author: Jasen, J. Simons, J.

text:
    Daniel E. Freitas et al., Appellants, v Geddes Savings and Loan Association, Respondent.
    Argued September 6, 1984;
    decided October 25, 1984

      POINTS OF COUNSEL

      Michael W. Harris for appellants.
    I. The “Commitment Fee” charged by defendant to plaintiffs to assure future financing constitutes interest within the meaning of General Regulations of the Banking Board (3 NYCRR 4.2 [a], 4.3). II. Defendant’s imposition of the 1% “Commitment Fee”, in addition to the charge of the maximum legal rate of interest on the funds loaned, totaled an interest charge to the borrowers which exceeded the maximum legal rate of interest. III. Defendant intended to charge, receive and continues to receive interest on funds loaned to plaintiffs at a rate in excess of that authorized by law. IV. The effect of a usurious transaction is the lender forfeiting the entire interest on the loan and refunding twice the interest already paid by the borrowers.

      Daniel F. Mathews, Jr., for respondent.
    I. The fee charged by the bank in connection with the building loan was not interest within the meaning of the regulations of the Banking Board. II. Section 380-e of the Banking Law requires an intent on the part of the lender to charge a rate of interest in excess of that allowed by law. (Condit v Baldwin, 21 NY 219; Brown v Robinson, 224 NY 301; Matter of Delmar Box Co. [Aetna Ins. Co.], 309 NY 60; Fiedler v Darrin, 50 NY 437; Matter of Dane, 55 AD2d 224; Hammond v Marrano, 88 AD2d 758; Angelo v Brenner, 90 AD2d 131; Matter of Jones v Berman, 37 NY2d 42; New York State Bridge Auth. v Moore, 299 NY 410; Matter of

      Erie County Water Auth. v Kramer, 4 AD2d 545, 5 NY2d 954.) III. The bank did not knowingly take, reserve or charge a rate of interest in excess of that allowed by law, in violation of section 380-e of the Banking Law. (Matter of Dane, 55 AD2d 224; Hammond v Marrano, 88 AD2d 758; Angelo v Brenner, 90 AD2d 131; Hammelburger v Foursome Inn Corp., 54 NY2d 580; Cusick v Ifshin, 70 Misc 2d 564, 73 Misc 2d 127; Leibovici v Rawicki, 57 Misc 2d 141, 64 Misc 2d 858; Giventer v Arnow, 44 AD2d 160, 37 NY2d 305; Brown v Robinson, 224 NY 301.)
   OPINION OF THE COURT

Jasen, J.

On this appeal, we are asked to decide whether a bank lender is civilly liable for usury, in the absence of usurious intent, solely on the basis of the failure to properly itemize an otherwise authorized bank charge.

On May 9, 1978, plaintiffs Daniel and Beverly Freitas submitted a formal mortgage application to defendant, Geddes Savings and Loan Association of Syracuse, New York, in order to finance the purchase of a modular home. The home was to be placed upon a lot in the Town of Camillus, which was a gift of the parents of Beverly Freitas to the couple. The mortgage application was for a conventional mortgage, with a term of 25 years, at an annual interest rate of 8.5%. Plaintiffs signed the mortgage application and paid a $50 appraisal fee and a $20 credit report fee.

On or about May 23, 1978, defendant mailed a letter of commitment to plaintiffs approving the mortgage application. The loan amount approved by defendant was $29,000 at an 8.5% annual interest rate, the maximum legal rate, at the time, for a duration of 25 years. Together with the letter of commitment was a request by defendant for a “[o]ne percent Commitment Fee of two hundred ninety dollars to be submitted with the acceptance of this commitment letter!” Plaintiffs forwarded a $290 check, and signed disclosure forms, to defendant on May 30, 1978. The loan was closed on August 24, 1978, at which time all parties were represented by independent counsel, and the funds were disbursed as directed by plaintiffs.

Subsequent to the closing, plaintiffs were advised that the $290 bank charge paid to defendant rendered the loan usurious, and plaintiffs commenced this action pursuant to section 380-e of the Banking Law seeking cancellation of the interest due upon the loan for the remaining 24 years of the mortgage and recovery of twice the interest paid. Plaintiffs argue that the bank charge was not itemized in accordance with General Regulations of the Banking Board so as to properly exclude the fee from the interest computation and, accordingly, the $290 fee renders the transaction usurious when added to the 8.5% annual rate of interest. Defendant explains that the fee, although incorrectly denominated as a “Commitment Fee”, was for additional services as authorized by the General Regulations of the Banking Board (3 NYCRR 4.3 [b] [7]) and that it did not knowingly charge a usurious rate of interest in violation of section 380-e of the Banking Law.

Plaintiffs’ motion for summary judgment at Special Term was denied. In denying summary judgment, the court held that a factual issue was raised as to the purpose of the $290 bank charge. After a nonjury trial, the court made two findings: that the $290 bank charge was not a subterfuge to collect illegal interest, and that the bank lacked usurious intent. However, the court went on to hold that the bank was not entitled to collect the $290 bank charge since it was not itemized in writing to the borrowers in accordance with banking regulations. Judgment for plaintiffs was rendered in the amount of $290, and an appeal was taken by plaintiffs. The Appellate Division, Fourth Department, affirmed the judgment of Supreme Court unanimously, without opinion. Leave to appeal was granted by this court.

A brief review of the legislative history of section 380-e of the Banking Law and the regulatory scheme established by authority of section 14-a of the Banking Law is necessary to determine the proper scope and operation of Banking Board regulations 4.2 and 4.3 (3 NYCRR 4.2, 4.3).

The proscription against usury, which has from time immemorial protected borrowers from the exaction of illegal interest (Schneider v Phelps, 41 NY2d 238, 243), is deeply rooted in the jurisprudence of New York. In 1787, this State enacted a usury statute which barred the taking of interest in excess of 7% by means of any corrupt bargain. (L 1787, ch 13.) In subsequent years, a generalized usury statute was enacted (L 1879, ch 538 [formerly General Business Law, § 370 et seq., from which General Obligations Law, § 5-501 et seq. is derived]) as were a number of specialized usury statutes to address the lending transactions of certain banking organizations, including banks and trust companies (Banking Law, § 108, subd 6); private bankers (Banking Law, § 173, subd 1); credit unions (Banking Law, § 453, subd 5, par [b]) and investment companies (Banking Law, § 510-a, subd 1). It was not until the enactment of chapter 963 of the Laws of 1960 (Banking Law, § 380-e) that the effect of usury by a savings and loan association was expressly defined. (See 1960 Report of NY Law Rev Comm, p 84.)

Section 380-e of the Banking Law, interposed by plaintiffs in an attempt to impeach the instant mortgage loan transaction, was enacted “to make certain that the consequences of taking excessive interest * * * by savings and loan associations are those provided by the Banking Law for banks and trust companies, private bankers, industrial banks, credit unions and investment companies, rather than those provided by the General Business Law” (official note, 1960 Session Laws of NY, L 1960, ch 963, pp 1542-1543). Pursuant to subdivision 1 of section 5-501 of the General Obligations Law, the Banking Board is empowered to prescribe the rate of interest in accordance with section 14-a of the Banking Law.

Section 14-a of the Banking Law authorizes the Banking Board to establish the maximum rate of interest to be employed in certain lending arrangements, including conventional home mortgage loans. The section further provides that such rate “shall include as interest any and all amounts paid or payable, directly or indirectly, by any person, to or for the account of the lender in consideration for the making of a loan or forbearance” (Banking Law, § 14-a, subd 2 [then § 14-a, subd 2, par (b)j) and that the Banking Board may adopt regulations to effectuate this policy (Banking Law, § 14-a, subd 3 [then § 14-a, subd 2, par (a), cl 2]). The purpose of section 14-a (subd 2, par [b]) of the Banking Law is to “curb the use of points and other charges which increase the lender’s return” and to empower the Board “to prescribe by regulation the specific fees and charges to be included as interest on loans subject to the ceilings prescribed by the Board.” (Memorandum of New York State Banking Dept, Bill Jacket, L 1968, ch 349, p 4.) The text and legislative history of section 14-a of the Banking Law are silent as to the mode of disclosure, if any, to be undertaken by the lender in a mortgage loan transaction.

At the time of the home mortgage loan by the Geddes Savings and Loan Association to the plaintiffs, the maximum rate of interest for such loan was 8.5%. (3 NYCRR 4.1; L 1973, ch 1055.) Interest has been defined by Banking Board regulation (3 NYCRR 4.2), which provides in pertinent part:

“4 2 * * *

“The term interest as used in section 4.1 of this Part:

“(a) when applied to any loan or forbearance secured primarily by an interest in real property improved by a one- or two-family residence occupied by the owner, shall include origination fees, points and other discounts and all other amounts paid or payable, directly or indirectly, by any person, to or for the account of the lender in consideration for making the loan or forbearance. The fees, charges and costs described in section 4.3 of this Part do not constitute amounts paid or payable, directly or indirectly, to or for the account of the lender in consideration for making the loan or forbearance and are not included in ‘interest’;

“(b) when applied to any other loan or forbearance, shall mean all amounts paid or payable, directly or indirectly, by any person, to or for the account of the lender which would be includible as interest under New York law as it existed prior to the enactment of chapter 349 of the Laws of 1968;

“(c) when applied to any loan or forbearance insured by the New York City Rehabilitation Mortgage Insurance Corporation, shall not include premiums paid for insurance pursuant to section 708 of the Private Housing Finance Law.” (Emphasis added.)

