate included a 3% fee to compensate petitioner for his efforts in "servicing” the loan on an ongoing basis.

Pursuant to the understanding of the parties, petitioner personally collected the loan payments each month from Miyazaki and, after subtracting his share of the interest, forwarded the remainder to Ditkowich. Although petitioner ordinarily picked up the money from Miyazaki at the latter’s place of business, there were occasions when the payments were either picked up by Vincent Pizzuto, petitioner’s law assistant, or delivered by Mrs. Miyazaki to petitioner’s chambers.

A similar arrangement was made in 1971, when Miyazaki approached petitioner with the plaint that he needed more money for his cash-hungry business. This time, petitioner arranged a $5,000 loan in which his dentist, Dr. Bukantz, acted as lender. The interest rate on this loan was also 27%, with 18% going to the lender and 9% going to petitioner for his ongoing role in collecting the payments.

Between 1970 and 1973, petitioner participated in a number of other transactions similar to the Miyazaki loans. The most significant of these was a loan of $10,000 made by one David Gilman to a Mr. Stein, the president of Merrick Harbor Drug Co., at an interest rate of 24% per year, of which petitioner was to receive half. As was his practice with respect to the other loans, petitioner would routinely collect the loan payments from the borrower at the borrower’s place of business. < In making the collections on the Gilman-Merrick Harbor Drug loan, however, petitioner consistently identified himself to the borrower as "Vincent Pizzuto”, using that name when he signed the receipts for the cash payments. Although petitioner testified before the commission that he concealed his true identity from Stein, the borrower, because he was "ashamed” to let Stein know that a Judge was acting as "a sort of messenger boy” who was "running back and forth handling this type of thing”, he offered no explanation as to why he continued to sign the receipts with his law assistant’s name after his identity had accidentally been made known to Stein.

In addition to the evidence concerning petitioner’s activities as a loan broker, the commission also considered petitioner’s dealings with the Internal Revenue Service during his early years on the Bench. It was conceded before the commission that petitioner failed to report a total of $3,203 of the income from his loan business on his Federal tax returns for 1971, 1972 and 1973. A $5,545 "forwarding fee” which was "earned” by petitioner while he was still a practicing attorney, also was omitted from his 1971 return. Finally, on his returns for 1971 and 1972, petitioner took "medical and dental expense” deductions for payments he made by check to Dr. Bukantz, although these payments actually represented transfers of funds paid to petitioner by Miyazaki toward the latter’s loan obligations.

On the basis of the foregoing facts, the Commission on Judicial Conduct determined that petitioner had engaged in a continuing course of conduct which cast his fitness to serve as a Judge in serious doubt and that, accordingly, he should be removed from the Bench. We agree.

The ethical mandates governing the conduct of Judges on and off the Bench have long cautioned against personal business practices which would create an appearance of impropriety and impugn the integrity of the judicial office (see Canon 2, subd A, Code of Judicial Conduct, reprinted in McKinney’s Cons Laws of NY, Book 29, p 518; Canon 4, Canons of Judicial Ethics, reprinted in McKinney’s Cons Laws of NY, Book 29, p 425 [1968 ed]). Specifically, Canon 25 of the Canons of Judicial Ethics, which constituted the governing ethical code at the time petitioner took office, provided: "A judge should avoid giving ground for any reasonable suspicion that he is utilizing the power or prestige of his office to persuade or coerce others to patronize or contribute * * * to the success of private business ventures * * *. He should, therefore, not enter into such private business, or pursue such a course of conduct, as would justify such suspicion, nor use the power of his office or the influence of his name to promote the business interests of others * * * nor should he enter into any business relation which, in the normal course of events reasonably to be expected, might bring his personal interest into conflict with the impartial performance of his official duties” (see, also, Canon 5, subd C, Code of Judicial Conduct, supra, pp 526-527).

While there may have been some uncertainty concerning the outer limits of this prohibition, petitioner cannot take refuge in any such uncertainty, since his private business activities fell squarely within the type of conduct that Canon 25 clearly and unambiguously proscribes. Whether or not petitioner deliberately and overtly used the prestige and authority of his office to persuade the lenders and borrowers in this case to enter into the transactions from which he personally profited, it cannot be doubted that his conduct created the appearance that such was indeed the case. Contrary to petitioner’s assertions, a Judge cannot simply cordon off his public role from his private life and assume safely that the former will have no impact upon the latter (see Matter of Kuehnel v State Comm. on Judicial Conduct, 49 NY2d 465, 469). Wherever he travels, a Judge carries the mantle of his esteemed office with him, and, consequently, he must always be sensitive to the fact that members of the public, including some of his friends, will regard his words and actions with heightened deference simply because he is a Judge. It takes little imagination to visualize the persuasive and perhaps even subtly coercive effect that occurs when a Judge solicits an unsecured loan for a friend and backs up his request with his personal guarantee. Similarly, can there be any serious doubt that a borrower would be hesitant to protest a seemingly high and perhaps even illegal interest rate when the person collecting the loan payments is a Judge with all of the power and prestige that that title implies?

We stress that in this case, the inevitable danger of subtle persuasion which might naturally arise from petitioner’s title was aggravated by petitioner’s occasional use of his chambers to conduct his loan business and by his utilization of a judicial employee in several instances to collect the loan payments. Far from indicating that petitioner took scrupulous care to separate his personal business from his public duties, these incidents are illustrative of an unacceptably careless attitude toward the obligations and privileges of his judicial office and a lack of sensitivity to the dangers inherent in their abuse.

Lest it be said that we are approving the imposition of the ultimate sanction of removal for what might be characterized as extremely poor judgment, we hasten to note that this is not just a case of simple careless inattention to the applicable ethical standards. The commission specifically found that petitioner intentionally misrepresented his income and allowable deductions on his Federal income tax returns. Although petitioner now contends that these errors on his tax returns were inadvertent, his protests lack the ring of truth. Having examined all of the relevant testimony on this point (see Matter of Spector v State Comm. on Judicial Conduct, 47 NY2d 462, 465-466, supra), we conclude that the commission’s finding of deliberate falsification was correct. Moreover, we cannot overlook the fact that petitioner attempted to conceal his true identity from the borrower in the Gilman-Merrick Harbor transaction. While he asserts that he did so only out of an acute sense of "embarrassment”, his continued and unexplained use of a pseudonym for purposes of signing receipts long after his identity was disclosed suggests an ongoing, albeit somewhat clumsy, effort to conceal his business activities from official scrutiny.

In summary, we find that petitioner’s conduct of the described financial affairs in utter disregard of the Canons of Judicial Ethics requires acceptance of the sanction of removal from judicial office.

Implicit in our holding is a rejection of the novel interpretation petitioner has asked us to place upon the relatively new constitutional provisions governing the removal of Judges from office. Our State Constitution now provides that Judges may be removed "for cause, including, but not limited to, misconduct in office, persistent failure to perform [their] duties, habitual intemperance, and conduct, on or off the bench, prejudicial to the administration of justice” (NY Const, art VI, § 22, subd a). Petitioner contends that violations of the canons and regulations governing judicial conduct cannot form the predicates for disciplinary action and that the foregoing constitutional provision provides the sole standard for imposing disciplinary sanctions upon the Judges of our State. This contention, however, represents a fundamental misunderstanding of the relationship between the constitutional provision and the various canons and regulations governing judicial conduct.

