author: Bellacosa, J. Titone, J. Kaye, J.

text:
    The People of the State of New York, Respondent, v Dionisio Hernandez, Appellant.
    Argued January 4, 1990;
    decided February 22, 1990

      POINTS OF COUNSEL

      Robert M. Pitler and Daniel E. Rosenfeld for appellant.

      Charles J. Hynes, District Attorney (Carol Teague Schwartzkopf and Barbara D. Underwood of counsel), for respondent.

      Guy C. Quinlan, Kenneth Kimerling and Kathleen A. Murray for Puerto Rican Legal Defense and Education Fund, Inc., amicus curiae.

   OPINION OF THE COURT

Bellacosa, J.

Defendant’s essential argument attacks the judgment of conviction as having been secured in violation of his equal protection rights because, as he asserts, the prosecution discriminatorily exercised its peremptory challenges to exclude two Latino persons from the jury that ultimately found him guilty of two counts each of attempted murder and criminal possession of a weapon (see, Batson v Kentucky, 476 US 79). Defendant, also a Latino, satisfied the Batson (476 US 79, supra) threshold predicate of discriminatory use of peremptory challenges by the prosecutor’s rejection of all the Latino prospective jurors.

The dispositive issue — circumscribed in this case by pertinent undisturbed factual findings — is whether the prosecution can be said to have failed to satisfy its burden, in turn, to come forward with a neutral explanation for its eschewal of those prospective jurors so as to refute the inference of purposeful discrimination. The two prospective jurors at issue, who were fluent in Spanish, indicated, according to the prosecutor’s articulated belief, that they would only try to respect as authoritative the official court interpreter’s translation of evidence given by Spanish-speaking witnesses. This prosecutorial assertion, sufficiently documented by the record and supported in the findings of the two lower courts, warrants our concluding that the prosecutor fulfilled his burden of coming forward with a satisfactory explanation that the peremptory strikes in this case were neutral and nondiscriminatory. We thus affirm the order of the Appellate Division which had affirmed the conviction.

The conviction, after a jury trial, arose out of a shooting in which defendant had attempted to kill his young woman friend and her mother as they left a restaurant in Brooklyn. During the incident, random shots from defendant’s gun struck and wounded two other patrons of the restaurant.

Prior to trial and after the voir dire examination of 63 jurors had been completed and nine jurors had been selected, defense counsel objected to the prosecutor’s use of peremptory challenges excusing four potential jurors with Latino surnames. Over the course of an extensive record colloquy, defense counsel objected repeatedly that the prosecutor had removed every Latino from the venire and moved for a mistrial.

The Assistant District Attorney responded that he had challenged two of the jurors, Munoz and Rivera, because each had a brother who had been prosecuted by the same District Attorney’s office and that in his opinion these jurors could not be fair in their deliberations on the case. The prosecutor further explained that he had challenged the other two jurors, Mikus and Gonzalez — the only jurors pertinent to the disposition of the issue before us — because each had given him a basis to believe from words and actions that their Spanish language fluency might create difficulties in their accepting the official court interpreter’s translation of the testimony of the Spanish-speaking witnesses. Among selected expressions made during the colloquy, the prosecutor proffered this summary for the record: "assistant district attorney: Your Honor, my reason for rejecting the — these two jurors — I’m not certain as to whether they’re Hispanics. I didn’t notice how many Hispanics had been called to the panel, but my reason for rejecting these two is I feel very uncertain that they would he able to listen and follow the interpreter. * * * We talked to them for a long time; the Court talked to them, I talked to them. I believe that in their heart they will try to follow it, but I felt there was a great deal of uncertainty as to whether they could accept the interpreter as the final arbiter of what was said by each of the witnesses, especially where there were going to be Spanish-speaking witnesses, and I didn’t feel, when I asked them whether or not they could accept the interpreter’s translation of it, I didn’t feel that they could. They each looked away from me and said with some hesitancy that they would try, not that they could, but that they would try to follow the interpreter, and I feel that in a case where the interpreter will be for the main witnesses, they would have an undue impact on the jury. ” (Appellant’s appendix, at A-23 — A-24 [emphasis added]; see also, appellant’s appendix, at A-26— A-28, A-29). The trial court then denied defendant’s mistrial motion, stating: "the court: Therefore, he [Assistant District Attorney] didn’t make a challenge for cause based upon that, but he said the reason that he did in fact remove these jurors is because even though they said they could listen to what the interpreter said and not let their own evaluation of what the witness says be the answer that they would utilize, he said I have grave doubts, and that’s why I’m asking”. (Appendix, at A-32 [emphasis added].) The case was tried with no Latinos on the jury and defendant was convicted. The Appellate Division affirmed the judgment of conviction and a Judge of this court granted leave to appeal.

New York’s Criminal Procedure Law provides a method for both the prosecution and defense counsel to challenge for cause the selection of a potential juror if it can be shown that bias may prevent that juror from deciding the case impartially (CPL 270.20). Additionally, a limited number of peremptory challenges — because counsel may intuit a bias that is not documentarily demonstrable sufficient for a challenge for cause — are allowed to exclude jurors usually without any explanation (CPL 270.25).

The 1986 rule in Batson v Kentucky (476 US 79, supra) added restrictions to the exercise by prosecutors of their peremptory challenges against members of a defendant’s racial class. It abandoned the prosecutorially weighted evidentiary tilt of Swain v Alabama (380 US 202) and imposed a new and important calculus. To succeed initially in erecting the presumption of purposeful discrimination, the defendant must demonstrate (1) membership in a "cognizable racial group”; (2) the exercise of peremptory challenges by the prosecutor to exclude members of the defendant’s group; and (3) "facts and any other relevant circumstances rais[ing] an inference” of a discriminatory purpose (Batson v Kentucky, supra, at 96).

At that point the burden shifts to the prosecution to come forward and overcome the attribution and inference of purposeful discrimination with an articulable neutral explanation for having excused those jurors. The prosecutor’s explanation need not rise to the level for sustaining a challenge for cause. On the other hand, the prosecutor cannot simply state that rejecting the jurors rested on the assumption they might be favorably disposed to the defendant because of shared race or ethnic similarities. While the prosecutor has this burden of coming forward, "the ultimate burden of persuasion” must be carried by the person alleging the intentional discrimination (Batson v Kentucky, supra, at 94, n 18). By these respective weights, Batson calibrates the test and burdens while supplying a potent and appropriate remedy against invidious petit jury discrimination.