Exclusions from interest in certain home mortgage loans have been set forth by Banking Board regulation (3 NYCRR 4.3), which provides in pertinent part:

«43 * * *

“The term interest for purposes of subdivision (a) of section 4.2 of this Part shall not include the following amounts payable in connection with the loan or forbearance, if itemized in writing to the borrower:

“(a) a reasonable fee in consideration for the legally enforceable written commitment of the lender to reserve funds for future disbursement to the borrower, provided such commitment was made prior to November 1, 1968;

“(b) reasonable fees, charges and costs for the following services actually and necessarily rendered:

“(1) appraisal of property securing the loan or forbearance;

“(2) preparation of surveys, abstracts or similar documents;

“(3) title examinations, examinations of public records or similar procedures;

“(4) title insurance;

“(5) legal services and reasonable disbursements related thereto;

“(6) notarizations, authentications or similar procedures; and

“(7) periodic inspections related to advances to be made under the loan agreement”. (Emphasis added.)

The imposition of civil liability for usury is closely circumscribed by the rules of construction traditionally applied to usury statutes, and the substantial burden of proof to be borne by the borrower which is only satisfied by clear and convincing evidence of each element of usury, including usurious intent.

Usury penalties imposed for the violation of the statute are to be strictly construed and should not be held to include any violation which is not clearly within the plain intention of the statute. (Di Nome v Personal Fin. Co., 291 NY 250, 253.) This view is in accord with the long line of authority establishing that usury must be proved by clear evidence as to all its elements and will not be presumed (see, e.g., Giventer v Arnow, 37 NY2d 305, 309), and recognizes that forfeiture imposed by usury statutes is penal in nature (McKinney’s Cons Laws of NY, Book 1, Statutes, § 273). In this regard, it has been noted that in cases of civil usury “[t]he [New York] courts, however, anxious to avoid the harsh penalty of forfeiture, have placed the burden of proving the transaction usurious on the borrower, declaring that the defense of usury must be ‘decisively proved * * * and not * * * left to inference or implication.’ (Brown v. Robinson, 224 N.Y. 301, 318)”. (Syndicate Loan-Shark Activities and New York’s Usury Statute, 66 Col L Rev 167,170, n 22.) Clear and convincing evidence, of an act unequivocally exacting a rate of interest in excess of that allowed by law, places a transaction within the plain intent of the usury statute.

Di Nome v Personal Fin. Co. (291 NY 250, supra) is illustrative of the view that the harsh penalty of forfeiture is wholly inappropriate where, as here, a technical violation of a statutory lending disclosure requirement occurs. Pursuant to the “Small Loans Act” (Banking Law, § 353), a lender was required to “[d]eliver to the borrower at the time any loan is made a statement * * * in the English language showing in clear and distinct terms the amount and date of the loan and of its maturity”. Defendant failed to disclose the date of maturity of the loan, as required by statute. Plaintiff contended that this omission was an illegal departure from the statutory command that the statement of the loan should clearly and distinctly show the date of maturity, and in view of the technical error, the note and chattel mortgage given to defendant to secure a loan should be declared void. In response to plaintiff’s contention, this court noted that violation of the act deprived the lender of all right to collect or receive any principal, interest or charges, and exposed the lender to the possibility of a misdemeanor charge. The court rejected plaintiff’s claim, and held that to impose penalties for failing to set forth the date of maturity would do violence to the principles that a provision imposing forfeiture should be strictly construed and that when conduct is to be visited with loss or impairment of liberty or property, clear and exact definition of the offense is necessary.

Usurious intent, an essential element of usury, which is embodied in the statutory requirement that an unlawful rate of interest be knowingly taken (Banking Law, § 380-e), is a question of fact. (Hammelburger v Foursome Inn Corp., 54 NY2d 580, 594.) It is the prevailing view that where usury does not appear on the face of the note, usury is a question of fact. (Mutual Protective Corp. v Palatnick, 118 Conn 1, 4; Chicago Tit. & Trust Co. v Jensen, 271 Ill App 419, 422; Janisse v Winston Inv. Co., 154 Cal App 2d 580; see, also, Matter of Gurinsky, 105 F Supp 42; Note, California’s Model Approach to Usury, 18 Stan L Rev 1381, 1390.) It has been properly observed: “[I]f the note or bond shows a rate of interest higher than the statutory lawful rate, it would be immaterial whether the lender actually intended to violate the law. His intent would be conclusively presumed. On the other hand, if the parties have made an honest mistake of fact, like a reasonable error in computation (91 C.J.S. Usury Sec. 14c, note 61), * * * there would be no usury because no unlawful intent.” (Hershman, Usury and the Tight Mortgage Market, 85 Banking LJ 189, 195.)

While it is settled that the voluntary taking or reservation of a greater interest or compensation for the loan or forbearance of money than that allowed by law is usurious, a bona fide mistake of fact vitiates usurious intent. (Fiedler v Darrin, 50 NY 437, 443; New York Firemen Ins. Co. v Ely & Parsons, 2 Cow 678, 705-707; 6A Corbin, Contracts, § 1504, p 696.) An imprecise lending disclosure (Di Nome v Personal Fin. Co., 291 NY 250, supra) or a computer error (Heelan v Security Nat. Bank, 73 Misc 2d 1004) constitutes a bona fide error of fact which is insufficient to establish the requisite usurious intent.

Applying these principles to the facts of this case, we must consider whether the trial court erred in viewing the import of the $290 “Commitment Fee” charge as a question of fact and in determining that the one-time charge, while erroneously described, was not a subterfuge to collect additional and illegal interest over and above the 8.5% annual interest rate allowed by law. In disallowing the claim that the fee charged by the bank constituted interest within the meaning of the bank regulations, the court found that the charge was intended as an authorized fee for processing and servicing a building loan as specifically authorized by regulation 4.3 (b) (7) (3 NYCRR), and was not unreasonable in amount in terms of the actual services rendered by the bank.

We hold that the courts below properly considered the import of the fee charged as one of fact. While sections 4.2 and 4.3 of the banking regulations define which fees and charges imposed by the bank in connection with a loan should or should not be included as interest within the meaning of the regulations, it does not necessarily follow that a failure properly to characterize a charge made should, as a matter of law, be included as interest within the meaning of the regulations. We reject plaintiffs’ contention that any denominated bank charge which does not literally fall within the exclusion from interest provision of section 4.3 of the banking regulations must be considered “interest” as a matter of law and that the intent of the parties entering into the transaction is irrelevant.

To accept this interpretation of the bank regulations and the statute would impose a strict liability upon the bank, a much more stringent test for usury than would be authorized by the statute under which the regulations were promulgated. It is axiomatic that an administrative agency may not by its rules expand the grant of authority from the Legislature, but must function within its mandate. (Matter of Jones v Berman, 37 NY2d 42, 53.) To sanction plaintiffs’ interpretation would be to impose a condition of strict compliance upon exclusions from interest irrespective of mistake or misdescription, which has neither been authorized nor contemplated by sections 14-a or 380-e of the Banking Law.

Section 380-e of the Banking Law prohibits the knowingly taking of interest in excess of that allowed by law. Where the rate of interest on the face of the note, as here, is not in excess of the legal rate at the time of the loan, it must be shown that the separate one-time bank charge denominated as “Commitment Fee” was knowingly received by the bank as a ruse to collect additional interest in excess of that allowed by law. While it is not necessary to the offense of usury that there should be an actual intention to violate the statute, there can be no usury without a showing of a general intent to take interest at a greater rate than that allowed by law. (Cf. Fiedler v Darrin, 50 NY 437, 443, supra.)

The dissent’s reliance upon People v Shapiro (4 NY2d 597) and People v Ahrend Co. (308 NY 112), each of which involved a criminal prosecution, to establish the intent requirement of civil usury is, at best, misplaced. This is especially true since the standard enunciated by Shapiro and Ahrend Co. was expressly derived from section 3 of the Penal Law, which has been superseded by subdivision 2 of section 15.05 of the Penal Law. Myers v U. S. Camera Pub. Corp. (9 Misc 2d 765) is similarly inapposite since the “knowledge” test set forth in that case was based exclusively upon general criminal law authority (to wit: Ballentine Law Dictionary, p 721; 8 RCL, Criminal Law, § 12, p 73). The “knowledge” test articulated by the dissent, derived from the criminal law, is akin to the standard utilized by New York’s criminal usury statutes. (Penal Law, §§ 190.40, 190.42.) This standard was expressly held to be irrelevant to loans by banks. (Flushing Nat. Bank v Pine- top Bldg. Corp., 54 AD2d 555, affd 42 NY2d 1038.) The standard applicable to the extortionate and socially repugnant offense of loansharking is emphatically inappropriate to civil usury resulting from a mere failure to properly itemize.