It is the constitutional provision that provides the basic authority for imposing disciplinary sanctions, including removal, upon Judges "for cause”. In addition, the new constitutional provision contains some specific examples of the types of conduct that would constitute grounds for the imposition of such sanctions. But the list of offenses specified in section 22 (subd a) of article VI is not an exclusive list; indeed, as is made clear by the language of that provision, the "causes” for which a Judge may be admonished, censured or removed are "not limited to” those described therein. This is precisely where the various prescriptive canons and regulations (see Rules Governing Judicial Conduct, 22 NYCRR 33.1-33.7; Code of Judicial Conduct, reprinted in McKinney’s Cons Laws of NY, Book 29, pp 517-540) come into play. These canons and regulations, along with " 'the general moral and ethical standards expected of judicial officers by the community’ ” infuse added meaning into the sparse statutory term "for cause” and provide guidelines for the commission and this court to use in determining when and to what extent a sanction should be imposed (Friedman v State of New York, 24 NY2d 528, 539-540, quoting Sarisohn v Appellate Div., Second Dept., Supreme Ct. of State of N. Y., 265 F Supp 455, 458; see, also, People v La Carrubba, 46 NY2d 658, 663-664; Matter of Owen, 47 NY2d M).

We agree in principle with petitioner’s contention that the extreme sanction of removal should not be imposed absent truly egregious circumstances. But we cannot accept his further contention that conduct off the Bench may give rise to removal only where there has been some act of overt illegality or extreme "moral turpitude”. We see no sound reason to distinguish between conduct "on the Bench” and conduct "off the Bench” for present purposes, since "[a]ny conduct, on or off the Bench, inconsistent with proper judicial demeanor subjects the judiciary as a whole to disrespect and impairs the usefulness of the individual Judge to carry out his or her constitutionally mandated function” (Matter of Kuehnel v State Comm, on Judicial Conduct, 49 NY2d 465, 469, supra; see Matter of Pfingst, 33 NY2d [ii], [kk]). Here, we have found that petitioner’s complete insensitivity to the special ethical obligations of Judges rendered him unfit for judicial service. Mindful that "[t]he place of justice is a hallowed place; and therefore not only the Bench but the foot pace and precincts and purprise thereof ought to be preserved without scandal and corruption” (Bacon, Of Judicature, reprinted in American Judicature Society, Handbook for Judges, pp 25-29 [1961]), we cannot and will not shrink from our constitutional obligation to preserve the integrity of the judiciary by removing petitioner from office.

For the foregoing reasons, the determined sanction of removal should be accepted, without costs.

Chief Judge Cooke and Judges Jasen, Gabrielli, Jones, Wachtler, Fuchsberg and Meyer concur in Per Curiam opinion.

Determined sanction accepted, without costs, and Jerome L. Steinberg is removed from his office of Judge of the Civil Court of the City of New York.

      . Of the remaining 21%, Ditkowich was to receive 18% and Silverman, who was an accountant, was to receive 3% for monitoring Miyazaki’s accounts receivable and reporting on them to the lender. A short time after the loan was consummated, however, Ditkowich became dissatisfied with the return he was receiving on his investment, and, consequently, the total annual interest rate was increased to 27%, out of which Ditkowich was to receive 24% and petitioner was to receive 3%. Silverman dropped out of the transaction at this point and relinquished his share of the interest payments.
      Although it is a crime under the Penal Law to charge more than 25% per annum interest (Penal Law, § 190.40), the Commission on Judicial Conduct stopped short of finding that petitioner had been guilty of participating in a criminally usurious transaction, because the "[requisite elements of intent and collateral circumstances were not developed [on the record]”. The testimony on the record does establish, however, that petitioner had been informed by his law assistant, who drafted the loan documents, that the law prohibits interest rates in excess of 25%. Additionally, there was testimony on the record, which was credited by the referee, indicating that, after the Miyazaki loan had been paid off, petitioner became "quite concerned about the extra percentage” when he learned that his financial activities were the subject of a Grand Jury investigation. According to this testimony, petitioner met with Miyazaki shortly before the latter was to testify before the Grand Jury and asked if there was "any way of not showing” the extra 3% per annum interest charge. Miyazaki apparently refused to accede to this request. Nevertheless, in a subsequent meeting between the two men, according to the testimony, petitioner again demonstrated concern for his own legal liabilities by asking Miyazaki to sign an affidavit attesting to the fact that the gross interest rate was only 24% and that the remaining 3% was understood to be a "service charge”. Once again, Miyazaki refused to co-operate.
      Although the charges made in connection with these incidents were ultimately dismissed by the.commission without comment, the underlying testimony does serve to indicate that petitioner was conscious of the potential legal ramifications of his actions and that, rather than attempting to rectify the situation, he made a concerted effort to conceal the true facts in the face of a Grand Jury investigation. Needless to say, such conduct is totally unacceptable, for a Judge is, of course, sworn to uphold the truth-seeking process.
      That the charges of misconduct associated with the above-mentioned testimonial evidence were not sustained by the commission does not vitiate our conclusion. As we noted in Matter of Spector v State Comm. on Judicial Conduct (47 NY2d 462, 465-466) and Matter of Dixon v State Comm. (47 NY2d 523, 525), this court is empowered to review the commission’s "findings of fact and conclusions of law” in these proceedings (NY Const, art VI, § 22, subd d). Having reviewed all of the evidence before the commission in this case, we are satisfied that the testimony credited by the referee accurately portrayed the events in question.

      . Any uncertainty concerning the range of business activities that are forbidden to full-time Judges was eliminated with the promulgation of section 33.5 (subd [c], par [2]) of the Rules Governing Judicial Conduct (22 NYCRR 33.5 [c] [2]). This regulation provides: "No judge or justice of the Court of Appeals, Appellate Division, Supreme Court, Court of Claims, County Court, Surrogate’s Court, Family Court, District Court, Civil Court of the City of New York, or Criminal Court of the City of New York shall be a managing or active participant in any form of business enterprise organized for profit”.
      We have no occasion to consider whether petitioner’s conduct, which occurred before section 33.5 (subd [c], par [2]) was promulgated, may be measured retroactively by the specific standard articulated in that provision (cf. Matter of Spector v State Comm. on Judicial Conduct, 47 NY2d 462, 469, supra), since we conclude that the conduct in question fell squarely within the long-standing prohibitions contained in Canon 25 of the Canons of Judicial Ethics.

      . Petitioner has also argued that the commission’s findings of fact on this and other issues should be rejected because the commission routinely uses the "preponderance of the evidence” standard in making its factual determinations (see 22 NYCRR 7000.6 [h]), although, in his view, the higher standard of proof by "clear and convincing evidence” is required. We note, however, that a resolution of this important legal question is unnecessary here, since, in petitioner’s case, the referee who initially heard the case expressly adopted the "clear and convincing evidence” standard at petitioner’s request, and the commission’s formal factual conclusions coincided in almost all respects with those of the referee. Moreover, our own analysis of the evidence satisfies us that the commission’s factual findings were supported by "clear and convincing evidence”. Thus, we do not deem it necessary to consider whether a disciplinary sanction may be imposed upon a Judge on the basis of a lesser standard of proof.