In People v Scott (70 NY2d 420), we applied the Batson rule retroactively under Griffith v Kentucky (479 US 314). Defendant, a black woman, was charged with murdering and robbing a white man. There were five black prospective jurors in the venire and the prosecutor excused them all peremptorily. We held that the prosecutor’s " 'pattern’ of strikes” gave rise to an inference of discrimination satisfying defendant’s lighter burden (People v Scott, supra, at 425-426). We reversed without having to address in that case the issue of what constitutes a neutral explanation under Batson.

Here, no one challenges the triggering of Batson’s threshold. The exercise of prosecutorial peremptory challenges to exclude the only Latino jurors in the prosecution of a Latino defendant is enough (Batson v Kentucky, 476 US, supra, at 96-97; People v Scott, 70 NY2d 420, supra). The only new issue, circumscribed here by pertinent undisturbed factual findings, is whether the prosecution responded with a satisfactory nondiscriminatory explanation for excluding the only Latino jurors. Defendant contends as a matter of law that the burden has not been met because the Latino origins and the Spanish language are so inextricably intertwined that an exclusion of Latinos on the basis of language is inescapably, almost irrefutably, an exclusion on forbidden ethnic or racial grounds.

These jurors, however, were challenged because they indicated their knowledge of the Spanish language might interfere with their sworn responsibility as jurors to accept the official translation of the Spanish-proffered testimony. So it cannot be, as defendant has posed it and as the dissenting opinion would conclude, that the isolated language-ethnic identity factor alone determines this case.

Rather, the prosecutor’s belief was that the two Spanish-speaking jurors might be unable or unwilling to accept the evidence properly submitted to them by the court. That is a legitimate neutral ground for exercising a peremptory challenge, and it was for the trial court to determine if the prosecutor’s explanation was pretextual or real and justified by the answers and conduct of the two jurors during voir dire. Indeed, the Supreme Court itself recognized that resolution of these issues springing from the Batson test were rightly reposed in fact-finding courts entitled to “great deference” with customary appellate oversight (Batson v Kentucky, 476 US, supra, at 97-98, n 21). That reasonable minds could disagree at this level of review on this record demonstrates the wisdom and propriety of the Supreme Court’s and our view that, in the distribution of judicial functions among courts, deference generally to the fact-finding and evidence-viewing court is warranted in these circumstances. The trial court accepted the prosecutor’s explanation, as did the Appellate Division, and we have no basis in law or policy to conclude that those courts erred in these essentially factual determinations.

Indeed, the prosecution documented its belief on the jurors’ statements and on doubt-raising body language descriptions (e.g., averted eyes and gazes on being questioned on the critical points) developed during an extensive voir dire and placed on the record before the Trial Justice, who was also present at the entire voir dire. The record-based beliefs, advanced to satisfy its Soison-based burden, do not appear to us as a matter of law and did not appear to the lower courts as a matter of fact to be some facial facade. If the court was not satisfied with the adequacy of this explanation after watching and listening to the proceedings, of course it could have conducted a further voir dire; but under the circumstances presented here, that was a matter within the trial court’s discretion.

The burden, moreover, does not require the prosecution, as the dissenting opinion would, to come forward with reasons rising, in effect and function, to a sustainable challenge for cause, for that would extend Batson and Scott, not apply them. Justice Powell’s opinion for the Supreme Court in Batson is the primary source of guidance and development, and it is carefully modulated to require that the prosecution must show only a neutral record-based belief for exercising a now properly circumscribed statutory right of peremptory excusal of jurors. To bear a proper and balanced burden of coming forward with a neutral explanation of a peremptory excusal of a juror is one thing; to create a new, higher burden of disproving, under "enhanced scrutiny” and the "inherently suspect” classification, a subjective, even "unconscious,” state of mind is quite something else. This would be practically and legally speaking an impossible and ultimate burden of proof, not the lesser burden of coming forward with a justifiable explanation. Indeed, this rule would not just circumscribe the exercise of a peremptory challenge by the People; it would change its very nature because the People would have to prove cause for removal as to the juror and absolute purity as to themselves.

In sum, we view quite straightforwardly the essence of this case as being really about a prosecutor’s court-accepted explanation concerning the ability of these jurors — or any sworn jurors no matter their race or ethnic similarities — to decide a case on the official evidence before them, not on their own personal expertise or language proficiency (compare, People v Legister, 75 NY2d 832). Hesitancy or uncertainty about being able to decide the case on the same evidence which binds every member of a jury is a proper, neutral and nondiscriminatory basis for the prosecutorial exercise of peremptory challenges. The findings here of a legitimately articulated reason rooted in principles of jury selection, responsibility and function are valid and supportable in this record.

It is important to emphasize, however, that pretextual maneuvering or less verifiable manifestations of jurors’ attitudes about adhering to governing instructions will not satisfy the prosecution’s burden. Thus, our holding in no way diminishes the apodictic policy and precedents at issue, which we unequivocally reaffirm.

Our analysis of the record and issues of this case on the merits would produce the same result under the Federal and State equal protection right, as no justification for breaking new ground as to this clause by differentiating between this dually protected constitutional right is sufficiently advanced (see, Under 21 v City of New York, 65 NY2d 344, 360; Matter of Esler v Walters, 56 NY2d 306, 313-314).

Defendant’s remaining contentions of evidentiary trial errors involving impeachment, bolstering and cross-examination are unavailing, because in the circumstances of this case these matters were within the range of the trial court’s discretion.

There being no equal protection violation or any other error warranting disturbing the actions of the courts below, the order of the Appellate Division should be affirmed.

Titone, J.

(concurring). I am in complete agreement with and wholeheartedly join in the majority opinion by Judge Bellacosa. In addition, the posture in which the Batson question is presented here prompts me to set forth my own, strongly held beliefs on the subject of post -Batson peremptory challenges.

In his concurrence in Batson v Kentucky (476 US 79, 102-108), Justice Marshall made the observation that the potential for racial discrimination is inherent in the very notion of a system of juror challenges that need not be explained. He further noted that a prosecutor’s seemingly neutral verbiage explaining his use of peremptories can easily mask an underlying racist animus, whether conscious or unconscious, adding another layer of complexity to the trial court’s task of assessing the propriety of the proffered explanation.

Justice Marshall’s comments highlight for me the very profound difficulties involved in reconciling a juror challenge system that is theoretically based on the attorney’s inexplicable personal hunch with a constitutional rule that requires attorneys to offer satisfactory "neutral” explanations for their choices. The mandated inquiry, as it is conceived in both the majority and the dissenting opinions, entails an analysis that looks beyond the prosecutor’s stated explanation in certain instances, and considers the prosecutor’s subjective motivations and state of mind. The inquiry thus renders what was originally to be a matter of unexplained choice into an exploration that is in some respects more complex, and certainly more intrusive, than the objective inquiry involved in resolving juror challenges for cause. Moreover, because, as the dissenter notes, racist motives are easily concealed, there is no assurance that even an in-depth inquiry will be effective in eradicating racial bias in the jury selection process.