Moreover, in each of the cases cited by the dissent in support of this singular view of the intent requirement (Giventer v Arnow, 37 NY2d 305, to Matter of Dane, 55 AD2d 224), usury was established on the face of the loan instrument, and resort to extrinsic evidence was not necessary. Thus, these cases are perfectly concordant with our view that where usury cannot be discerned from the four corners of the mortgage instrument, and there exists a bona fide dispute as to the import of a fee extraneous to the note, the existence of usury is a question of fact.

Here, it cannot be said, as a matter of law, that the bank loan, on its face, establishes clear evidence of usury. Whether or not there was a general intent in collecting the $290 bank charge which was denominated as a “Commitment Fee” to take and receive a rate of interest in excess of • the legal percentage allowable at the time of the loan, is a question of fact. (Hammelburger v Foursome Inn Corp., 54 NY2d 580, 594, supra.) The trial court, treating this as a question of fact, found, after a trial, that the “Commitment Fee” was in fact intended to be a charge for an authorized item allowed under section 4.3 of the regulations, to wit: “periodic inspections related to advances to be made under the loan agreement”. (3 NYCRR 4.3 [b] [7].) In light of the Appellate Division’s affirmance, there is an affirmed finding of fact that the plaintiffs failed to establish by clear and convincing proof that the bank, in charging the $290 fee, had a general intent to take and receive a rate of interest in excess of 8.5%, the prevailing rate.

Where, as here, usury cannot be discerned from the four corners of the mortgage instrument, it was properly the function of the trier of fact to determine whether an error in the description of the bank charge was bona fide or a clandestine attempt to exact a usurious rate of interest. Had the Legislature intended to make usury a strict liability offense, where intent under all circumstances would be irrelevant, it would have so provided.

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

Simons, J.

(dissenting). I would reverse and grant judgment to plaintiffs because defendant charged them an unlawful rate of interest, not through excusable mistake, but knowingly. Having established that, plaintiffs had no obligation to go further and prove that defendant did so “clandestinely” with the specific intent to violate the usury laws or that its conduct amounted to a “subterfuge” or “ruse” to do so.

Analysis starts with the statute which prohibits savings and loan institutions from “knowingly taking, receiving, reserving, or charging * * * interest * * * at a rate greater than * * * authorized by law” (Banking Law, § 380-e). The rate authorized by law at the time of this transaction was 8V2% which, the statute says, shall include “all amounts paid or payable, directly or indirectly * * * to or for the account of the lender in consideration for the making of a loan” (Banking Law, § 14-a, subd 2, par [b] [now § 14-a, subd 2]). The regulations adopted pursuant to the Banking Law similarly provide that the maximum mortgage interest allowed (i.e., 8V2%) shall include origination fees, points and other discounts “and all other amounts paid or payable, directly or indirectly * * * to or for the account of the lender in consideration for making the loan” (3 NYCRR 4.1, 4.2 [emphasis added]). The language of these provisions could hardly state more broadly that the legal rate shall be computed after considering all amounts paid to the lender by the buyer and that the total shall not exceed 8V2%. There are no exceptions other than those specific charges enumerated in section 4.3 of the regulations and they may be excluded from the computation of interest only if itemized (3 NYCRR 4.2, 4.3). The additional 1% charge assessed plaintiffs by defendant in this case was not one of the exceptions listed. Neither was it itemized by defendant.

The only exception contained in section 4.3 of the regulations relevant to this appeal is the exception dealing with charges for periodic inspections related to advances to be made under a loan agreement (3 NYCRR 4.3 [b] [7]). It is questionable whether periodic inspections of plaintiffs’ premises were made, but paragraph 7 does not apply in any event because no advances were made to plaintiffs. The entire principal was paid over at the closing on August 24, 1978, after the building was completed. Thus, during the first year of the loan plaintiffs paid defendant a total consideration of 9Vfe% for the loan, 8x/%% interest plus an additional 1% for the unauthorized “Commitment Fee”. Since the law forbids the exaction of interest greater than 8Vz% and provides that all sums paid shall be considered interest unless exception is specifically authorized and itemized, it is manifest that the loan was usurious.

Conceding that the 1% charge was wrongfully assessed and must be returned, the majority hold, somewhat inconsistently, that the charge was for a lawful purpose and that it was made by mistake. Thus, it finds that plaintiffs failed to prove usurious intent.

The general rule is that the intent required to establish usury is the general intent to act contrary to the statute, not a specific intent to commit usury. This rule is consistent with the Banking Law’s use of the term “knowingly”. “Knowingly” imports knowledge that the facts exist which constitute the offense, not knowledge of the unlawfulness of the act (see People v Shapiro, 4 NY2d 597, 600; People v Ahrend Co., 308 NY 112; Myers v U. S. Camera Pub. Corp., 9 Misc 2d 765, 768; see, also, Black’s Law Dictionary [5th ed], p 784). Thus, once excessive interest is charged, the intent to violate the statute will be implied (see, generally, 91 CJS, Usury, § 14; 32 NY Jur, Interest and Usury, §§ 72, 73). In most cases, the nature of the transaction establishes the excessive charge and the finding of intent follows from it (see, e.g., Giventer v Arnow, 37 NY2d 305; Fiedler v Darrin, 50 NY 437; Angelo v Brenner, 90 AD2d 131; Hammond v Marrano, 88 AD2d 758; Reschke v Eadi, 84 AD2d 904; Matter of Dane, 55 AD2d 224). To be distinguished, however, are cases in which the facts are disputed and the transaction on its face appears legal or is ambiguous. Presumably, parties do not intentionally violate the law and in those cases extrinsic evidence is necessary to clearly establish the offense (Brown v Robinson, 224 NY 301, 318; White v Benjamin, 138 NY 623, 624). Thus, a corrupt intent must be established where it does not clearly appear that the transaction was a loan (see, e.g., Brown v Robinson, supra; Meaker v Fiero, 145 NY 165), or that unlawful interest was exacted for it (see, e.g., Rosenstein v Fox, 150 NY 354; McNellis v Dubnoff, 367 F2d 513).

There is nothing ambiguous about this case or the inferences which must be drawn from the established facts. Defendant loaned money to plaintiffs by a mortgage transaction and it charged and received more interest for the loan than the law allows. Usurious intent is implied, therefore, unless defendant did so because of an excusable mistake.

Mistakes can be categorized as mistakes of fact or mistakes of law. Generally, when a person makes a mistake of fact, his act may be excusable because his act does not represent the performance he intended. Clerical or arithmetical mistakes fall into this category (see Marvine v Hymers, 12 NY 223; Archibald v Thomas, 3 Cow 284) and so do computer errors (see Heelan v Security Nat. Bank, 73 Misc 2d 1004). When a party makes a mistake in the law, however, he is bound by his action even though he would have acted otherwise had he not been ignorant of the law (see Vee Bee Serv. Co. v Household Fin. Corp., 51 NYS2d 590, 611, affd 269 App Div 772; and see, generally, Usury as Affected by Mistake in Amount or Calculation of Interest or Service Charges for Loan, Ann., 11 ALR3d 1498). The defendant’s act of charging an additional 1% “Commitment Fee” was a deliberate and purposeful act, not a mistake in calculation, and it does not excuse defendant from the consequences. The reason for the rule is obvious enough: the lender would rarely be chargeable with knowledge or unlawful intent if free to claim, after the fact, ignorance of the interest rate or of the laws and regulations. That is precisely what defendant bank claims here, that it acted in good faith and was unaware of the banking statute and regulations or of the true nature of the transaction with plaintiffs. If the usury laws are to mean anything, that simply is not excuse enough.

The concern, of course, is the windfall to the borrowers, but any “windfall” is lawful, sanctioned by the statute because of New York’s strong public policy against lenders exacting excessive interest. If the statute and regulations effectuating that policy are not enforced, then lenders may, either by sharp or shoddy practice, experience another type of windfall, an illegal one, by imposing excessive fees and charges on their customers.

Chief Judge Cooke and Judge Meyer concur with Judge Jasen; Judge Kaye concurs in result only; Judge Simons dissents and votes to reverse in a separate opinion in which Judge Jones concurs; Judge Wachtler taking no part.

Order affirmed, with costs.

      . Inasmuch as no cross appeal has been filed by the defendant to test the propriety of this finding, we do not reach the question.