      . The only outstanding documents or records which contained petitioner’s name and which could serve to link him directly to any of the loan transactions were the checks he drew on his own bank account to pay Dr. Bukantz his share of the proceeds from the Miyazaki loan. These checks, as noted above, were later identified on petitioner’s tax return as payments to Dr. Bukantz for his professional services. The other papers which contained petitioner’s name were all retained by him. By signing his law secretary’s name to the receipts he was required to give to Merrick Harbor Drug Co. in exchange for its cash payments, petitioner was able to avoid having his own name appear on the only documents that were to remain in the hands of a relative stranger.


source: Caselaw Access Project

author: Wachtler, J.

license: Public Domain

text:
    Chemical Bank of Rochester, Appellant, v John Haskell, Respondent. (Action No. 1.) Paddy Chayefsky, as a Limited Partner in Quarry Square Associates, Individually and on Behalf of All Others Similarly Situated, Respondent, v Chemical Bank of Rochester, Appellant. (Action No. 2.) Halsey F. Sherwood et al., as Limited Partners in Quarry Square Associates, Individually and on Behalf of All Others Similarly Situated, Respondents, v Chemical Bank of Rochester, Appellant. (Action No. 3.)
    Argued September 2, 1980;
    decided October 9, 1980

      POINTS OF COUNSEL

      Richard B. Callen for appellant.
    I. Respondents have not proven at trial a valid defense to the payment of their notes. Accordingly, appellant is entitled to judgment as a matter of law. (American Ind. Contr. Co. v Travelers Ind. Co., 54 AD2d 679, 42 NY2d 1041; Coastal Commercial Corp. v Kosoff &

      Sons, 15 AD2d 730; Lichtyger v Franchard Corp., 18 NY2d 528.) II. Assuming that respondents have proven a defense to the enforcement of the notes, such defense is not available as against a holder in due course. (First Nat. Bank of Odessa v Fazzari, 10 NY2d 394.) III. Assuming that the indorsement of the limited partnership was unauthorized within the meaning of section 3-404 of the Uniform Commercial Code, appellant should still recover payment on the notes from respondents. IV. Appellant should be awarded reasonable and adequate counsel fees as provided for by the terms of the notes. (Kahn v Ronson, 72 Misc 2d 551; McAvoy v Harron, 26 AD2d 452.)

      Frank A. Aloi for respondents.
    I. The note pledge by Stanndco to Chemical Bank was not authorized in the limited partnership agreements, was contrary to law and thus "illegal”, and as such was and is a complete real defense to the notes regardless of whether Chemical Bank is a holder in due course. (Newburger, Loeb & Co. v Gross, 563 F2d 1057; Chemical Bank of Rochester v Ashenburg, 94 Misc 2d 64.) II. Respondents established the defense of want and/or failure of consideration against Chemical Bank. (Marston v Swett, 66 NY 206; 407 East 61st Garage v Savoy Fifth Ave. Corp., 23 NY2d 275; Frenchman & Sweet v Philco Discount Corp., 21 AD2d 180; Mansion Carpets v Marinoff, 24 AD2d 947; Pugatch v David’s Jewelers, 53 Misc 2d 327; Long Is. Trust Co. v International Inst. for Packaging Educ., 38 NY2d 493; Cranesville Block Co. v Pentagon Constr. Co., 51 AD2d 610; McAbee v Keen, 21 AD2d 740; Rafkin v Continental Diamond Mines, 19 AD2d 615.) III. The defense of fraud in the factum was established in the proof for and on behalf of makers Sherwood and Giliotti and as such is a complete defense against Chemical Bank regardless of whether Chemical Bank is a holder or a holder in due course. (First Nat. Bank of Odessa v Fazzari, 10 NY2d 394; Pioneer Credit Corp. v Bon Bon Cleaners Corp., 38 AD2d 743.) IV. On the facts of the instant case, Chemical Bank is not a holder in due course. (City of New York v Nic Homes, 44 Misc 2d 440; Securities Inv. Co. v Maxwell, 131 Misc 160, 224 App Div 872; Colonial Discount Co. v Rumens, 249 App Div 736, 274 NY 612; Broad & Lackawanna Realty Co. v Breitung, 239 NY 154; Vosburgh v Diefendorf, 119 NY 357; Sabine v Paine, 166 App Div 9; Heinbach v Doubleday, Page & Co., 130 App Div 34; Pellegrino v First Nat. Bank of Newark, 210 App Div 584; Title Guar. & Trust Co. v Pam, 192 App Div 268; German-American Bank of Rochester v Cunning

      ham, 97 App Div 244.) V. With the establishment of the defenses of illegality, breach of fiduciary duty and failure of consideration, it was incumbent upon Chemical Bank to go forward with proof of its alleged status as a holder in due course. Chemical Bank failed to sustain that burden. VI. The court below properly vacated the award of attorney’s fees to Chemical Bank by the trial court. Since Chemical Bank was not entitled to collect the partnership note amounts negotiated by Stanndco for its own account, Chemical Bank had no right to attorney’s fees for collection. VII. Even if Chemical Bank prevailed in its efforts to collect on the notes, its testimony on the question of attorney’s fees as an expense of collection was insufficient as a matter of law. The award of $6,475 by the trial court was improper as a matter of law. (Soffer v Glickman, 27 Misc 2d 721; Matter of Singer v Korda & Co., 41 Misc 2d 785; Gorman v Kings Mercantile Co., 36 Misc 2d 38; Matter of Thompson v Chemical Bank, 84 Misc 2d 721.) VIII. On the issue of attorney’s fees, it is within the court’s discretion to deny an award of fees where it would be inequitable to impose them on a party, and, further, where the party has failed to demonstrate that the fees not only have been incurred but also have been paid. (Quaker Oats Co. v Burnett, 289 F Supp 283.)
   OPINION OF THE COURT

Wachtler, J.

The issue on this appeal is whether the plaintiff Chemical Bank of Rochester (Chemical) acquired the status of a holder in due course as to several notes executed by defendants Paddy Chayefsky, John Haskell, Halsey F. Sherwood and Arthur Giliotti. The trial court held in these three related cases, that Chemical was a holder in due course and in that capacity took the notes free of all defenses raised by the makers. The Appellate Division reversed, based on its conclusion that Chemical did not act in good faith in purchasing the notes. Chemical appeals.

In 1972 defendants became involved in the organization of a limited partnership, Quarry Square Associates (Quarry), for the purpose of developing an apartment complex in Buffalo, New York. Stanndco Developer’s, Inc. (Stanndco), and David J. Quigley, among others, were general partners in the enterprise. The defendants, among others, were limited partners who . made capital contributions to the partnership by execution of the notes in issue on this appeal.

In 1973 Quigley approached T. Richard Olney in an attempt to borrow money using the notes as collateral. Olney, who at the time was an officer of Chemical’s predecessor, the State Bank of Hilton (State Bank), declined to enter a debtor-creditor relationship with Stanndco, but offered instead to buy the notes outright. Stanndco agreed to the transfer for a discount on their face value. On May 25, 1973, the transaction was consummated by Stanndco, through its agent Quigley, and acting as general partner of Quarry, indorsing the notes to itself as an individual, and then indorsing the notes to the State Bank of Hilton. In return, State Bank drew a check for $274,390 to the order of Stanndco. It is noteworthy that this check was not drawn to the order of Stanndco as general partner of Quarry, nor did it otherwise indicate that Stanndco was to be handling the funds in a representative capacity. On July 26, 1973, Chemical notified the makers that it had become a holder of the notes. The makers did not respond, and the first payments under the notes were made on schedule by all except Haskell during December, 1973. By February, 1974, however, Quigley and Stanndco had filed in bankruptcy. Chemical then sued Haskell on his notes and Chayefsky sued Chemical on behalf of himself and the other limited partners seeking, inter alia, to prevent Chemical from attempting to collect on the paper. Sherwood and Giliotti brought an action similar to Chayefsky’s and seeking the same relief. The bank counterclaimed in the suits by the makers, and, because the three cases presented similar issues, they were tried together.

In order for Chemical to recover it first had to establish its status as a holder of the notes. This it did by production of the notes in its possession, which had been transferred to Chemical by another holder with all necessary indorsements (Uniform Commercial Code, § 1-201, subd [20]; § 3-202, subd [1]). There is no merit to the argument by defendants that Chemical cannot be a holder because Stanndco had no actual authority to indorse the instruments for nonpartnership purposes (cf. Uniform Commercial Code, § 3-404). The code contemplates that it is possible for a person to have the power to indorse an instrument even though the signing is beyond actual authority, if the signer is clothed with apparent authority (see Uniform Commercial Code, § 3-207; McKinney’s Cons Laws of NY, Book 62 Vi, Uniform Commercial Code, § 3-403, official comment No. 1). Clearly, as the organizer and managing general partner for Quarry, Stanndco had at least apparent authority to deal with negotiable instruments which were the property of the partnership. Thus; as a holder, Chemical is entitled to recover unless the makers established a defense (Uniform Commercial Code, § 3-307, subd [2]). Several have been alleged, including fraud, failure of consideration, and breach of fiduciary duty, all arising out of the activities of Stanndco. The makers contend that as a transferee of Stanndco, Chemical, too, is subject to these defenses (see Uniform Commercial Code, §§ 3-201, 3-306). However, even assuming their validity, these defenses, none of which, incidentally, are even colorably of the real defense variety, they are to no avail, because Chemical has established itself as a holder in due course (Uniform Commercial Code, § 3-305).