The Supreme Court’s decision in Batson was a welcome, necessary and important judicial statement that racial bias and racist motivations have no place in our American courtrooms. In the final analysis, however, the most significant development to come out of Batson may well lie in Justice Marshall’s observation that "only by banning peremptories entirely can such discrimination be ended.” (476 US, at 108.) Even Batson, as Justice Marshall noted, permits a degree of discrimination by establishing a threshold test for a prima facie case that tolerates some number of unexplained ethnically targeted challenges (476 US, at 105 ["(p)rosecutors are left free to discriminate * * * provided that they hold that discrimination to an 'acceptable level’ ”]). Manifestly, an institution that furnishes the opportunity for racial discrimination, at any level, is — and will continue to be — highly problematic in a society that has grown increasingly intolerant of judgments made on the basis of stereotyping in any form.

At this point in the evolution of this legal issue, I suspect that rather than developing a complex set of judicially imposed limitations and standards, the most constructive course would be for the Legislature to take a hard look at the existing peremptory system with a view toward determining whether it is still viable, at least as it is presently constituted. Whether or not Justice Marshall was correct in his assumption that the historic institution of peremptory challenges simply cannot be purged of its potential for discriminatory practices, it has become increasingly clear that judicial efforts to accomplish that goal can lead only to new layers of inquiry and complex tests that are fundamentally incompatible with the institution’s basic premise (see, People v McCray, 57 NY2d 542, 545-549). While such efforts can and must continue to be made, it seems to me that the time is fast approaching for the Legislature to rethink its policy choices in this highly sensitive area of law.

Kaye, J.

(dissenting). The special importance of this appeal is that it calls upon us, for the first time, to spell out the People’s burden once a defendant has established a prima facie case of discrimination in the exercise of peremptory challenges. The United States Supreme Court has not yet been required to do that; nor has our only other opinion on point — People v Scott (70 NY2d 420). By this case we thus set a course for the future in this State, marking out the tolerable limits for the People’s exercise of peremptory challenges.

The course we now set, I believe, diminishes the declared principle that peremptory challenges cannot be used to discriminate against racial or ethnic groups. As Justice Marshall cautioned in Batson v Kentucky, "[a]ny prosecutor can easily assert facially neutral reasons for striking a juror”. (476 US 79, 106.) If that is all that is required, the majority’s decision proves his point that there is indeed little real protection in defendant’s newly recognized equal protection right. I therefore respectfully dissent.

Preliminarily, this case should be decided as a matter of State law, rather than Federal law (majority opn, at 358).

Issues involving the proper exercise of peremptory challenges are especially suited to resolution as a matter of State law at this time. As Justice White made clear in his Batson concurrence, "[m]uch litigation will be required to spell out the contours of the Court’s equal protection holding today, and the significant effect it will have on the conduct of criminal trials cannot be gainsaid.” (476 US, at 102.) In a matter of such day-to-day vital importance locally, the citizens of this State would be well served by the development of an authoritative body of State law instead of being held in suspense, case-by-case, over the next decade of litigation while the United States Supreme Court fleshes out the newly recognized minimum equal protection right that will prevail across the Nation. Several other State courts do exactly this. Indeed, the independent development of State law concerning peremptory challenges has proved particularly beneficial nationally as well as locally. It was, after all, State courts independently construing their State Constitutions that ultimately led the Supreme Court in Batson to abandon Swain v Alabama (380 US 202) and follow "the lead of number of state courts construing their State’s Constitution.” (See, Batson v Kentucky, supra, at 82, n 1.)

Moreover, it cannot be assumed that State law would proceed in lockstep with Federal law as the Federal law on this issue emerges. While this court in People v McCray (57 NY2d 542, cert denied 461 US 961) declined to read the State equal protection right differently from then-existing Federal law, Batson has effected a very significant change in Federal law that might well alter that conclusion. Just such a shift occurred only recently with respect to the exclusionary rule (see, People v P. J. Video, 68 NY2d 296, cert denied 479 US 1091; see also, People v Johnson, 66 NY2d 398, 411 [Titone, J., concurring]).

Thus, I would decide this case as a matter of State law, agreeing with the observation of the New Jersey Supreme Court that the fact "[t]hat the United States Supreme Court has overruled Swain in Batson does not mean that the laboratories operated by leading state courts should now close up shop.” (State v Gilmore, 103 NJ 508, 522, 511 A2d 1150, 1157.)

Reaching the merits, if our review of the prosecutor’s conduct is to become merely a matter of identifying undisturbed findings of fact with some support in the record, or deferring to the trial court and Appellate Division or to the prosecutor’s assertion of some ostensibly neutral ground, then the role of this court in defining and protecting defendant’s nascent constitutional right has been virtually surrendered at the outset. While the Trial Judge’s observations of the unfolding events are of course important, there is still a significant role for this court in clearly articulating the standard and then determining the law question whether the People have satisfied that standard. That has not been done.

This case differs from other "Batson” cases in a critical respect that is not sufficiently credited by the majority. Here, the prosecutor’s "neutral” explanation is one that necessarily produces disparate impact on a single ethnic group. The statistics before us indicate that, in Kings County, virtually all Latinos speak Spanish at home. That this case additionally involves testimony of witnesses in Spanish and an official translator hardly minimizes the potential for disparate impact: we are advised that the State court system employs 113 Spanish translators — presumably rendering accurate translations in court proceedings — who are engaged more than 250 times a day. Accepting as a sufficient explanation that the prosecution will offer the testimony of a witness whose native tongue is Spanish — whether or not an interpreter is required —too easily circumvents the People’s obligation and the defendant’s right, and allows the prosecutor to do by indirection what can no longer be done directly.