      . Section 380-e of the Banking Law provides, in pertinent part: “The knowingly taking, receiving, reserving, or charging by a savings and loan association of interest, as computed pursuant to this article, at a rate greater than such rate of interest as may be authorized by law shall be held and adjudged a forfeiture of the entire interest which the note or other evidence of debt carries with it, or which has been agreed to be paid thereon. If such greater rate of interest has been paid, the person paying the same or his legal representatives may recover from the savings and loan association twice the entire amount of the interest thus paid.”

      . The dissent’s reliance upon Vee See Serv. Co. v Household Fin. Corp. (51 NYS2d 590, affd without opn 269 App Div 772) is misplaced. The Vee See case, which is actually an expansive report of a court-appointed referee, is hardly controlling upon the issue of the effect of mistakes upon loan agreements. Vee See is factually dissimilar insofar as it concerns a dispute between large lending institutions arising from a nationwide scheme which doubled the rate of interest upon hundreds of transactions.

      . The statement of the dissent that “[i]t is questionable whether periodic inspections of plaintiffs’ premises were made” is simply incorrect. The trial court made a factual determination that inspection services were rendered by the bank, and the amount charged for such services, as well as services for processing the loan “is not so disproportionate to the actual services rendered as to lead to a conclusion that it was a subterfuge to collect illegal interest.”


source: Caselaw Access Project

author: Kaye, J.

license: Public Domain

text:
    In the Matter of Anthony M., a Person Alleged to be a Juvenile Delinquent, Appellant. The People of the State of New York, Appellant, v Frank Cable and Denise Godbee, Respondents.
    Argued September 11, 1984;
    decided October 30, 1984

      POINTS OF COUNSEL

      Barbara H. Dildine and Lenore Gittis for appellant in the first above-entitled case.
    I. Where the deceased showed no signs of heart failure for eight days after the incident and then suddenly and unexpectedly suffered a fatal heart attack, and the testimony of the prosecution’s expert witnesses could not establish a causal connection between appellant’s conduct and the heart attack, the evidence was legally insufficient to establish appellant’s guilt of manslaughter in the second degree. (People v Stewart, 40 NY2d 692; People v Kibbe, 35 NY2d 407; People v Caprio, 47 AD2d 1; People v Parody, 248 App Div 269; People v Roberts, 73 AD2d 954; People v Lozano, 107 Misc 2d 345; People v Aponte, 82 Misc 2d 283; Matter of Burris v Lewis, 2 NY2d 323; Matter of Riehl v Town of Amherst, 308 NY 212; Matter of Miller v National Cabinet Co., 8 NY2d 277.) II. The proof establishing appellant’s mental state was legally insufficient to sustain a finding of manslaughter in the second degree or criminally negligent homicide. (People v Licitra, 47 NY2d 554; People v Cruciani, 36 NY2d 304; People u Deitsch, 97 AD2d 327; People v France, 57 AD2d 432; People v Pinckney, 38 AD2d 217, 32 NY2d 749; People v Haney, 30 NY2d 328; People v Montanez, 41 NY2d 53; People v Warner-Lambert Co., 51 NY2d 295, 450 US 1031; People ex rel. Wayburn v Schupf, 39 NY2d 682.)

      Frederick A. O. Schwarz, Jr., Corporation Counsel (Cecilia Tso and Stephen J. McGrath of counsel), for respondent in the first above-entitled case.
    I. The court may not review the weight that the fact-finder gave to the expert testimony it heard in determining the issue of causation. Its finding on causation may not be disturbed by this court. (Matter of Hofbrauer, 47 NY2d 648; Matter of Raymond W., 44 NY2d 438; Dunham v Village of Canisteo, 303 NY 498; Proce v Franklin Gen. Hosp., 83 AD2d 903; Matter of Thrall

      v Turner Excavating Contr., 77 AD2d 724; Mrachek v Sunshine Biscuit, 308 NY 116; Rodolitz v Boston-Old Colony Ins. Co., 74 AD2d 821; Whiton v Snyder, 88 NY 299; Matter of Aetna Cas. & Sur. Co. v Barile, 86 AD2d 362.) II. It was proven beyond a reasonable doubt that appellant committed acts which, if done by an adult, would constitute manslaughter in the second degree. In any event, the record shows beyond a reasonable doubt that appellant committed acts constituting criminally negligent homicide. (People v Stewart, 40 NY2d 692; People v Brengard, 265 NY 100; People v Kibbe, 35 NY2d 407; Cox v People, 80 NY 500; People v Kane, 213 NY 260; People v Licitra, 47 NY2d 554; People v Heinsohn, 92 AD2d 574, 61 NY2d 855; People v Aponte, 82 Misc 2d 283, 63 AD2d 865; People v Lozano, 107 Misc 2d 345.

      Robert M. Morgenthau, District Attorney (John Latella and Joyce P. Adolf sen of counsel), for appellant in the second above-entitled case.
    I. A rational trier of fact, viewing the evidence in the light most favorable to the People, could have found, beyond a reasonable doubt, that defendants’ actions during the robbery and burglary caused Mr. Weiner’s fatal heart attack. (People v Contes, 60 NY2d 620; People v Stewart, 40 NY2d 692; People v Cicchetti, 44 NY2d 803; People v Bonifacio, 190 NY 150.) II. The trial court properly refused to instruct the jury on the affirmative defense to felony murder. (People v Watts, 57 NY2d 299; People v Robinson, 36 NY2d 224.)

      Bernard V. Kleinman for Frank Cable, respondent in the second above-entitled case.
    The court below correctly ruled that there was insufficient evidence to establish beyond a reasonable doubt that the actions of defendant-respondent caused the death of Arnold Weiner. (People v Stewart, 40 NY2d 692; Cox v People, 80 NY 500; People v Brengard, 265 NY 100; People v Kibbe, 35 NY2d 407; People v Warner-Lambert Co., 51 NY2d 295; People v Dlugash, 41 NY2d 725; People v Lozano, 107 Misc 2d 345; People v Arzon, 92 Misc 2d 739; People v Bonilla, 95 AD2d 396.)

      Ronna D. Brown and William E. Hellerstein for Denise Godbee, respondent in the second above-entitled case.
    I. The court below correctly decided there was insufficient evidence to establish that the 89-year-old decedent’s heart attack was caused by the robbery, two and a half days earlier, where the deceased suffered from arteriosclerosis, obesity and prior infarcts, and where the medical experts provided equivocal testimony. (Jackson v Virginia, 443 US 307; People v Kibbe, 35 NY2d 407; People v Stewart, 40 NY2d 692; People v Brengard, 265 NY 100; Matter of Burris v Lewis, 2 NY2d 323; Matter of Riehl v Town of Amherst, 308 NY 212; People v Harding, 59 AD2d 897; People v Kane, 213 NY 260; People v Roberts, 73 AD2d 954.) II. The court below correctly decided that the trial court’s refusal to charge the jury regarding the affirmative defense to felony murder deprived respondent of her due process right to a fair trial. (People v Edwards, 64 AD2d 201; People v Watts, 57 NY2d 299; People v Smith, 55 NY2d 888.) III. The evidence was legally insufficient to convict respondent, as an accessory, of robbery, burglary, and felony murder where she entered the premises during the middle of the robbery, was herself threatened, sat passively throughout the duration of the incident, and twice called the police immediately after the intruder left. (Jackson v Virginia, 443 US 307; People v Bennett, 49 NY 137; People v Borrero, 26 NY2d 430; People v Forestieri, 87 AD2d 523; People v Fitzgerald, 156 NY 253; United States v Stanchich, 550 F2d 1294.) IV. The court erred in permitting improper prosecution rebuttal evidence to stand while concurrently denying the defense the opportunity to present rebuttal evidence and thus irreparably prejudiced appellant and denied her a fair trial. (People v Harris, 57 NY2d 335; Marshall v Davies, 78 NY 414; People v Bonier, 189 NY 108; People v McCann, 90 AD2d 554; Yeomans v Warren, 87 AD2d 713; People v Richardson, 25 AD2d 221; Jenkins v McKeithen, 395 US 411; People v Gilliam, 45 AD2d 744, 37 NY2d 722.)
   OPINION OF THE COURT

Kaye, J.

In the two appeals before us, elderly victims of crime — an attempted purse-snatching, and a robbery and burglary — some days after these incidents, succumbed to heart attacks, having shown no immediate signs of heart trouble. The central issue is whether there was sufficient proof to support the fact-finders’ determinations that the stress of the incidents was a cause of the fatalities. Concluding that there was sufficient evidence of causal connection, we affirm the adjudication of Anthony M. for juvenile delinquency based on manslaughter, and we reverse the Appellate Division order and reinstate the conviction and sentence of defendant Frank Cable for felony murder, manslaughter and robbery. While our conclusion as to causal connection applies with equal force to Cable’s codefendant, Denise Godbee, she is entitled to a new trial with respect to the homicide charges because in her case the court erroneously refused to charge the affirmative defense to felony murder.

MATTER OF ANTHONY M.