A holder in due course is a holder who takes an instrument (1) for value, (2) in good faith, and (3) without notice that it is overdue or has been dishonored or of any defense or claim against it on the part of another (Uniform Commercial Code, § 3-302, subd [1]). There is no question that value was given for the notes in question. Nevertheless, the Appellate Division did not deem Chemical a holder in due course because that court considered the facts and circumstances surrounding the negotiation of the notes to Chemical as sufficiently indicative of irregularities so as to put Chemical on inquiry as to the purposes for which Stanndco was acting. We disagree.

The conclusion of the Appellate Division concerning Chemical’s duty to inquire raises important questions as to the meaning of the terms "in good faith” and "without notice” as used in section 3-302. Good faith under the code is defined as "honesty in fact in the conduct or transaction concerned” (Uniform Commercial Code, § 1-201, subd [19]) and it is clear that the draftsmen intended that this language set a subjective and not objective standard. In fact, so that no confusion would persist on this score, a proposed draft of section 3-302 which explained good faith in terms related to commercial reasonableness was amended to delete the offending language (White and Summers, Uniform Commercial Code [2d ed], § 14-6, p 563; 1954 Report of NY Law Rev Comm, vol 1, pp 203-205). Thus, the inquiry is not whether a reasonable banker in Chemical’s position would have known, or would have inquired concerning the alleged breach by Stanndco of its partnership duties, but rather, the inquiry is what Chemical itself actually knew. If Chemical did not have actual knowledge of some fact which would prevent a commercially honest individual from taking up the instruments, then its good faith was sufficiently shown (see 1955 Report of NY Law Rev Comm, vol 2, pp 906-907).

A similar problem is presented on the issue of whether Chemical had notice of claims or defenses on the notes. Notice is defined for the code generally in section 1-201 (subd. 25) which states: "A person has 'notice’ of a fact when (a) he has actual knowledge of it; or (b) he has received a notice or notification of it; or (c) from all the facts and circumstances known to him at the time in question he has reason to know that it exists.”

Arguably, were paragraph (c) of subdivision (25) to be applied to determine whether a holder has taken an instrument "without notice * * * of any defense * * * or claim” (Uniform Commercial Code, § 3-302, subd [1]), an objective or reasonable person standard would be appropriate. However, section 1-201 also states that its definitions are "[sjubject to additional definitions contained in the subsequent Articles of this Act which are applicable to specific Articles or Parts thereof, and unless the context otherwise requires”.

We therefore examine the explanation of notice provided in article three, which states in specific reference to notice of a claim or defense that: "the purchaser must have knowledge of the claim or defense or knowledge of such facts that his action in taking the instrument amounts to bad faith.” (Emphasis added.) (Uniform Commercial Code, § 3-304, subd [7].) It is important to note that this subdivision speaks in terms of "knowledge” and not the "reason to know” language used in subdivision (3) of the same section. This is a meaningful distinction because "knowledge” under the code means "actual knowledge” (Uniform Commercial Code, § 1-201, subd [25]). Moreover, subdivision (7) of section 3-304 was added by New York to the 1962 Official Text of the code in order to make clear that the subjective test, applicable in this State even before the enactment of the code was intended to be continued (1962 Supp Report on the Uniform Commercial Code, NY Comm on Uniform State Laws,* pp 6-7; see Hall v Bank of Blasdell, 306 NY 336).

In applying the above principles to the facts at bar, we hold that Chemical sustained its burden of establishing itself as a holder in due course. Chemical’s president, Olney, testified that he "was aware of no defense”, and that as far as communication with the makers indicating the existence of defenses was concerned, there was "none whatsoever”. In no way is this testimony directly controverted. On the contrary, the fact that when the makers were notified of the transfer they never communicated to Chemical the difficulties now argued, indicates that they, too, were unaware of any defenses. It is unreasonable to expect in this situation that Chemical foresee improprieties in the underlying transaction which would later be disclosed. The State’s interest in free flow of commercial paper does not tolerate the placing of such a burden on banks acting in good faith.

The most that can be said of the testimony offered to controvert Chemical’s position is that it indicated suspicious circumstances which might well have induced a prudent banker to investigate more thoroughly than did Chemical before taking the notes. However, as has been previously indicated, this is not enough. Chemical was not bound to be " 'alert for circumstances which might possibly excite the suspicions of wary vigilance’ ” (Hall v Bank of Blasdell, 306 NY 336, 341, supra). There was no obligation on Chemical, as a purchaser of negotiable paper, to investigate the financial position of its transferor, or the progress of the underlying construction project. The failure of Chemical to take steps to insure that Stanndco was negotiating the instruments for partnership purposes or the fact that correspondence sent to Chemical was written on Stanndco stationery do not, in and of themselves, indicate impropriety. Nor did the fact that the notes were purchased at a discount, or that Chemical drew the check by which it purchased the drafts to the order of Stanndco and not Quarry, or the other factors incidental to the transaction, indicate in any substantial way a misuse of funds or constitute notice of misappropriation. Stanndco was a general partner vested by the limited partners with broad managing powers, and if misdealings originating in that delegation created a loss, the loss should not fall on those who dealt with Stanndco in good faith, but on those who provided the opportunity for misappropriation. There was no testimony that Chemical had any knowing part in the alleged misappropriation and, in fact, Chemical had reason to believe that Stanndco was acting for a partnership purpose at the time that it sold the notes and received the proceeds.

Accordingly, the orders of the Appellate Division should be reversed, and the case remitted to Supreme Court, Monroe County, for a determination of amounts of plaintiff’s attorney’s fees, and for the entry of judgments for the amounts due on the notes together with attorney’s fees in favor of appellant Chemical Bank of Rochester.

Chief Judge Cooke and Judges Jasen, Gabrielli, Jones, Fuchsberg and Meyer concur.

Orders reversed, with costs, and the case remitted to Supreme Court, Monroe County, for further proceedings in accordance with the opinion herein.

      . Defendants Sherwood and Giliotti did attempt to allege fraud in the factum concerning the procurement by Stanndco of their notes, but both Trial Term and the Appellate Division found — and we agree — that this allegation was wholly unsupported, there being no proof that Sherwood and Giliotti did not understand the nature of the instruments they signed.

      . In this respect, of course, section 1-201 clarifies, and is in no way inconsistent with section 3-304.


author:
      Per Curiam.
     Gabrielli, Jones and Wachtler, JJ.

text:
    In the Matter of Marie B. Bush, Respondent, v George D. Salerno et al., Respondents, and George R. Arney, Appellant.
    Argued September 3,1980;
    decided September 5,1980

      POINTS OF COUNSEL

      John M. Owens for appellant.
    I. The court lacked jurisdiction since the specifications were not filed within six days of the general objections. (Matter of Reis v Cohen, 240 App Div 854, 262 NY 705; Matter of Richter v Thaler, 33 Misc 2d 290; Matter of Margolis v Larkin, 39 AD2d 951, 30 NY2d 876.) II. Petitioner’s expert witness was erroneously permitted to render an opinion absent the court’s proper determination of his qualifications. (Anderson v Rome, Watertown & Ogdensburgh R. R. Co., 54 NY 334.) III. The testimony from the examination before trial should not have been admitted. (Adamo v Kirsch Beverages, 80 Misc 2d 369; Nicholas v Island Ind. Park

      of Patchogue, 46 AD2d 804.) IV. The court below erred in shifting the burden of proof to respondent to establish that certain petition sheets were valid. (Matter of Civilette v Caccamise, 42 AD2d 1026; Schwartz v De Sapio, 9 AD2d 756; Matter of Burns; 199 Misc 1005, 278 App Div 1023.) V. The court should have allowed respondent to validate certain signatures which had been invalidated by the State Board of Elections. (Matter of Suarez v Sadowski, 48 NY2d 620.) VI. The petition sheets on which there was no evidence of irregularity should not have been invalidated. (Matter of Martano v Verdi, 32 NY2d 838; Matter of Quinones v Bass, 45 NY2d 811.)