An explanation by a prosecutor that may appear facially neutral but nonetheless has a disparate impact on members of defendant’s racial or ethnic group is "inherently suspect.” (Serr & Maney, Racism, Peremptory Challenges, and the Democratic Jury: The Jurisprudence of A Delicate Balance, 79 J Grim L & Criminology 1, 54 [1988].) Consequently, a reason that is grounded largely in speculation rather than facts uncovered in a voir dire examination, as revealed by the record, should not be accepted (see, State v Slappy, 522 So 2d 18 [Fla]; Gamble v State, 257 Ga 325, 357 SE2d 792; State v Gilmore, supra; see also, 2 LaFave & Israel, Criminal Procedure § 21.3 [1989 Pocket Part]). To conclude otherwise can too easily permit discriminatory practices to continue. " '[I]t is even possible that an attorney may lie to himself in an effort to convince himself that his motives are legal.’ * * * A prosecutor’s own conscious or unconscious racism may lead him easily to the conclusion that a prospective [Latino] juror is ‘sullen,’ or 'distant,’ a characterization that would not have come to his mind if a white juror had acted identically. A judge’s own conscious or unconscious racism may lead him to accept such an explanation as well supported. * * * [Prosecutor’s peremptories are based on their 'seat-of-the-pants instincts’ * * * Yet 'seat-of-the-pants instincts’ may often be just another term for racial prejudice.” (Batson v Kentucky, 476 US, supra, at 106 [Marshall, J., concurring].)

Here, there is not a sufficient evidentiary record to support the prosecutor’s explanation. Two persons believed to be of "Spanish descent” were excluded because their Spanish language fluency "might interfere with their sworn responsibility as jurors to accept the official translation of the Spanish-proffered testimony.” (Majority opn, at 356.) The majority skews the issue when it states that this case is really about these jurors’ ability "to decide [the] case on the official evidence before them, not on their own personal expertise or language proficiency” (majority opn, at 357); if that were so they undoubtedly would have been excused for cause. Despite this court’s repeated reference to the two jurors’ initial expressed uncertainty or hesitancy, the fact remains that both individuals satisfied the court that they would accept the official court translation, and that they would be fair and impartial jurors. As the Trial Judge stated on the record, the two jurors "said they could listen to what the interpreter said and not let their own evaluation of what the witness says be the answer that they would utilize.” Similarly, the prosecutor acknowledged that the jurors’ "final answer was they could do it” (i.e., accept the official court translation as final).

While the People emphasize their interest in excluding Spanish-speaking jurors because of the presence of an interpreter, there is no indication that any other members of the panel were also asked if they spoke Spanish. Charged by defense counsel with discriminating against the two, it is significant that in offering his explanation to the trial court the prosecutor made no indication of similar interest about the balance of the panel (cf., State v Antwine, 743 SW2d 51 [Mo], cert denied 486 US 1017 [reasons given — inattentiveness during voir dire and relative in prison — were also reasons used to challenge whites]; State v Walton, 227 Neb 559, 418 NW2d 589 [reason given — no ties to community — also used to challenge whites]; see also, 2 LaFave & Israel, op. cit.).

Thus, given the potential for disparate impact and the meager record made by the People on the issue, I cannot agree with the majority that the People have satisfied their burden of rebutting the prima facie case of discrimination in this case.

Where, as here, a language-based reason for exercising peremptory challenges is intimately linked to ethnicity and has the same impact as one that is, in fact, ethnically based, the People’s offer of a neutral explanation must be subjected to enhanced scrutiny. The objective of such scrutiny is not to equate peremptories with challenges for cause but to determine whether the proffered ground is indeed an appropriate reason to exclude such groups from the jury at all. Additional voir dire, either directed or conducted by the court, may not always be necessary, but some investigation or inquiry beyond the minimum mandated in the ordinary case is. Otherwise, absent that somewhat more demanding standard, the prosecution’s removal of all persons of a certain ethnic group, whether intentionally or not, can all too readily be justified by the mere recitation of a language-based reason. In this State, with its varied and often concentrated ethnic populations, the inevitable effect on the composition of our juries of permitting such language-based justifications without close inspection would be intolerable.

In any event, certainly something more is required than the prosecutor’s reference to a subjective impression (based on lack of eye contact) of the sincerity of the jurors’ assurances that they would accept the interpreter’s version of what the witnesses said. All that we know for certain in this case is that defendant is a Latino, and every Latino has been excluded from a panel of 63 individuals. That being so, the inference remains unrebutted that the trial prosecutor struck the last two Latino jurors on the basis of an intuitive judgment deriving from their heritage. The Supreme Court in Batson concluded that the prosecutor "may not rebut the defendant’s prima facie case of discrimination by stating merely that he challenged jurors of the defendant’s race on the assumption — or his intuitive judgment — that they would be partial to the defendant because of their shared race.” (476 US, at 97.) On this record, we really have no more than that.

Finally, I must question the majority’s facile assumption that the explanation offered by the prosecutor was a valid trial-related concern at all. If the interpreters employed by our criminal courts are as accurate as they should be, given that the defendant’s liberty may depend upon the translator’s words, then there should be no disagreement between the translator and jurors fluent in Spanish. Surely, the majority does not intend to suggest, on the other hand, that if the translator is rendering a witness’ testimony inaccurately into English, the State has a valid interest in permitting the errors to go unnoticed. And if the prosecutor’s concern is merely that the jurors may become involved in disputes about nuance and word choice, that could be adequately addressed by an instruction that Spanish-speaking jurors are to adhere to the official translation only, and bring any errors they may discern to the attention of the court, but under no circumstances to the attention of their fellow jurors. What is not a permissible method of addressing the situation is the wholesale exclusion from the jury of anyone sharing defendant’s racial or ethnic background.

On this record, the removal of the last two Latino jurors for what in the end is simply their proficiency in the Spanish language, should not be sanctioned. I would reverse the Appellate Division order and order a new trial.

Chief Judge Wachtler and Judges Simons and Titone concur with Judge Bellacosa; Judge Titone concurs in a separate opinion; Judge Kaye dissents and votes to reverse in another opinion in which Judge Hancock, Jr., concurs; Judge Alexander taking no part.

Order affirmed.

       It may well be that a system with a drastically reduced number of peremptories for each side would adequately serve the essential purpose of permitting some unexplained juror challenges (see, People v McCray, 57 NY2d 542, 547-549), while at the same time minimizing the opportunity for and incentives to engage in purposeful discrimination.


source: Caselaw Access Project

author: Hancock, Jr., J.

license: Public Domain

text:
    Federal Insurance Company, Appellant, v Arthur Andersen & Co., Respondent.
    Argued January 9, 1990;
    decided February 22, 1990

      POINTS OF COUNSEL

      Arthur N. Lambert and Susan E. Jaffee for appellant.

      Sidney H. Stein and Rob J. Crichton for respondent.
   OPINION OF THE COURT

Hancock, Jr., J.