Anthony M., a 12 year old, in the early evening of April 17, 1982, was seen loitering near a subway entrance in midtown Manhattan half an hour before the incident and again observed there, for about five minutes, when two elderly women passed, one of them the 83-year-old victim, Lee Gibson. In a matter of seconds, Anthony crouched behind her, grabbed her handbag and, when Mrs. Gibson would not release the bag, he pulled the strap with such force that she was whirled around, thrown to the sidewalk on her left side, and dragged a short distance, whereupon Anthony let go and disappeared into the subway station. Mrs. Gibson was taken to the hospital, where a fractured left hip and other bruises were diagnosed. She was also that day examined by her cardiologist, Dr. Jerome Zacks, who recommended transfer to another hospital for surgery involving the implantation of a pin in order that she might walk again. In the initial days following the incident, she exhibited no symptoms of heart trouble, despite a medical history that included hypertension, long-standing angina (both believed to be under control), an enlarged heart, arteriosclerosis of the coronary artery and vascular disease. After hip surgery was performed, on April 19, in the second hospital, her condition progressed normally.

On April 25, Mrs. Gibson developed congestive heart failure, and two days later died of a myocardial infarction.

At a fact-finding hearing on charges against Anthony involving manslaughter, attempted robbery and assault, three medical experts testified regarding the cause of Mrs. Gibson’s death. The testimony of Dr. Manuel Navarro, Associate Medical Examiner, who had performed the autopsy on April 28,1982, established that the direct cause of Mrs. Gibson’s death was a myocardial infarction, three to five days old. However, he could not with any medical certainty pinpoint the April 17 incident as a cause of the heart attack, nor could the medical witness called by the defense, Dr. Tina Dobsevage, an expert in internal medicine. Both felt;, in substance, that given her general physical condition Mrs. Gibson could well have died at any time even without the stress of the attempted purse-snatching. Dr. Zacks, the cardiologist, while acknowledging that he would not have recommended the hospital transfer and surgery if he perceived an undue risk, and that Mrs. Gibson was doing well postoperatively, expressed the opinion with a reasonable degree of medical certainty that the indirect cause of her death was the “stress of a mugging and subsequent fracture of a hip, surgery for that hip fracture, thereafter, pain and anxiety and fear of never being able to walk again while she was in the hospital prior to her sudden — cardiac arrest * * * [T]he stress precipitated the myocardial infarction with subsequent cardiac arrest and ultimate death.”

Finding that Anthony had created a substantial and unjustifiable risk when he selected Mrs. Gibson as his victim, that he was heedless of the peril created by his violence, and that his criminal act set in motion the sequence of events that led inexorably to her death, the trial court found that Anthony had committed acts that if done by an adult would constitute the crimes of attempted robbery in the first degree, assault in the first degree, and manslaughter in the second degree, and placed him with the Division for Youth, Title III, for 18 months. The Appellate Division affirmed, without opinion. Only the finding regarding manslaughter is challenged on appeal.

CABLE AND GODBEE

Arnold Weiner, an 89-year-old retired diamond merchant, and his wife, Anna, on July 23,1980 were robbed in their Manhattan apartment, threatened with a knife, bound, and left lying facedown on their living room floor. Mr. Weiner was also struck in the face. Two days later, he died of a myocardial infarction.

A man identified as defendant Cable was seen entering the Weiners’ apartment building early in the morning of July 23. His girlfriend, defendant Godbee, who had recently begun work as a maid for the Weiners, followed moments later. Defendants rode up together in the elevator which stopped at the tenth floor, where the Weiners lived. Godbee was admitted to the Weiners’ apartment, but went right out to deliver a newspaper to a neighbor, leaving the apartment door unlocked, as she had done on a prior occasion. When she returned, she discovered that a male intruder (found by the jury to be Cable) had tied up Weiner, and was in the process of tying up Mrs. Weiner. Godbee, according to her statement to the police, started to call for help, but was threatened by the intruder, who proceeded to take several items of jewelry. Mrs. Weiner later awakened to find herself and her husband, both bound, on the living room floor, her husband bleeding from the mouth. She asked Godbee, who was seated in a chair, to call the superintendent, but Godbee said that she had already called the police. Some 20 minutes after he had entered, Cable was seen leaving the building, attempting to hide his face. Several of the items of jewelry were, later that day and the next, sold by Cable.

Weiner that afternoon was taken to Roosevelt Hospital by a neighbor, treated for the cuts and bruises, and returned home. The next day, July 24, he visited his personal physician, Dr. Walter Liebling, complaining of pains in his left lateral lower chest, just above the waistline; no EKG was taken. On July 25 he again complained of not feeling well and spent the day in bed. Late that day, some 56 or 57 hours after the theft, Weiner suffered heart failure and died.

At the trial of defendants for felony murder, depraved indifference murder, robbery and burglary, Dr. Liebling testified that, despite excess weight and arteriosclerosis, Weiner prior to July 23 was in “good general health.” During the four years of their relationship, Dr. Liebling had never detected any sign of heart disease in Weiner, and he had no serious illness.

While the experts agreed that the direct cause of Weiner’s death was the myocardial infarction, they differed on when the infarction occurred. For the People, Dr. Elliott Gross, Chief Medical Examiner for New York City, who performed the autopsy, testified as a pathology expert that from the color of the infarct and lack of scar tissue, it most likely occurred 44 to 54 hours before death. In his opinion, it was possible for a 90-year-old man who had been burglarized to suffer a mild cardio-infarction that would not show up for two days, but the infarction also could have occurred without any excitement or trauma. Testifying in Godbee’s behalf, Dr. Steven Factor, a specialist in cardiovascular pathology, dated the infarct at 72 to 96 hours before Mr. Weiner’s death — which would have placed it before the theft — basing his opinion on the number of white cells and the presence of fibroblasts, or “scavenger” cells, at the periphery of the infarct. Like Dr. Gross, he testified that it was “possible” that the stress of the robbery led directly to the infarct, but he could not be certain of this, and he further opined that no one could be. Dr. Millard Hyland, Deputy Chief Medical Examiner for Manhattan and Staten Island, testifying on rebuttal as an expert in forensic pathology, from the white cells and absence of fibroblasts, as well as the red blood cells of the clot and the absence of scar tissue, placed the infarct between 36 and 72 hours before death. Moreover, while acknowledging the possibility of other causes, he expressed the opinion with a reasonable degree of medical certainty, as well as commonsense certainty, that the emotional and physical trauma of the burglary caused Weiner’s heart attack.

Defendants were convicted of felony murder, manslaughter in the second degree, robbery in the first and second degrees, and burglary in the second degree. The Appellate Division, two Justices dissenting, reversed the convictions for felony murder, manslaughter and robbery in the first degree, and dismissed the charges underlying them.

In both appeals, defendants urge — as the Appellate Division majority concluded in Cable and Godbee — that the necessary causal connection between offense and myocardial infarction was insufficiently established. Measured by a standard of “whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt” (Jackson v Virginia, 443 US 307, 319; see, also, People u Contes, 60 NY2d 620, 621), we believe that there was sufficient evidence to support the finding of causation made at the trial level.

For criminal liability to attach, a defendant’s actions must have been an actual contributory cause of death, in the sense that they “forged a link in the chain of causes which actually brought about the death” (People v Stewart, 40 NY2d 692, 697). “An obscure or a merely probable connection between an assault and death will, as in every case of alleged crime, require acquittal of the charge of any degree of homicide” (People v Brengard, 265 NY 100, 108). A defendant’s acts need not be the sole cause of death; where the necessary causative link is established, other causes, such as a victim’s preexisting condition, will not relieve the defendant of responsibility for homicide (see People v Kane, 213 NY 260, 273). By the same token, death need.not follow on the heels of injury. Even an intervening, independent agency will not exonerate defendant unless “the,death is solely attributable to the secondary agency, and not at all induced by the primary one” (People v Kane, 213 NY 260, 270, supra). An injury may trigger immediate measurable deterioration and a gradual process of dying for which defendant is responsible (People v Brengard, 265 NY 100, 104-105, supra; see, also, People v Roberts, 73 AD2d 954), but that is not to say that a victim who evidences no immediate decline cannot just as surely have been set by defendant’s acts on a certain course to death.

Though sometimes perceptible to lay witnesses (see People v Brengard, 265 NY 100, 105, supra), the progression from injury to death, often unseen and not readily comprehended, will generally be a subject for expert medical opinion. To establish a causal connection, conclusions which are only “contingent, speculative, or merely possible” (Matter of Burris v Lewis, 2 NY2d 323, 327) will not suffice, but neither is absolute certainty and the exclusion of every other possibility required. While in both cases other possible causes of the heart attacks suffered by the elderly victims were not eliminated, the medical evidence, viewed from the perspective enunciated in Jackson, supported the fact-finders’ determinations that defendants’ acts were at least a contributing cause of both fatalities. In Anthony M., the medical evidence connected the stress of the fall and fractured hip to the consequent stresses and fears of immobility, pain and surgery to correct the condition caused by the fall, leading to cardiac arrest and ultimate death. Similarly, in Cable and Godbee, there was proof in the medical evidence to support the jury determination that the stress arising from defendants’ acts was a cause of the infarction that manifested itself two days later. In neither instance was the testimony of the medical expert that there was a causal link so baseless or riddled with contradiction that it was unworthy of belief as a matter of law (see People v Stewart, 40 NY2d 692, 699, supra; People v Ledwon, 153 NY 10) and, despite contrary medical opinion, the jury was entitled to accept this evidence.