      Thomas J. Spargo for Marie Bush, respondent.
    I. The objections and specifications of objections were timely filed with the State Board of Elections. II. The testimony of certain witnesses taken at an examination before trial was properly introduced into evidence. III. Appellant made no specific pleading in his answer to validate any signatures invalidated by the State Board of Elections. (Matter of Suarez v Sadowski, 48 NY2d 620.) IV. Petitioner established by a fair preponderance of the evidence that the questioned sheets were not properly authenticated and had been routinely and systematically altered after being submitted by the witnesses directly or indirectly to Donna Chittenden or Barbara Whitehead. (Matter of Perfetto v Doering, 28 AD2d 810; Matter of White v McNab, 40 NY2d 912; Matter of Marcatante v Lundy, 4 AD2d 883, 3 NY2d 913.)
   OPINION OF THE COURT

Per Curiam.

The courts below were without jurisdiction to pass upon the petition to invalidate the petition designating George R. Arney as a candidate for the Republican Party nomination for the office of State Senator, 52nd Senatorial District, because the specifications of objection to the petition were not filed within six days after the general objection was filed. The order of the Appellate Division should, therefore, be reversed and the proceeding dismissed and the State Board of Elections directed to place appellant’s name on the appropriate ballots.

The papers before us establish that Marie Bush by letter dated July 28, 1980, mailed to the State Board of Elections in an envelope postmarked July 28, 1980 and received by the board on July 31, 1980, objected generally to the Arney designating petition, and that by letter dated August 4, 1980, mailed in an envelope postmarked August 5, 1980 and received by the board on August 7, 1980, specifications of the objections were filed by Ms. Bush. While we have no transcript of the proceeding before the Trial Judge, there not being time for transcription, the parties have stipulated on argument before us that an objection to jurisdiction on the ground that the specifications had not been timely filed was made and was overruled by the Trial Judge. The Appellate Division briefs show that the point was argued there as well: We conclude that in failing to dismiss on jurisdictional grounds the courts below erred.

There can be no question that the failure to file specifications within six days after the filing of general objections is jurisdictionally fatal. Subdivision 2 of section 6-154 of the Election Law, both before and after the amendments effective December 1, 1978, expressly provided: "When such an objection is filed, specifications of the grounds of the objections shall be filed within six days thereafter * * * and if specifications are not timely filed, the objection shall be null and void.” Moreover, we have held under prior versions of the Election Law that the failure is jurisdictional (Matter of Maneiro v Northrup, 34 NY2d 963, 964; see Matter of Kavesh, 247 App Div 175; 18 NY Jur, Elections, §§ 375, 385).

Determination of when the six-day period begins to run thus turns on when the general objection is filed. Subdivision 1 of section 1-106 of the Election Law provides that "All papers sent by mail in an envelope postmarked prior to midnight of the last day of filing shall be deemed timely filed and accepted for filing when received” and also that "If the last day for filing shall fall on a Saturday, Sunday or legal holiday, the next business day shall become the last day for filing.” Petitioner argues that the words "accepted for filing when received” require the conclusion that her objections were filed on July 31 when received rather than on July 28 when mailed. The history of the first quoted sentence shows the contrary. Prior to the revision of the Election Law by chapter 233 of the Laws of 1976 the first quoted sentence read "All papers sent by mail in an envelope postmarked prior to midnight of the last day of filing shall be accepted for filing when received,” the words "deemed timely filed and” being inserted after "shall be” by chapter 233. Thus, prior to the 1976 amendment the sentence required acceptance when received as filed prior to the last day for filing, provided the envelope bore the required postmark. The use of the words "deemed timely filed” (italics supplied) in the 1976 amendment makes doubly clear that the filing referred to is on the postmarked date prior to the last day for filing, for if the actual receipt constituted the date for filing there would be no need to "deem” the filing timely; it would be timely because the statute expressly permitted late filing not because its filing was related back to the last day for filing by "deeming” it timely filed.

The rule for which petitioner contends would result in a multiplicity of filing deadlines and render meaningless the requirement of subdivision 2 of section 6-154 that specifications be filed within six days after objections. By the simple process of mailing his general objection the objector could extend his time to file specifications by the number of days between the mailing to and the receipt by the board of his general objection. Yet there is no need for such an extension, for an objector knows when he filed his general objection, and thus when his time to file specifications begins to run. Petitioner’s construction of the filing requirement could conceivably more than double the time for filing specifications depending on what the delay in mail delivery in a particular case happened to be.

That such was not the legislative intent is clear from the legislative history discussed in our decision in Matter of Carr v New York State Bd. of Elections (40 NY2d 556). In that case certificates of nomination for judicial office were filed 10 hours late. We reversed the Appellate Division’s order affirming the judgment of Special Term requiring the board to accept the certificate and dismissed the petition. In doing so we noted the prior judicial practice of permitting such errors to be corrected notwithstanding the mandatory language of the sentence in question, then part of section 143 of the Election Law. We then quoted from the Department of State memorandum concerning the 1969 amendment to the subdivision (NY Legis Ann, 1969, pp 249-250) the following language:

"The purpose of the election time-table is to establish an orderly progression of events culminating in the election of candidates to public office or party position. The mandatory nature of the provisions of the Election Law relating to the time for filing establishes the rules of the game, which should be applied to all with equal effect.
"The Legislature, in making the time limitations for filing mandatory, intended that such provisions be construed strictly. A liberal construction of such provisions would diminish their effect, resulting in confusion and inequality.
"The purpose of this bill is to overcome the trend of recent court decisions which have had the effect of impairing the mandatory nature of the time-table.
* * *
"It is therefore of paramount importance that it be made crystal clear that the time limitations for filing are mandatory”

and concluded that (40 NY2d, at p 559): "Section 330 of the Election Law vests jurisdiction in the Supreme Court to summarily determine any question of law Or fact arising in respect to the nomination of any candidate, same to be construed liberally and with a direction to courts to make such order as justice may require. These provisions, however, do not permit a court to ignore the statutory mandate of subdivision 12 of section 143 of the Election Law, since the explicit language of the later statute control over the general words of the earlier enactment (Gwynne v Board of Educ., 259 NY 191, 197; East End Trust Co. v Otten, 255 NY 283, 286), this being especially so in this instance where it is apparent that the Legislature enacted the later statute to make 'the time limitations provided therefor absolute and not a matter subject to the exercise of discretion by the courts.’ ”

Petitioner argues further that to hold that filing occurs on the date of mailing rather than the date of receipt may make it possible to forestall objection by simply filing a petition by mail in the hope that the three days in which to file a general objection will have run before the petition is received by the board. The short answer is that that situation is not before us. Moreover, Matter of Pell v Coveney (37 NY2d 494) suggests a remedy where it appears that the late receipt by the board of the petition has made it impossible for an objector to file his general objection within the required three-day period after filing, and, of course, the Legislature, if it sees fit to do so, may obviate the problem by amending either or both of the subdivisions in question. Whatever the solution to that problem may be, it constitutes no reason to ignore the specific legislative direction in section 6-154 as now worded that the grounds of objection be filed within six days after the general objection.