Plaintiff, a fidelity insurer, paid its insured for a loss caused by the defalcations of an employee. Thereafter, it sued defendant, its insured’s accountant and auditor, to recover what it had paid, alleging that defendant was negligent in failing to discover the defalcations. This appeal is from an order affirming summary judgment against plaintiff and dismissing its action.

The decisive question is whether plaintiff’s rights to recover as equitable subrogee to the extent of its payment to its insured are barred as a matter of law, as defendant contends, either because plaintiff did not reimburse its insured for the full amount of the loss or because of the operation of the doctrine of superior equities. For reasons which follow, we reject the contention that plaintiff’s equitable rights are barred. Accordingly, the order of the Appellate Division should be reversed and summary judgment denied.

I

Between 1975 and 1983, Albert Ferrarese, an employee of Benton & Bowles (B&B), embezzled approximately $4,000,000 by manipulating the books of account and creating nonexistent receivables. Defendant — B&B’s auditor which prepared financial statements for the years 1980, 1981, and 1982 — was allegedly negligent in failing to uncover the fictitious receivables and permitting them to be reflected in B&B’s balance sheet. After discovery of Ferrarese’s defalcations, defendant and B&B on May 2, 1983 entered into a "Settlement Agreement and Release” under which each party released the other from any claims arising out of or connected with the fictitious receivables. As part of the settlement, defendant agreed to perform $900,000 worth of professional services for B&B. The agreement also contained the following provision: "It is further understood and agreed that this release shall not diminish, compromise, prejudice or otherwise affect in any way any rights of one party to this agreement against the other to which a third party may he subrogated by virtue of any insurance policy or otherwise” (emphasis added).

On February 13, 1985 plaintiff paid B&B $1,000,000 for the loss — the policy limit under its contract. In the "Release, Assignment and Subrogation Agreement” accompanying the payment, plaintiff and B&B each reserved its rights to seek reimbursement from Ferrarese or from any other person or firms responsible for the loss; B&B agreed that it did "hereby subrogate, assign, transfer and set unto [plaintiff] all the rights, claims, interest and causes of action it ha[d] against [defendant] up to the amount paid by [plaintiff] to [B&B]”; and B&B promised to cooperate with plaintiff in its efforts to seek reimbursement from defendant and to retain and produce at plaintiff’s request all correspondence, books and other documents pertaining to the loss. In addition, plaintiff and B&B, agreed as follows: "It is further understood that any of the aforesaid rights that [plaintiff] has against [defendant] have not been prejudiced or impaired in any way by any agreements entered into between [B&B] and [defendant]”.

In granting defendant’s motion for summary judgment and dismissing plaintiff’s amended complaint, Supreme Court rejected plaintiff’s contention that its agreement with its insured, B&B, gave it the right to sue defendant as B&B’s contractual subrogee. The court construed the writing between B&B and plaintiff not as an agreement effecting a contractual subrogation but rather as one purporting to assign to plaintiff whatever claims B&B had against defendant. Because B&B had released defendant in the May 2, 1983 agreement, Supreme Court reasoned that B&B had no rights to assign to plaintiff on February 13, 1985 when it attempted to do so. Thus, the court concluded that the February 13, 1985 agreement gave plaintiff no rights either as contractual subrogee or assignee.

Supreme Court also rejected plaintiff’s alternative theory that, however the February 13, 1985 agreement might be construed, plaintiff should be permitted to advance a claim for reimbursement as equitable subrogee. The court, citing Mc-Grath v Carnegie Trust Co. (221 NY 92) and American Sur. Co. v Gerold (255 App Div 285, rearg denied 255 App Div 950), stated that "it is basic to the existence of subrogation that the proposed subrogee pay the debt owed by the debtor to the creditor, in full. ” (Emphasis added.) Noting that plaintiff had made only a partial payment, the court held that even when "the partial payment represents the full extent of the duty owed by the proposed subrogee to the creditor, [it] will not result in subrogation”.

In view of its holding that plaintiff’s failure to make payment for the full loss to B&B barred its claim for equitable subrogation, Supreme Court found it unnecessary to determine whether plaintiff’s rights as equitable subrogee were also barred by application of the doctrine of superior equities. Supreme Court, however, did reject plaintiff’s contention that the doctrine of superior equities does not exist in New York. The Appellate Division unanimously affirmed the summary judgment and dismissal for the reasons stated at Supreme Court.

II

Any rights which plaintiff, as B&B’s insurer, has as equitable subrogee accrued to it not by virtue of some agreement with B&B, but independently of any contractual provision upon payment of the loss under its policy. Thus, if we hold that plaintiff may properly make a claim as B&B’s equitable subrogee, as we do, it becomes unnecessary to determine whether plaintiff also has a valid claim as contractual subrogee under the February 13, 1985 agreement with B&B. It would make no difference whether in the February 13, 1985 writing plaintiff and B&B intended a contractual subrogation of B&B’s rights against defendant or, as the courts below viewed it, an effort, albeit unsuccessful, to assign B&B’s rights, as long as there is no language in the agreement with B&B which could be construed as barring plaintiff’s claim as equitable subrogee. There is no such language.

Moreover, the May 2, 1983 "Settlement Agreement and Release” between B&B and defendant expressly exempted from the release any subrogation rights of an insurance company, and B&B unequivocally represented in its February 13, 1985 agreement with plaintiff that its prior release of defendant had not impaired or prejudiced whatever subrogation rights plaintiff might have. Under these writings plaintiff’s rights to proceed against defendant as equitable subrogee were clearly preserved (see, Connecticut Fire Ins. Co. v Erie Ry. Co., 73 NY 399, 404-405; Point Tennis Co. v Irvin Indus. Corp., 63 AD2d 967; see also, Weinberg v Transamerica Ins. Co., 62 NY2d 379, 383-384). We turn to a discussion of these rights.

Ill

Unlike contractual subrogation where the subrogee’s rights are defined in an express agreement between the insurersubrogee and the insured-subrogor, the rights of an insurer against a third party as equitable subrogee arise independently of any agreement (see, American Sur. Co. v Palmer, 240 NY 63, 67; New York Bd. of Fire Underwriters v Trans Urban Constr. Co., 91 AD2d 115, 119-120, affd 60 NY2d 912; 16 Couch, Insurance 2d § 61:46 et seq.). These rights accrue upon payment of the loss and are based upon the principle that in equity an insurer, which has been compelled under its policy to pay a loss, ought in fairness to be reimbursed by the party which caused the loss (see, Ocean Acc. & Guar. Corp. v Hooker Electrochemical Corp., 240 NY 37, 47; Pittsburgh-Westmoreland Coal Co. v Kerr, 220 NY 137, 143-144; National Sur. Co. v National City Bank, 184 App Div 771, 773-774). The rights of an insurer as equitable subrogee against a third party are derivative and limited to such rights as the insured "would have had against such third party for its default or wrongdoing.” (Ocean Acc. & Guar. Corp. v Hooker Electrochemical Corp., supra, at 47.) Thus, the insurer can only recover if the insured could have recovered and its claim as subrogee is subject to whatever defenses the third party might have asserted against its insured (see, American Sur. Co. v Town of Islip, 268 App Div 92, 94; 11A Appleman, Insurance Law & Practice § 6551, at 3-9; see generally, 16 Couch, Insurance 2d § 61:285, at 326).