Godbee and Anthony M. raise several additional issues with respect to sufficiency of the evidence and fairness of the trials.

Anthony M. argues that, regardless of causation, there was insufficient proof that he possessed the necessary mental state for manslaughter. We disagree. Viewed in the light most favorable to the prosecution, there was sufficient proof in the circumstances of the incident for the fact-finder to conclude that Anthony was aware of and consciously disregarded a substantial and unjustifiable risk that death would result from his actions. (See People v Heinsohn, 61 NY2d 855; Penal Law, § 125.15, subd 1.) The evidence shows that Anthony made a careful, conscious choice when, after a period of watching and waiting in front of the subway station, he marked as his intended victim a greyhaired, five-foot, two-inch, elderly woman, obviously selected from the passing crowd because of her condition, as the easiest prey. We must agree with the courts below that having sought out such a victim, Anthony is to be held responsible for the unusual peril he created to her when he tugged at her purse strap with such force that she was whirled around and thrown to the ground, and then briefly dragged by him along the pavement.

As to Godbee’s contention that the evidence at most showed her “guilty knowledge and negative acquiescence,” and thus was legally insufficient to convict her, as an accessory, of robbery, burglary and felony murder, we agree with the Appellate Division that the evidence was sufficient to justify the jury’s conclusion that she was an accessory. Viewed in the light most favorable to the People (People v Malizia, 62 NY2d 755, 757; People v Kennedy, 47 NY2d 196, 203; People v Benzinger, 36 NY2d 29, 32), the evidence demonstrated that she intentionally aided Cable in the conduct constituting the offense (Penal Law, § 20.00): Godbee and Cable, her boyfriend, arrived in the building at approximately the same early morning hour and rode up in the elevator, which stopped at the Weiners’ floor; she left the Weiners’ door unlatched, and on finding an intruder in the apartment failed to alert the superintendent or doorman, who might have stopped an intruder leaving the building, but instead called the police, thus affording Cable an opportunity to escape; she gave the police a misleading description of Cable, and thereafter moved without leaving a forwarding address. That each act could, viewed separately, perhaps be subject to an innocent explanation does not at this juncture entitle Godbee to upset the jury’s finding that she intentionally aided Cable in the commission of robbery, burglary and felony murder.

Although the evidence against Godbee was sufficient, we agree, for the reasons stated by the Appellate Division, that the trial court erred in refusing to charge the affirmative defense to felony murder. We cannot disregard this error. The jury convicted Godbee of reckless manslaughter (as a lesser included offense of depraved indifference murder), thereby demonstrating its acceptance of the People’s contention that Godbee caused the victim’s death by soliciting, requesting, commanding, importuning or intentionally aiding Cable to engage in such conduct (Penal Law, § 20.00). This verdict would have been unreconcilable with acquittal of felony murder based on the affirmative defense because, to establish the affirmative defense, Godbee had to prove that she did not solicit, request, command, importune, cause or aid the commission. of the homicide act (Penal Law, § 125.25, subd 3, par [a]). Nevertheless, as a practical matter, by erroneously refusing to give the charge the court divested Godbee’s counsel of any reason to argue that, while she may have aided in the robbery, Godbee did not participate in the acts causing the victim’s death. Success on this issue, absent submission of the affirmative defense to which Godbee was entitled, would have been an empty victory since she would still have been convicted of felony murder. Consequently, an acquittal on depraved indifference murder or its lesser included offenses could not have benefited Godbee in terms of the sentence imposed. Had counsel been given the opportunity to argue the affirmative defense, as he should have been, we cannot say the jury would have reached the conclusion it did regarding Godbee’s complicity in the acts causing the victim’s death. Although this error would on the law entitle Godbee to a new trial on the felony murder count, since the Appellate Division has not yet passed on the facts the order for a new trial must await that court’s review of the facts. Furthermore, since the jury’s acceptance of the affirmative defense to felony murder would have required an acquittal of reckless manslaughter, the erroneous failure to give the instruction would on the law require a new trial on that charge as well.

Finally, Godbee contends that it was reversible error for the trial court to have denied her request for an adjournment, made both during and at the conclusion of Dr. Hyland’s testimony, so that she could “be in a position to secure” another expert witness in surrebuttal. The court rejected the request, on the basis that it came at “the nth hour” after “ample opportunity” and that such testimony would be purely cumulative, each side having already produced two medical expert witnesses on the issue of causation. The granting of an adjournment for any purpose is a matter resting within the sound discretion of the trial court (People v Singleton, 41 NY2d 402, 405; People v Oskroba, 305 NY 113, 117). Here, no surrebuttal witness was identified, the Trial Judge’s expressed concern that the proposed medical testimony would be only cumulative was not addressed, and no showing was made that the proof would be material and favorable to the defense (see People v Singleton, 41 NY2d 402, 406, supra; and People v Foy, 32 NY2d 473, 478). On this record, we cannot say that the trial court abused its discretion as a matter of law by denying the adjournment, or by denying Godbee’s request to present another expert witness in surrebuttal.

Accordingly, in Matter of Anthony M., the order of the Appellate Division should be affirmed. In People v Cable and Godbee, the orders of the Appellate Division, insofar as appealed from, should be reversed, the convictions and sentences for felony murder, second degree manslaughter and first degree robbery reinstated, and the case remitted to the Appellate Division, First Department, for consideration of the facts (CPL 470.25, subd 2, par [d]; 470.40, subd 2, par [b]). As to defendant Godbee, in view of the charge error described above, unless the Appellate Division on consideration of the facts dismisses the felony murder charge against her, that court is directed to reverse God-bee’s felony murder conviction and order a new trial on that count. As to Godbee’s manslaughter conviction, since manslaughter was submitted as a lesser included offense of depraved indifference murder, on which the jury acquitted, unless the Appellate Division dismisses her manslaughter conviction on its review of the facts, the court should vacate her second degree manslaughter conviction, without prejudice to an application by the People for leave to resubmit to a Grand Jury the facts upon which that conviction was based (see People v Mayo, 48 NY2d 245, 253).

Meyer, J.

(dissenting in part). Respectfully I dissent from so much of the majority opinion as holds that denial of the request by defendants Godbee and Cable that they be granted a continuance to call a surrebuttal witness was not error. I would, therefore, grant a new trial in their case.

At the conclusion of Dr. Hyland’s direct testimony, defendant Godbee’s attorney asked for a 10-minute recess, stating “This witness came in and testified what other doctors consistently denied.” When the recess was over and before the jury returned, the Trial Judge asked whether the attorney had an application. Told that there would be “no application at this time,” the Judge responded, “You propose to have an application for a continuance to allow you to bring in another expert witness, isn’t that it?”, and, receiving a positive response, rejoined, “Well I will tell you now that I deny it * * * I consider it cumulative. You have had ample opportunity. We are at the nth hour, that’s it.”

Upon completion of the cross-examination the jury was sent to lunch. At that point defendant Godbee’s attorney asked for “a continuance until tomorrow morning so that we can be in a position to secure other testimony.” Again the request was denied as “fruitless and cumulative in essence”. Counsel then moved for a mistrial, noting that the information about which the rebuttal witness might testify had not been disclosed to him prior to the witness being called and that the rebuttal testimony “was substantially different from that of all the other three experts”. He asked that “under the circumstances, we should be given an opportunity to”, only to be cut off in midsentence by the Judge’s interjection, “You propose to protract this indefinitely?” On return from luncheon recess counsel moved to strike Dr. Hyland’s testimony, pointing out that because he was “the first doctor, indeed, to testify as to ascertaining medically reasonably certain connection between the alleged incident, the cause of death, that his testimony was more properly elicited on direct examination.” That motion too was denied.

The original objection made clear that Dr. Hyland had testified to what the other doctors had consistently denied and thus went beyond the scope of proper rebuttal and the same point was made in relation to the motion for a mistrial and the motion to strike. It was, of course, within the Trial Judge’s discretion, under the last sentence of CPL 260.30 (subd 7), to permit the People “to offer evidence upon rebuttal which is not technically of a rebuttal nature but more properly a part of [their] original case.” But under the first sentence of that subdivision when the People offer evidence in rebuttal of the defense evidence, “the defendant may then offer evidence in rebuttal of the people’s rebuttal”.