Since petitioner’s time to file her specifications began to run on July 28, 1980 when her general objection was mailed, her six days to file specifications expired on August 3, 1980. That, however, having been a Sunday, her time to file was extended by the second sentence quoted above to the next business day, August 4. In fact, however, as noted above, she mailed her specifications on August 5 and they were received August 7.

The specifications not having been timely received, the general objection was "null and void” (Election Law, § 6-154, subd 2) and the court was without jurisdiction to entertain the petition. It follows that the order of the Appellate Division should be reversed and the petition should be dismissed, with directions to the State Board of Elections as above noted.

Gabrielli, Jones and Wachtler, JJ.

(dissenting). We dissent and vote to affirm the order of the Appellate Division which determined that George R. Arney is not qualified to be a candidate for the primary election upon the ground that he has filed an insufficient number of valid signatures to permit him to be on the ballot. Special Term’s findings have been affirmed by an unanimous Appellate Division; and both courts below have determined that appellant Arney has an insufficient number of untainted signatures to qualify him as a candidate in the primary election to be held September 9, 1980. In effect, the majority holds that the State Board of Elections was without jurisdiction to entertain the objections to the Arney petitions, upon the ground that the specifications mailed and filed pursuant to law by the objector arrived at the Board of Elections on the seventh day following receipt by the board of the original objections.

Although the question of lack of jurisdiction was unanimously rejected by both courts below and, further, although the jurisdiction question was not fully briefed the majority has, nevertheless, reversed on this ground. In doing this they have validated petitions which although accepted by the Board of Elections were found by the lower courts, also with unanimity, to be tainted by "a general scheme or method of operation” which resulted in changes being made on the petitions after the subscribing witnesses had executed their statements.

The objector, in bringing these irregularities to the attention of the Board of Elections, was following a procedure which, as we have been advised by counsel, has long been accepted by the Board of Elections. Indeed, in this very case, the board advised the objector by mail to follow this procedure. Unfortunately, the critical issue has not been briefed as fully as would have been desirable and was reluctantly pursued by the parties and in the twilight hours shortly before the primary election.

More important they have invalidated a procedure long followed, as we are advised, by the Board of Elections heedless of the consequences and without allowing sufficient time to consider the consequences or to hear from the agency whose responsibility it is to administer the Election Law throughout the State. This is jurisprudentially unsound.

We cannot concur in the disposition reached by the court today. Based upon solid jurisprudential authority and procedure, we would prefer to follow the precedent established in another election case in somewhat similar circumstances, namely, on reconsideration to recall our determination of September 2, 1980 and deny the application for leave to appeal (cf. Matter of Taylor v McNab, 40 NY2d 821). Stare decisis and sound judicial policy ought to require such a disposition. In that connection and dealing with an election law matter just one year ago, we took pains to elevate stare decisis to the position which it deserves (Matter of Higby v Mahoney, 48 NY2d 15). The principle is no less valid today.

The majority disposes of this case on a jurisdictional ground involving the interpretation of a statute of broad application throughout the entire field of election law, with potentially far-reaching ramifications. Although it is true that the proposition which the majority today adopts was advanced in both courts below, it was rejected without any writing at nisi prius and was not addressed by the Appellate Division. As stated, what has proved to be the determinative issue was not fully developed before our court.

On such argument we were informed that it has been the uniform practice of the State Board of Elections to interpret that sentence of subdivision 1 of section 1-106 of the Election Law which reads in part that "[a]ll papers sent by mail in an envelope postmarked prior to midnight of the last day of filing shall be deemed timely filed and accepted for filing when received” as prescribing that the date of . receipt of the mailing shall be the date of filing for purposes of computing periods of time thereafter within which related action under the Election Law is required to be taken. The record in this case discloses that on July 31, 1980 the Executive Director of the State Board of Elections advised Mary Bush, the objector in this case, that her objection to the designating petition of George R. Arney was received on July 31, 1980 and that "Specifications setting forth in detail the grounds of objections to said designation are required to be filed in this office no later than August 6, 1980.”

It may be that opportunity for deliberative consideration of the legislative history of this statutory provision, of the basis on which the State Board of Elections predicates its interpretation of the statute and of the practical consequences which may attend the court’s reading of the statute might possibly result in a varying interpretation. We are obliged to conclude, however, that the submission so far made to us provides the court with an insufficient jurisprudential basis on which to ground a considered determination, which is the obligation of this court. We are particularly handicapped by the circumstance that the State agency charged with responsibility for administration of the Election Law, a nominal party to the proceeding, has not furnished us with any expression of its views (cf. Matter of Howard v Wyman, 28 NY2d 434, 438). We are unwilling to overturn the interpretation placed on subdivision 1 of section 1-106 by the board upon the analysis tendered by the majority and without the benefit of such an expression by the board.

Nonetheless, and in view of the holding by the majority, we are required to proceed with what we each perceive to be the legal conclusions to be reached based upon the relevant statute and the papers submitted to us.

It is not and, indeed, cannot be disputed that objections were properly posted and mailed on July 28, 1980; that in accordance with the provisions of subdivision 2 of section 6-154 of the Election Law, these objections were accepted for filing on July 31, the date when they were received by the Board of Elections; that the required specifications were duly mailed by the objector on August 5 and were received by the Board of Elections on August 7.

No persuasive authority or precedent is cited to sustain the analysis offered by the majority. Indeed, none is available to them for the statutes governing these procedures and, indeed, the directive of the State Board of Elections to the objector unmistakenly and clearly provided that specifications were "required to be filed * * * no later than August 6, 1980”.

Section 1-106 of the Election Law provides, in pertinent part, that all papers required to be filed which are "sent by mail in an envelope postmarked prior to midnight of the last day of filing shall be deemed timely filed and accepted for filing when received” (emphasis added). Put another way, papers are timely filed if postmarked prior to the expiration of the appropriate time period, but they are deemed to be actually filed for purposes of triggering time periods for subsequent filings on the date they are received, as clearly stated in the statute. Here the specifications were timely filed within the period prescribed by section 6-154 of the Election Law, they having been postmarked on August 5, but five days after the filing of objections on July 31.

Parenthetically, if section 1-106, applicable to all filings under the Election Law, is read to hold that papers are deemed actually filed on the day they are postmarked and then if the mail is delayed in delivery, the majority’s holding would or could well require that objections may have to be filed before the petitions are even seen by a potential objector. For example, section 6-154 requires that objections must be filed within three days of the "filing” of the petitions, and specifications must be filed within six days of the filing of objections. Upon the analysis of the majority, if the mail is delayed beyond three days, then objections would be required to be filed before the objector had any opportunity to view the material he was objecting to. Obviously, the Legislature could not have intended and indeed did not intend that an objector be expected to specify grounds for invalidating a petition before he was even given an opportunity to see the petition. This is precisely the problem the Legislature intended to prevent in its use of the words "when received” in section 1-106.

Section 1-106 of the Election Law also provides for filing of objections to petitions and/or specifications for the City of New York. We take pains to point out that the statute, for papers to be filed in New York City, specifically requires that papers "must be actually received by such city board of elections on or before the last day to file any such petition, certificate or objection”. It must be, and indeed is evident that had the Legislature intended that in the areas outside of the city specifications be actually received within six days of the filing of objections, the statute would have clearly so stated. The Legislature, for good and valid reasons, determined that the filing requirements for rural and up-State areas be governed by the quoted provisions of section 1-106 declaring that these documents, when filed as in this case, "be deemed timely filed and accepted for filing when received”.

The correct interpretation of section 1-106 and the appropriate time constraints in section 6-154 is vividly explained and documented by the directive of the State Board of Elections, sent to the objector in this case — your specifications must be filed within six days after our receipt of your objections.