In New York, rights of insurers to recover as equitable subrogees against negligent third parties have been recognized in cases where the insurer has paid an automobile collision loss (see, e.g., Hamilton Fire Ins. Co. v Greger, 246 NY 162, 166-167), a fire loss (see, e.g., Connecticut Fire Ins. Co. v Erie Ry. Co., 73 NY 399, supra; Tishman Co. v Carney & Del Guidice, 36 AD2d 273, affd 34 NY2d 941) and a loss under a marine insurance policy (Phoenix Ins. Co. v Parsons, 129 NY 86, 94). Similarly, fidelity insurers have been permitted to proceed as equitable subrogees where banks have negligently caused or contributed to the loss (see, Fidelity & Deposit Co. v Queens County Trust Co., 226 NY 225, 233; Federal Ins. Co. v Groveland State Bank, 44 AD2d 182, mod on other grounds 37 NY2d 252, rearg denied 37 NY2d 924; National Sur. Co. v National City Bank, supra, at 773-774).

While our court has not considered the precise question of whether the fidelity insurer of an employer may proceed as subrogee against public accountants who negligently fail to discover an employee’s defalcations, other courts have held that such an insurer may do so (see, e.g., National Sur. Corp. v Lybrand, 256 App Div 226; Maryland Cas. Co. v Cook, 35 F Supp 160 [ED Mich 1940]; Liberty Mut. Ins. Co. v Harris, Kerr, Forster & Co., 89 Cal Rpt 437, 10 Cal App 3d 1100 [2d Dist Ct App 1970]; Western Sur. Co. v Loy, 3 Kan App 2d 310, 594 P2d 257 [Ct App Kan 1979]; Dantzler Lbr. & Export Co. v Columbia Cas. Co., 115 Fla 541, 156 So 116 [1934]; see, 11A Appleman, Insurance Law & Practice § 6563, at 52; 16 Couch, Insurance 2d § 61:294, at 331-332; cf., Fidelity & Deposit Co. v Atherton, 47 NM 443, 144 P2d 157).

We have held that "the principle of subrogation ought to be liberally applied to the protection of those who are its natural beneficiaries.” (Ocean Acc. & Guar. Corp. v Hooker Electrochemical Corp., 240 NY 37, 47, supra). There would seem to be no reason why the principle should apply any differently when the loss is due to the negligence of accountants than when it has been caused, for example, by the negligence of a bank (see, Fidelity & Deposit Co. v Queens County Trust Co., supra; Federal Ins. Co. v Groveland State Bank, supra; National Sur. Co. v National City Bank, supra, at 773). If general principles of subrogation are applied, the fidelity insurer should be permitted to proceed as equitable subrogee when it has been compelled under its policy to pay a loss and when it can establish that the loss was caused by the negligent conduct of its insured’s public accountants for which the insured could have recovered (see, Ocean Acc. & Guar. Corp. v Hooker Electrochemical Corp., supra, at 47-48; Standard Acc. Ins. Co. v Pellecchia, 15 NJ 162, 104 A2d 288, 292-293 [1954]; 11 Appleman, Insurance Law & Practice §§ 6501, 6502, 6503, at 431, 434, 440; Note, Subrogation of the Insurer to Collateral Rights of the Insured, 28 Colum L Rev 202; King, Subrogation Under Contracts Insuring Property, 30 Tex L Rev 62). Defendant argues, however, that these general principles should not apply in the circumstances here.

IV

Defendant contends first that there should be a legal bar to equitable subrogation because plaintiff has reimbursed its insured for only a part of the loss, not all of it. Defendant cites cases dealing with the rights of sureties and creditors (see, e.g., Hanlon v Union Bank, 247 NY 389, 390; McGrath v Carnegie Trust Co., 221 NY 92, supra; 23 NY Jur 2d, Contribution, Indemnity and Subrogation, § 30 [and cases cited]) holding that in order to be equitably subrogated to the claim of a creditor with respect to another’s obligation, a person must have completely discharged the obligation and that a "creditor may not be required to surrender any part of his collateral till payment has been made in full” (McGrath v Carnegie Trust Co., supra, at 95).

The theory underlying these rules is simply that subrogation to the rights of the creditor should in no way impair the creditor’s interest in the security for the debt or its right to proceed against the debtor. When the debt is paid in full the creditor no longer has an interest in pursuing the debtor or resorting to the collateral. Until it is paid, however, it is entitled to exclusive possession of the collateral and control of the debt and the remedies for its enforcement (see, American Sur. Co. v Gerold, 255 App Div 285, 287, supra; New Jersey Equities Co. v Mandel, 178 Misc 783, 787; Restatement of Security § 141, comment e, at 387).

Neither the rules requiring full payment of the debt nor their underlying rationale fit the case of an insurer which, like plaintiff, has paid part of the loss to its insured and seeks to recoup only what it has paid from the alleged wrongdoer. Permitting the insurer to sue for that amount as equitable subrogee does not affect the insured’s right to sue for the amount of the loss remaining unreimbursed. Thus, the general rule is that an insurer which has paid part of a loss may proceed pro tanto against a third person whose negligence or wrongful act caused the loss (see, Hamilton Fire Ins. Co. v Greger, 246 NY 162, 166, 168, supra; Connecticut Fire Ins. Co. v Erie Ry. Co., 73 NY 399, supra; Aetna Cas. & Sur. Co. v McCullough, 41 AD2d 161, 163; Galante v Hathaway Bakeries, 6 AD2d 142, 149; 6A Appleman, Insurance Law & Practice § 4054; see also, Aetna Cas. & Sur. Co. v Bekins Van Lines Co., 67 NY2d 901).