True, as noted in the majority’s footnote 2, Godbee’s attorney’s request was for a continuance until the next morning “so that we can be in a position to secure other testimony”, but Dr. Hyland’s evidence being before the jury, counsel was not obligated to move to strike as improper rebuttal rather than seék a continuance in order to produce counter testimony. And it being clear that defense counsel had not been advised prior to Dr. Hyland’s appearance what he would testify about, they cannot be faulted for not having a witness immediately available and, therefore, requesting an overnight continuance instead of “the opportunity to present a particular witness in surrebuttal” (as the majority’s n 2 suggests) if, indeed, that was not what would have been said had counsel been permitted to complete his request that “under the circumstances, we should be given an opportunity to” (cf. People v De Jesus, 42 NY2d 519, 526).

In sum, even if the right given a defendant by the first sentence of CPL 260.30 (subd 7) to present surrebuttal testimony after prosecution rebuttal which goes beyond the proper scope of rebuttal be considered as a matter within the Trial Judge’s discretion, “if there is a flagrant abuse of this discretion, the wrong may be redressed upon appeal” (Richardson, Evidence [Prince, 10th ed], § 459, p 450). And since “Few rights are more fundamental than that Of an accused to present witnesses in his own defense” (Chambers v Mississippi, 410 US 284, 302) and “mere inconvenience is not sufficient ground for denying an adjournment when to do so would abridge a basic right” (People v Foy, 32 NY2d 473, 477), I have no hesitancy in concluding, particularly in light of the close and difficult medical question presented to the jury and the prior equivocal medical testimony, that denial to defense counsel under the circumstances of this case of an overnight adjournment (a loss of about three hours court time) was, though not “actuated by any improper motive”, an “abuse of discretion, in a legal sense * * * [and] a plain error of law” (Meyer v Cullen, 54 NY 392, 397).

In Matter of Anthony M.: Order affirmed, without costs.

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

In People v Cable and Godbee: Orders insofar as appealed from reversed, convictions and sentences for felony murder, second degree manslaughter and first degree robbery reinstated and case remitted to the Appellate Division, First Department, for further proceedings in accordance with the opinion herein.

Chief Judge Cooke and Judges Jasen, Jones, Wachtler and Simons concur with Judge Kaye; Judge Meyer dissents in part and votes to reverse and order a new trial as to both defendants in a separate opinion.

      . It was stipulated that Dr. Geeben Natarajan, Deputy Medical Examiner of New Jersey, would have given the same testimony as Dr. Factor, for defendant Cable.

      . [4] Godbee’s contention in this court is not so much that the evidence was improper rebuttal, particularly since (a) it responded to the scientific observations given by the defense expert; (b) permitting testimony, even if not technically rebuttal, was not shown to have been an abuse of discretion (CPL 260.30, subd 7; see, also, People v Harris, 57 NY2d 335, 345-346, cert den 460.US 1047); and (c) no objection was asserted on the basis of improper rebuttal until the" witness had completed direct, cross and redirect examination, when a motion to strike was made (see Richardson, Evidence [Prince, 10th ed], § 537, p 529). Godbee’s contention — which we reject — is that since the prosecution was allowed rebuttal, the defense had an absolute right under CPL 260.30 (subd 7) to present surrebuttal testimony in the person of another medical witness.

      . Although before us only Godbee has briefed the point, defendant Cable’s attorney joined in the requests for continuance, for a mistrial, and to strike Dr. Hyland’s testimony. A new trial should, therefore, be had as to both defendants.

      . The People’s reply brief concedes that “portions of Dr. Hyland’s testimony were more properly part of the People’s direct case”.


author: Per Curiam.

text:
    The People of the State of New York, Respondent, v Miguel Leiva, Appellant.
    Argued October 8, 1984;
    decided November 13, 1984

      POINTS OF COUNSEL

      David P. Greenberg and William E. Hellerstein for appellant.
    First degree robbery is an inappropriate predicate crime for a count charging first degree criminal use of a firearm, because any criminal use count incorporating robbery as its underlying crime causes conflicts between the criminal use and robbery statutes and is superfluous to the remedial legislative purpose behind the criminal use statute. (People v Horne, 121 Misc 2d 389; People v Serrano, 119 Misc 2d 321; People v Cohen, 50 NY2d 908; People v Miller, 79 AD2d 579.)

      Robert M. Morgenthau, District Attorney (Irving L. Rotter and Debora K. Grobman of counsel), for respondent.
    First degree knife-point robbery is an appropriate predicate class B violent felony for a charge of criminal use of a firearm. (Nettleton Co. v Diamond, 27 NY2d 182; People v Graham, 55 NY2d 144; Allen v Minskoff 38 NY2d 506; Lawrence Constr. Corp. v State of New York, 293 NY 634.)
   OPINION OF THE COURT

Per Curiam.

The order of the Appellate Division should be affirmed.

In the late evening of October 24, 1980, defendant, Miguel Leiva, together with Reynaldo Barrios, accosted and robbed Merrill Fuchs as she walked along Cabrini Boulevard in Manhattan. Defendant displayed what appeared to be a handgun, but which was actually a toy pistol, and Barrios wielded a knife. Defendant and Barrios were apprehended and, by means of a four-count indictment, were charged with (1) first degree robbery, pursuant to subdivision 3 of section 160.15 of the Penal Law, for displaying a dangerous instrument, a knife, during the commission of the crime; (2) second degree robbery, pursuant to subdivision 1 of section 160.10 of the Penal Law on the theory of accomplice presence; (3) second degree robbery, pursuant to subdivision 2 of section 160.10 of the Penal Law, for display of what appeared to be a handgun; and (4) first degree criminal use of a firearm, pursuant to section 265.09 of the Penal Law.

After a jury trial, defendant was found guilty on all four counts of the indictment and was sentenced to concurrent prison terms of three to nine years on each of the four conviction counts. The Appellate Division, First Department, unanimously affirmed the conviction, without opinion.

The issue presented is whether first degree robbery is an appropriate predicate crime to support a conviction for first degree criminal use of a firearm.

Defendant contends that the utilization of first degree robbery as the predicate crime to support a conviction for criminal use of a firearm is inappropriate since every robbery involving a gun qualifies as an armed felony, and it would be superfluous to prosecute for both first degree robbery and criminal use of a firearm. Inasmuch as defendant’s first degree robbery conviction rests upon the display of a dangerous instrument — a knife — and not a gun, the first degree robbery conviction, a class B felony, properly serves as a predicate crime to support a conviction for criminal use of a firearm. Accordingly, the alleged conceptual redundancy of concurrent prosecution of defendant for both criminal use of a firearm and first degree robbery based upon the presence or apparent presence of a firearm, and the question of whether such a prosecution would be concordant with the intended scope of section 265.09 of the Penal Law, need not be addressed.

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

Order affirmed.


author: Chief Judge Cooke.

text:
    Grant-Howard Associates et al., Respondents, v General Housewares Corp., Appellant.
    Argued September 6, 1984;
    decided October 16, 1984

      POINTS OF COUNSEL

      James M. O’Brien for appellant.
    I. Housewares is not liable for the Pohl claim. (Hagaman Mfg. Corp. v Rough-Wear Clothing Co., 284 App Div 189; Bartley v Walentas, 78 AD2d 310; Balkan Demolition Co. v Yorkshire Ins. Co., 3 AD2d 902; Spoor-Lasher Co. v Aetna Cas. & Sur. Co., 39 NY2d 875; Hartford Acc. & Ind. Co. v Canron, Inc., 43 NY2d 823; Gardner v Fyr-Fyter Co., 47 AD2d 591; People v Bneses, 91 Misc 2d 625; People v Heller, 33 NY2d 314.) II. Summary judgment should not have been granted to plaintiffs herein, since they did not sustain their burden of proof and questions of fact exist. (Heil Co. v Swiftainer Inds. Corp., 52 AD2d 549; Scolite Int. Corp. v Vincent J. Smith, Inc., 68 AD2d 417; Chisholm Ryder Co. v Monro Games, 58 AD2d 972; Yates v Dow Chem. Co., 68 AD2d 907; Hartford Acc. & Ind. Co. v Canron, Inc., 43 NY2d 823; Schumacher v Richards Shear Co., 88 AD2d 1071, 59 NY2d 239; Emrich v Kroner, 79 AD2d 854.) III. Housewares has made no admissions against interest in the pleadings as urged by Holt Howard. (Arena v Home Ind. Co., 33 AD2d 694; Davis v Prudential Ins. Co., 31 AD2d 865; Giaraffa v Moore-McCormack Lines, 270 F Supp 342.)