The State Board of Elections is the agency (Election Law, § 3-100) which by statute is mandated and delegated to supervise the filings of all petitions, objections and specifications (Election Law, § 3-102, subd 1). Subdivision 1 of section 3-102 empowers the board to "issue instructions *' * * relating to the administration of the election process”. The clear interpretation by the board as noted in the directive and instructions in the above-quoted letter comports with legislative intent as previously noted. Importantly, not only is this directive by the board a correct interpretation of time limitations but, even if it were not we must also recognize that this explicit official notification led, or could have led, the objector to file the papers as she did in this case.

The majority unrealistically dismisses the problem of objections and specifications becoming due before the petition leaves the mailman’s hands. They suggest that the problem need not be considered because it is not before us today and because the Legislature could obviate the problem. We believe this could create a dangerous precedent. As the dissenter in another case suggested, the increasing demands upon a legislator’s time, the fact that a majority within a Legislature may have no opinion, and the realities of the legislative process militate against our relying on the Legislature to correct by piecemeal amendment an "erroneous decisional interpretation of an isolated section” (see Matter of Higby v Mahoney, 48 NY2d 15, dissenting opn, at p 28, supra).

For all the foregoing reasons, the order of the Appellate Division should be affirmed.

Chief Judge Cooke and Judges Jasen, Fuchsberg and Meyer concur in Per Curiam opinion; Judges Gabrielli, Jones and Wachtler dissent and vote to affirm in a memorandum.

Order reversed, without costs, the petition** dismissed and the State Board of Elections directed to place appellant’s name on the appropriate ballots.

       The dissent requires that we observe (1) that Matter of Taylor v McNab (40 NY2d 821) has no bearing on a jurisdictional question, (2) that the State Board of Elections is a party to this proceeding, but has not seen fit to appear and argue (cf. Matter of Butler v Hayduk, 37 NY2d 497, 499), (3) that the court in Matter of Higby v Mahoney (48 NY2d 15, 21, n 3) explicitly rejected the “novel proposition” that the need for “deliberative” consideration distinguished election cases from cases of other types as precedents, (4) that the parties have stipulated that the Trial Judge ruled on the jurisdictional objection from the bench, and (5) that the Board of Election’s error in its letter of July 31, 1980 is simply irrelevant since it cannot by interpretation expand the command of the statute. Matter of Farrell v Morton (268 NY 622) is exactly in point on the last observation.


author: Wachtler, J. Jones, J.

text:
    The People of the State of New York, Respondent, v John Lloyd, Appellant.
    Argued September 5, 1980;
    decided October 9, 1980

      POINTS OF COUNSEL

      Barry Gene Rhodes for appellant.
    I. At a trial where two defendants are represented by a single attorney, neither a perfunctory examination by the presiding Judge on the issue of joint representation nor a statement by the lawyer that a member of his firm discussed the matter with defendants constitutes a knowing and intelligent waiver of independent, conflict-free counsel. The examination must bethorough, particularly where the presiding Judge perceives a conflict of interest. (Glasser v United States, 315 US 60; Holloway v Arkansas, 435 US 475; People v Macerola, 47 NY2d 257; People v Gomberg, 38 NY2d 307; People v Gonzalez, 30 NY2d 28, 409 US 859; People v Reason, 37 NY2d 351; United States v Lawriw, 568 F2d 98; United States v Mahar, 550 F2d 1005; Abraham v United States, 549 F2d 236; United States v Carrigan, 543 F2d 1053.) II. Since there was an inadequate waiver on the issue, and the interests of appellant and the acquitted codefendant conflicted, there should be a new trial. (United States v Mandell, 525 F2d 671, 423 US 1049; People v Macerola, 47 NY2d 257; Lollar v United States, 376 F2d 243; Holloway v Arkansas, 435 US 475; Glasser v United States, 315 US 60; People v Gomberg, 38 NY2d 307.) III. The instructions to the jury on intent impermissibly shifted the burden of proof on that issue to defendant. (People v Patterson, 39 NY2d 288, 432 US 197; People v Bennett, 29 NY2d 462; People v McLucas, 15 NY2d 167.)

      John J. Santucci, District Attorney (Deborah Carlin Stevens of counsel), for respondent.
    I. Appellant knowingly waived his right to separate representation at trial on two occasions after sufficient inquiry. Moreover, no conflict of interest existed between appellant and his codefendant. (Glasser v United States, 315 US 60; People v Gonzalez, 30 NY2d 28; People v Gomberg, 38 NY2d 307; United States v Carrigan, 543 F2d 1053; People v Macerola, 47 NY2d 257; People v Coleman, 42 NY2d 500; Salomon v La Vallee, 575 F2d 1051; United States v De Berry, 487 F2d 448; United States v Vowteras, 500 F2d 1210; United States v De Fillipo, 590 F2d 1228.) II. The court’s charge on intent was proper. (People v Robinson, 36 NY2d 224; People v Patterson, 39 NY2d 288, 432 US 197; Cupp v Naughten, 414 US 141.)
   OPINION OF THE COURT

Wachtler, J.

On this appeal by the defendant from an order affirming his conviction for assault, the primary question is whether the trial court adequately advised the defendant of the potential conflicts of interest inherent in joint representation of the defendant and a codefendant by one attorney.

The defendant and his brother were jointly indicted and tried for attempted murder. At the trial they were both represented by the same attorney. However, before the trial commenced, the court informed the defendants and their attorney that "[tjhere could be a possibility of a conflict of interest, in that the first individual [the defendant] was on the scene, one of the brothers was there and then the other brother came at a later date.” The court indicated that it had "no objection if counsel and both defendants feel that there is no conflict of interest” and wished to continue the joint representation. In response to the court’s questions the defendant and his brother acknowledged that they understood what the court was saying, but that there was no conflict of interest between them and that they wished to continue with the joint representation.

After the jury selection had been completed, the court informed the defendants that they had the right to separate counsel and once again asked them if they wished to continue with the joint representation. The defendants however repeated their intention to continue with the joint representation. The defendants’ attorney also informed the court that the possibility of a conflict had been fully explained to the defendants. On inquiry by the court the defendants acknowledged that they understood.

At the trial the People submitted evidence that the defendant and his brother had severely beaten Sal La Micela on an Astoria street in March of 1977. According to the People’s witnesses the incident began when the defendant, John Lloyd, followed a girl who had refused to take a ride with him. When La Micela, who was acquainted with the girl, approached the defendant, the defendant got out of his car and beat La Micela with a long stick or bat, kicked him when he fell and then proceeded to smash the windshield of La Micela’s car. The defendant’s brother, who happened to be walking a dog nearby, joined the defendant and also hit and kicked La Micela.

The defendant, on the other hand, testified that he had acted out of self-defense. Both the defendant and his brother testified that the brother did not arrive until the fight was nearly over and that the brother took no part in the beating. The jury found the defendant guilty of assault but found his brother not guilty.

The defendant now claims that the court’s pretrial inquiry was not sufficiently thorough to assure that the defendant knowingly and intelligently waived his right to separate counsel. He urges that the court should have explained in detail the potential conflict of interest in this particular case, and should not have merely relied upon the statement by defendants’ counsel that this had been done.

An attorney must, of course, realize and inform his client of any potential conflict of interest (People v Gomberg, 38 NY2d 307, 314). And, in this State, the Trial Judge also has an independent obligation to insure that two or more defendants represented by the same attorney are aware of the potential risks involved in joint representation (People v Macerola, 47 NY2d 257, 263; but see Cuyler v Sullivan, 446 US 335). Generally, however, the court’s inqiry need not be as thorough or as detailed as that required of the attorney. First, prior to trial, when the inquiry should be made, the court may not be fully aware of the evidence, the nature of the defendants’ case or its ramifications (People v Gomberg, 38 NY2d 307, 314, supra). Secondly, and more important, to require the defendant or his attorney to disclose to the court details of the defense, defense conferences, or strategy would in itself invade the defendants’ rights, including the right to counsel (People v Gomberg, supra, p 313).