It is not suggested that applying the general rule in this case and permitting plaintiff to be subrogated to the extent of the $1,000,000 payment to B&B could work to B&B’s detriment. B&B cannot claim that permitting subrogation will prejudice its rights, since it has already pursued and settled its claim against defendant. Thus, the case of American Sur. Co. v Gerold (255 App Div 285, supra), relied upon by defendant, is readily distinguished. There, denial of the insurer’s claimed right to proceed as subrogee upon the ground that it had not paid the insured for the full extent of the loss prevented an injustice to the insured. Unlike plaintiff here, the insured had not pursued its remedy against the third party; it would have been deprived of its right to do so, had subrogation been permitted.

Finally, defendant contends that it should be insulated from any liability to plaintiff by the doctrine of superior equities. The rule that the right of subrogation should not be invoked against one whose equities are equal or superior to those of the party seeking to be subrogated has been applied in cases in our State involving rights of creditors where obligations are secured by surety bonds or mortgages (see, e.g., Seely’s Son v Fulton-Edison, Inc., 52 AD2d 575 [mortgage foreclosure action]; Laski v State of New York, 217 App Div 420 [claimed subrogation rights under surety bond]; New Jersey Equities Co. v Mandel, 178 Misc 783, 786, supra [same]; Bell v Greenwood, 229 App Div 550, 552-553 [subrogation under appeal bond]). In each of these cases subrogation would have diminished or in some way prejudiced the rights or remedies that the creditor or obligee would otherwise have had in connection with the underlying obligation.

While the doctrine of superior equities is sometimes alluded to in the context of an insurer’s claim to subrogation rights (see, e.g., Murphy v Aetna Ins. Co., 96 AD2d 99, 102; see generally, Standard Acc. Ins. Co. v Pellecchia, 15 NJ 162, 104 A2d 288, 292-293, 296-299, supra; Comment, Nature and Extent of Subrogation Rights of Fidelity Insurers Against Officers and Directors of Financial Institutions, 47 U Pitt L Rev 727, 735-737), there are numerous cases in New York upholding the subrogation rights of insurers where the doctrine is never mentioned (see, e.g., Hamilton Fire Ins. Co. v Greger, 246 NY 162, supra; Fidelity & Deposit Co. v Queens County Trust Co., 226 NY 225, 233, supra; Connecticut Fire Ins. Co. v Erie Ry. Co., 73 NY 399, supra; Federal Ins. Co. v Groveland State Bank, 44 AD2d 182, supra; Tishman Co. v Carney & Del Guidice, 36 AD2d 273, affd 34 NY2d 941, supra; National Sur. Co. v National City Bank, 184 App Div 771, supra).

Analysis of the New York cases where the doctrine of superior equities has been discussed leads to the conclusion that, in essence, it is an application of the established principle that subrogation is designed "to dispense equity and justice among the parties” (Seely’s Son v Fulton-Edison, Inc., supra, at 578) and should not be permitted where that result will not be achieved (see, Ocean Acc. & Guar. Corp. v Hooker Electrochemical Corp., 240 NY 37, 47, supra; see generally, 11 Appleman, Insurance Law & Practice § 6502). As noted, there is no basis here for a holding that the insured’s or obligee’s rights would in any way be diminished by subrogation (contrast, Bell v Greenwood, 229 App Div 550, supra). Nor could subrogation affect defendant’s position, since it can assert whatever rights or defenses it has against B&B’s claim in defense of plaintiff’s claim as B&B’s subrogee.

Defendant would, nevertheless, have us hold, as a matter of law, that as between it and plaintiff, its equities are superior and that, therefore, plaintiff’s claim should be dismissed. Defendant argues that, although plaintiff as the insurer has not benefited from the loss and is charged with no wrongdoing, the fact that plaintiff is a compensated insurer puts it in an inferior position in equity to defendant — an allegedly negligent wrongdoer. This court has not applied such a rule (see, e.g., Hamilton Fire Ins. Co. v Greger, 246 NY 162, supra; Fidelity & Deposit Co. v Queens County Trust Co., 226 NY 225, supra; but see, Hartford Acc. & Indem. Co. v Peat, Marwick, Mitchell & Co., 129 Misc 2d 990, 991, affd 123 AD2d 903). While other courts have given some weight to the fact that the party seeking subrogation is a paid surety or insurer where subrogation is sought against an innocent third party (see, e.g., Meyers v Bank of Am. Natl. Trust & Sav. Assn., 11 Cal 2d 92, 77 P2d 1084, 1093 [1938]; Fidelity & Deposit Co. v De Strajman, 29 Cal Rptr 855, 215 Cal App 2d 10 [Cal App 1st Dist 1963]; 11A Appleman, Insurance Law & Practice § 6551, at 4), that fact has not precluded subrogation where the third party was negligent (see, e.g., Fidelity & Deposit Co. v Oklahoma State Bank, 77 F2d 734 [10th Cir], cert denied 296 US 611; Federal Deposit Ins. Corp. v National Sur. Corp., 434 F Supp 61 [ED NY]; Western Sur. Co. v Loy, 3 Kan App 2d 310, 594 P2d 257, supra).

It is difficult to see the merit of the rule that defendant proposes in the case of a fidelity insurer seeking subrogation against an allegedly negligent public accountant: viz., that because the risk assumed includes the specific risk that the defalcation may be caused by the insured’s accountant’s negligence in making an audit and because the fidelity insurer has received premiums for this risk, it should lose its right as the insured’s equitable subrogee. While arguably a compensated insurer or surety should in fairness bear the loss where the third party’s liability is solely contractual and not based on fault (see, Meyers v Bank of Am. Natl. Trust & Sav. Assn., supra; see generally, Standard Acc. Ins. Co. v Pellecchia, 15 NJ 162, 104 A2d 288, 293-303, supra; but see, National Sur. Co. v National City Bank, 184 App Div 771, supra; Liberty Mut. Ins. Co. v First Natl. Bank, 151 Tex 12, 245 SW2d 237 [1951]), such a result seems neither fair nor judicious when the loss has been caused by the third party’s tortious conduct.

Defendant contends, however, that the doctrine of superior equities calls for a denial of subrogation by a fidelity insurer in a case of this kind because of the particular nature of the obligations of an accountant and auditor and the inherent limitations in detecting errors or irregularities through the auditing process (see, Matson, Subrogation Claims Against Auditors: What is "The Purest Equity?", 6 Ohio NU L Rev 313 [advocating a rule that the auditor or accountant should not be liable to the fidelity insurer absent some proof of "participation” in the defalcations]). Such contentions pertain to causation and to the claimed breach of the duties owed by the public accountant to the insured and involve factual questions for the trial court in determining whether the fidelity insurer should recover as equitable subrogee.