      Mark Jon Sugarman and George B. Yankwitt for respondents.
    I. Housewares has assumed all of Holt Howard’s liabilities as a matter of law since the reorganization constitutes a de facto merger. (Travis v Harris Corp., 565 F2d 443; Knapp v North Amer. Rockwell Corp., 506 F2d 361; Shannon v Langston Co., 379 F Supp 797; Cinocca v Baxter Labs., 400 F Supp 527; Amader v Pittsburgh Corning Corp., 546 F Supp 1033; Chadwick v Air Reduction Co., 239 F Supp 247; Lopata v Bemis Co., 383 F Supp 342; Kloberdanz v Joy Mfg. Co., 288 F Supp 817.) II. Housewares has assumed the liabilities of Holt Howard as a matter of law under the mere continuation doctrine. (Knapp v North Amer. Rockwell Corp., 506 F2d 361; Forest Labs. v Pillsbury Co., 452 F2d 621; Bazan v Kux Mach. Co., 358 F Supp 1250; Shane v Hobam, Inc., 332 F Supp 526; Copease Mfg. Co. v Cormac Photocopy Corp., 242 F Supp 993; Schumacher v Richards Shear Co., 59 NY2d 239.) III. The judgment and order appealed from fits squarely within the rules of law established by this court in Schumacher v Richards Shear Co. (Schumacher v Richards Shear Co., 59 NY2d 239.) IV. Pursuant to the relevant terms of the Reorganization Agreement, Housewares has expressly and impliedly assumed any liability arising from Pohl action. (Parochial Bus Systems v Board of Educ., 60 NY2d 539; Keller v Clark Equip. Co., 715 F2d 1280; Bouton v Litton Inds., 423 F2d 643.) V. In view of the fact that the liability in issue has been both expressly assumed and assumed by operation of law, Housewares’ counterclaim was properly dismissed. VI. Housewares is liable to respondents for all costs, including attorneys’ fees, incurred in both defending against the claims asserted in the Pohl action, as well as the costs arising from the present action. (Bouton v Litton Inds., 423 F2d 643; Chase v Brandis, 238 App Div 440; State Bank v Sheldon, 130 Misc 64; Mann v Munch Brewery, 225 NY 189.)
   OPINION OF THE COURT

Chief Judge Cooke.

The legal doctrine that a successor corporation may be held liable for the torts of its predecessor does not prevent two companies from allocating risk for such injuries among themselves. Thus, the purchasing company here is not required to indemnify plaintiffs in the circumstances of this case.

Plaintiffs are a defunct corporation, Holt Howard Associates, Inc., its major shareholders, and a partnership, Grant-Howard Associates, formed by two of the individual shareholders. The corporate business involved the importing and sale of housewares.

On July 15,1969, defendant General Housewares Corporation entered a “Reorganization Agreement” to purchase substantially all of Holt Howard’s corporate assets by transferring its own stock and assuming certain specified liabilities of Holt Howard. Specifically, in section 6(b), defendant “agree[d] to assume, perform and discharge (i) all of the obligations and liabilities of [Holt Howard] which exist at the Closing Date, except for such of those liabilities as are excluded from this assumption by the following Section 6(c),” which contained a general and specific enumeration of matters. No express reference was made to contingent tort liability. Section 13 of the Reorganization Agreement was a lengthy indemnification clause providing that: “in no event shall [defendant] be liable for any damages, claims, losses, liabilities or expenses (including legal and other expenses) with respect to any liabilities, obligations or other commitments not assumed by [defendant]”; and the plaintiff shareholders would hold defendant harmless for such liabilities and expenses. The closing was held on August 18, 1969, and Holt Howard was dissolved nine days later.

In 1974, Stephanie Pohl allegedly was injured after she drank juice from a ceramic pitcher that had been imported and sold by Holt Howard in 1967. She commenced two actions. One named Holt Howard, its shareholders, and Grant-Howard as defendants; the other moved against General Housewares as successor in interest to Holt Howard.

Plaintiffs commenced the present action seeking a declaration that, pursuant to the Reorganization Agreement, defendant had assumed liability for the Pohl injuries and that plaintiffs were entitled to indemnity for any and all funds expended for defending the Pohl suit and paying any judgment. Defendant answered and asserted counterclaims for common-law indemnity. On cross motions for summary judgment, Special Term granted plaintiffs’ motion. That court discounted the import of the Reorganization Agreement by assessing the controversy as follows: “This issue transcends the intent of the parties to the business arrangement since the rights of an injured third party are involved and poses the question of whether as a matter of law the legal effect of the acquisition subjects the defendant General to liability to the third party in a product liability case” (Grant-Howard Assoc, v General Housewares Corp., 115 Misc 2d 704, 705). The court then concluded that defendant was a successor corporation to Holt Howard and, as such, had assumed Holt Howard’s liabilities as a matter of law. On that basis, the court ruled that plaintiffs were entitled to common-law indemnification. The Appellate Division affirmed, and this court granted defendant’s motion for leave to appeal.

Plaintiffs continue to argue that they must be indemnified in the Pohl lawsuit because defendant is liable to Pohl as a successor corporation. Although perhaps logically sound, plaintiffs’ argument fails as it commences with a faulty premise: that the doctrine of successor corporations is related to theories of indemnification.

Allowing recovery in tort against a successor corporation is merely an extension of the concept of products liability, which calls for the burden of consumer injuries to be borne by the manufacturer, who can transfer the costs to the general public as a component of the selling price. Strict liability assures that a responsible source is available to compensate the injured party. “A corporation may be held liable for the torts of its predecessor if (1) it expressly or impliedly assumed the predecessor’s tort liability, (2) there was a consolidation or merger of seller and purchaser, (3) the purchasing corporation was a mere continuation of the selling corporation, or (4) the transaction is entered into fraudulently to escape such obligations” (Schumacher v Richards Shear Co., 59 NY2d 239, 245). The second and third items are based on the concept that a successor that effectively takes over a company in its entirety should carry the predecessor’s liabilities as a concomitant to the benefits it derives from the good will purchased. This is consistent with the desire to ensure that a source remains to pay for the victim’s injuries.

All of this, however, is irrelevant to the question of indemnification or liability as between the seller and purchaser. The precise issue here is the ordering of relations between the two contracting parties, not guaranteeing that some third party has recovery against a tort-feasor. A sale of assets does not vitiate the original company’s liability (see Business Corporation Law, § 1006); it may allow an injured plaintiff to proceed against a successor corporation (see Schumacher v Richards Shear Co., supra). In short, the injured party can elect to proceed against the defunct corporation, the successor corporation, or both. This right of election cannot be altered per se by the corporations. The companies can regulate how such liability will be allocated among themselves, but they cannot affect the rights of a stranger to their contract (see Texas & Pacific Ry. v Watson, 190 US 287, 293; Robins Dry Dock & Repair Co. v Navigazione Libera Triestina, S.A., 261 NY 455, 463, cert den sub nom. Moran Towing & Transp. Co. v Robins Dry Dock & Repair Co., 290 US 656; Brewer v New York, Lake Erie & Western R. R. Co., 124 NY 59; Buck u Standard Oil Co., 224 App Div 299, affd no opn 249 NY 595; Finegan v Piercy Contr. Co., 189 App Div 699).

By this analysis, it is unnecessary to decide defendant’s status as a successor corporation. Who must bear the ultimate burden of defending the Pohl suit and, if unsuccessful, paying the damages, is wholly dependent on the terms of the Reorganization Agreement. That contract included defendant’s assumption of existing liabilities. As Pohl was not injured until some five years later, this potential liability was excluded and so was not assumed by defendant.

Plaintiffs argue that defendant must bear the burden of the Pohl claim because it was a contingent liability at the closing date. They reason that the allegedly faulty ceramic pitcher was purchased before defendant acquired Holt Howard so that there was already the potential for a lawsuit. This is not persuasive. A tort action does not accrue until injury occurs (see Martin v Dierck Equip. Co., 43 NY2d 583, 591; Victorson v Bock Laundry Mach. Co., 37 NY2d 395, 403). An uninjured party simply is not a “contingent liability” in the usual sense of that term (see, e.g., Black’s Law Dictionary [5th ed], p 291 [“A potential liability; e.g. pending lawsuit”]). There is no liability or claim before injury occurs. Granted that “contingency” invokes uncertain events, the uncertainty should be restricted to the success of asserting an existing claim, rather than expanding it to include the altogether unpredictable event that an injury will occur. Were plaintiffs’ position to be adopted, a purchaser would be unable to meaningfully limit its liability as every item ever sold by the predecessor would be a potential source of assumed liability. Thus, plaintiffs are not entitled to indemnity because the Pohl claim was not an existing liability at the time of closing.

Inasmuch as defendant’s counterclaims sought relief solely on the basis of common-law principles of indemnity, this court does not have occasion to determine whether defendant is entitled to indemnity under the Reorganization Agreement. As the lower courts never ruled on defendant’s counterclaims, which may involve questions of fact, the action must be returned for their consideration.

Accordingly, the order of the Appellate Division should be reversed, with costs; defendant’s answer should be reinstated; and the case should be remitted to Supreme Court, New York County, for entry of judgment in favor of defendant declaring that defendant has not assumed the liability of Holt Howard Associates, Inc., asserted herein, and for further proceedings in accordance with this opinion.

Judges Jasen, Jones, Meyer, Simons and Kaye concur; Judge Wachtler taking no part.

Order reversed, etc.