The argument that the court should be required' to explain in detail any potential conflict of interest with specific reference to the facts or. posture of the particular case was recently and unsuccessfully made in People v Ortiz (49 NY2d 718). In Ortiz, the Trial Judge did no more than advise the defendants in general terms that the joint representation by a single attorney presented the possibility of a conflict of interest during trial. In that case we noted that the court had fulfilled its obligations under the Gomberg and Macerola cases when, as in the case now before us, it "specifically alerted defendant to the possibility that a conflict of interest might flow from joint representation of defendant and a codefendant by the same attorney * * * informed defendant of his right to separate counsel” and was assured by the defendant that he wished to continue the joint representation.

In sum, although a court confronted with two or more defendants represented by one attorney must personally address the defendants to ascertain whether each "has an awareness of the potential risks involved in that course and has knowingly chosen it” (People v Gomberg, supra, pp 313-314; People v Macerola, supra, p 263), there is no prescribed format or catechism that the court must follow (cf. People v Nixon, 21 NY2d 338, 353). Because the exact nature of the defense and particularly defense strategy must remain off limits to the court the extent of the precautions to be taken by the trial court to insure that the defendants perceive the risk inherent in joint representation must necessarily involve a measure of discretion.

Since we conclude that the trial court’s inquiry of the defendant and his counsel as to possible conflict of interest was sufficient to protect defendants’ right to effective assistance of counsel, the order of the Appellate Division should be affirmed.

Jones, J.

(dissenting). Because the decision of the majority in this case marks a significant departure from our recent writings and because the responsibility of the Trial Judge in cases involving joint representation should be made clear I am obliged to dissent.

This case presents the latest in a series of recent cases in which we have been called on to determine whether a defendant has been deprived of his constitutional right to effective assistance of counsel by reason of the fact that he and his codefendant have been represented by the same attorney. This defendant and his brother were represented by a single attorney at the trial of an indictment charging them, while acting in concert, with attempted murder in the second degree and assault in the first degree. Defendant was convicted of assault, first degree, and his brother was acquitted.

As the majority accurately states, the trial court expressly informed the two defendants both of the fact that there was the possibility of a conflict of interest and that such possibility arose from the circumstance that defendant’s brother came on the scene at a point late in time. Also, the trial court was informed by defendant’s attorney that he had discussed the possibility of a conflict of interest with his attorney-father who "had spoken to both the defendants and then he related it onto me that everything was explained to them and the possibility of a conflict”. It is equally clear that both defendants indicated that it was their wish to proceed to trial with the same attorney, notwithstanding the possibility of a conflict of interest.

I had supposed that we had established the obligation of the trial court to ascertain on the record, before permitting defendants to proceed to trial with a single attorney, not only that each was aware of the possibility of a conflict in interest, but also that each "was cognizant of the potential risks inherent in the simultaneous representation of codefendants” (People v Macerola, 47 NY2d 257, 262; see People v Gomberg, 38 NY2d 307). In this instance, although the trial court expressly alerted the defendants to the fact that there existed the possibility of a conflict of interest, he did not himself explain the particulars or potential pitfalls of joint representation. The majority holds, however, that, in vievs) of the attorney’s statement, the trial court was required to go no further.

Very recently and subsequent to our decision in People v Ortiz (49 NY2d 718) on which the majority rely, we wrote, "[although the trial court may place some reliance on the statement by counsel that he has informed his clients of the pitfalls of joint representation and gotten their consent * * * such a statement alone does not relieve the trial court of the obligation 'independent of the attorney’s obligation’ * * * to probe the defendants’ awareness of the risks in the manner suggested by our discussion in Macerola. ” (People v Baffi, 49 NY2d 820, 822.) In this instance there was nothing other than the attorney’s conclusory statement on which the trial court could rely in the discharge of its . responsibility to defendant. Beyond confirmation that the defendants had been alerted to the fact' of possible conflict of interest, there could be no assurance that the details of the potential risks involved had been described to them or that they had each made an informed decision to proceed with a single attorney. The attorney’s discussion with his clients was related only in summary fashion; no particulars were furnished the court. Indeed, the fact that the attorney considered representation of one defendant by his partner-father and representation of the other by him an acceptable solution suggests that he himself máy not have fully perceived the essence of the right to independent representation.

We have indicated that a court may, in proper circumstances, rely at least to some extent on the participation of counsel in the protection of the rights of the defendant, as where, for instance, the court is satisfied that the attorney-client discussions alone or as supplemented by the court have adequately informed the defendant of the "pitfalls” and "potential risks”, as distinguished from the fact, of possible conflict of interest, and that the defendants have each made an informed decision. It is the obligation of the court, on the record, to make certain that the interests of the defendant have been adequately protected. The record in this case does not give the assurance that we have previously required.

The majority lays stress on the argument that to require the court to make certain that the defendant comprehends the particulars of the risks attending joint representation might result in an improper invasion of the confidentiality of the attorney-client relationship (p 111). We have noted that this is a consideration to be weighed by the trial court (People v Gomberg, 38 NY2d 307, 313, supra). Although the trial court should certainly be sensitive to the situation, the right to be free from improper intrusion is the defendant’s to assert. It ill becomes the prosecution to seek to justify what may have been a failure to protect the constitutional rights of the defendant on the ground that the defendant might not have wished to have such protection, particularly where, as here, the defendant is vigorously protesting that he was denied that very protection. A different situation would be presented if it appeared that the defendant opposed further inquiry by the trial court. There is nothing in the record here, however, to suggest that such was the cáse in this instance.

It would remain then, in my view, to be determined whether, there having been no sufficient discharge of the responsibility of the trial court, defendant has demonstrated "an actual conflict of interest 'or at least the significant possibility thereof ”. (People v Baffi, 49 NY2d 820, 822, supra.) It would only be in such event that defendant would be entitled to a new trial. While there is no proof in this case of actual conflict, I am satisfied that there existed a significant possibility of conflict.

There was proof that defendant had trailed and accosted a young lady as she walked to work in the early morning; that a passing friend responded to her request to be driven back home; that they were followed by defendant in his car; that when both cars stopped at a traffic light the other driver got out of his car and went back to defendant’s car; that defendant got out of his car with a bat or stick in his hand; that an altercation followed during the course of which defendant’s brother came out of his.house and joined the melee; that the other driver suffered fractures of the skull and wrists and that 19 sutures were needed to close his wounds. At trial defendant asserted the defense of justification and testified that his brother did not participate in the fight — testimony at variance with that of the victim and an independent eyewitness. It would seem that defendant should have been advised of the risk involved — that, while such testimony might exculpate his brother it would cast serious doubt on all his own testimony, including the credibility of his defense of justification. Any such advice, however, would have been adverse to the interests of the codefendant. The brother’s testimony related only to his own exculpation.

Whenever the active parts allegedly played by two defendants acting in concert in a single criminal transaction are different in nature, extent, origin and duration, and the strategies and tactics of their separate defenses may be different and even inconsistent, it must be concluded that there exists a significant possibility of prejudice to each when both are defended by the same attorney. This conclusion is not negated in this case by the fact that it appears that it was the brother rather than defendant whose interests were more likely to have been prejudiced or the circumstance that the verdicts demonstrate that the jury did differentiate as to the relative responsibilities of the two defendants.

For the reasons stated, I would reverse the order of the Appellate Division, vacate defendant’s conviction, and remit the case to Supreme Court for further proceedings on the indictment.

Chief Judge Cooke and Judges Jasen and Gabrielli concur with Judge Wachtler; Judge Jones dissents and votes to reverse in a separate opinion in which Judges Fuchsberg and Meyer concur.

Order affirmed.