Assuming for the sake of argument that defendant’s negligence in failing to discover Ferrarese’s defalcations caused the loss, defendant could have been held directly liable to B&B in a suit brought by it. The rule defendant urges here would allow it to escape this liability simply because the victim, B&B, carried fidelity insurance. In effect, defendant seeks to avail itself of B&B’s fidelity insurance as its own liability policy without paying for it. Such a rule would be contrary to precedent (see, e.g., Federal & Deposit Co. v Queens County Trust Co., 226 NY 225, supra) and we see no reason in policy or fairness for adopting it. Moreover, it would conflict with the basic notion of subrogation as the " 'mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay it.’ ” (Arnold v Green, 116 NY 566, 571-572).

The order of the Appellate Division should be reversed, with costs, and the motion for summary judgment denied.

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

Order reversed, etc.


author: Kaye, J.

text:
    The People of the State of New York, Respondent, v Julio Natal, Appellant.
    Argued February 8, 1990;
    decided March 27, 1990

      POINTS OF COUNSEL

      David B. Weisfuse and Stephen J. Pittari for, appellant.

      Carl A. Vergari, District Attorney (Maryanne Luciano and Richard E. Weill of counsel), for respondent.
   OPINION OF THE COURT

Kaye, J.

This appeal challenges the District Attorney’s conduct in obtaining — by subpoena returnable to himself — defendant’s clothing and personal effects which were taken at the time of arrest and held at the jail during pretrial confinement. We conclude that in this case defendant suffered no constitutional deprivation, and that the conviction should be affirmed despite the District Attorney’s misuse of court process.

In connection with his arrest and detention for breaking into a house in the City of Rye, defendant was taken to police headquarters, where he was forced to surrender his clothing and personal effects. As a matter of police routine, those items were inventoried as personal property, placed in a locker for safekeeping, and then transferred to the Westchester County jail where defendant awaited trial.

Nine months later — just one week before trial — by subpoena served on the jail’s "Booking Officer,” the District Attorney demanded "forthwith” "[i]tems of clothing worn by defendant at time of alleged incident (7/20/85) including white tennis clothes; white tennis socks and sneakers; blue bag.” The subpoena was on a printed form, but indicated no court part or Judge’s name, and further stated that the officer did "not have to appear in person if this property is immediately furnished to [the] Assistant District Attorney”. In response, the requested items were handed over to the District Attorney.

Defendant sought suppression of three of the items — a red bandana, blue bag and letter opener — on the ground that the District Attorney’s action constituted an unlawful seizure and abuse of the subpoena process. After denial of the motion, defendant was tried and convicted of burglary, grand larceny and criminal mischief. The bandana, bag and letter opener were introduced in evidence as part of the People’s case.

The Appellate Division affirmed defendant’s conviction, concluding that the disputed items were not the product of an illegal search or seizure. Moreover, the court held that any error was harmless in that "the physical evidence introduced at trial did little to reinforce the eyewitness’s uncontroverted testimony regarding the defendant’s involvement in the burglary and his subsequent in-court identification of the defendant.” (144 AD2d 587, 588.) We now affirm.

Defendant does not challenge the search conducted at the time of his arrest or the inventory of his property conducted as a matter of administrative routine at the time he was jailed. Rather, he asserts that, without a warrant, the People had no right to seize his property while it was being held for him during his pretrial detention. The first question we address, therefore, is whether personal items exposed to police view under unobjectionable circumstances and then lawfully held by the jail for safekeeping may be transferred to the District Attorney, without a warrant, for use as trial evidence. We agree with the Appellate Division that the answer is yes.

Unlike items seized by the police as evidence at the time of arrest — which may be subjected to examination and testing, and retained after defendant is released from custody — items later taken by prison authorities are held as bailments, to be safeguarded for the accused during incarceration (see, Thomas v Grupposo, 73 Misc 2d 427, 430; Comment, The Inventory Search and the Arrestee’s Privacy Expectation, 59 Ind LJ 321, 322-323 [1984]). As the jail rules here provided, the arrestee had the right to take his property with him on posting bail or direct that it be released to a third person.

Thus, while he had no immediate possessory right, defendant retained a property interest in his personal effects when he surrendered them at the jail. But the existence of a property interest does not mean that defendant also had a privacy interest protectable by the State and Federal guarantees against unreasonable searches and seizures (People v Reynolds, 71 NY2d 552, 557; United States v Chadwick, 433 US 1, 7). A constitutionally protected privacy interest requires the existence of a subjective expectation of privacy that society is willing to recognize as reasonable (People v Rodriguez, 69 NY2d 159, 164-165; People v Mercado, 68 NY2d 874, cert denied 479 US 1095). Defendant has not made that showing.

Warrantless searches and seizures of arrestees’ possessions during incarceration have been the subject of considerable judicial scrutiny (see generally, 2 LaFave, Search and Seizure § 5.3 [b], at 491-497). Overwhelmingly, the cases hold that inspection of personal effects previously exposed to police view under unobjectionable circumstances, does not invade any substantial privacy interest. Relying upon this line of authority, the Supreme Court in United States v Edwards (415 US 800) has suggested that a warrant would not be necessary in situations “where the clothing or effects are immediately seized upon arrival at the jail, held under the defendant’s name in the 'property room’ of the jail, and at a later time searched and taken for use at the subsequent criminal trial.” (Id., at 807.) In summarizing the present state of Federal law, one prominent commentator has observed: "at least when (i) an object lawfully came into plain view at the time of a search upon the arrestee’s arrival at the place of detention, (ii) later investigation establishes that this item is of evidentiary value, and (iii) the item remains in police custody as a part of the arrestee’s inventoried property, then it is permissible for the police, without a warrant, to retrieve that object and thereafter deal with it as an item of evidence.” (2 LaFave, op. cit., at 491.) While the property here was maintained by the county jail rather than the police, plainly the present case fits within these criteria, and defendant’s argument must be rejected under Federal law.

Defendant’s argument must also be rejected under State constitutional law, although the facts of this case do not require us to decide whether, as a matter of State constitutional law, we would subscribe to the perceived Federal law on the subject. Most significantly, the facts before us do not involve a postarrest investigation or (to borrow the trial court’s phrase in denying preclusion) a "fishing expedition” to uncover evidence with respect to the charged or any other offense. The disputed items here were known personal articles —already fully exposed to view and identified, in accordance with law — that were relevant to the identification of defendant in a trial about to commence, and not sought for further searching or experimentation.

Central to our consideration of defendant’s State constitutional claim is People v Perel (34 NY2d 462), where the disputed property consisted of slips of paper placed in an envelope at the time of arrest and shortly after retrieved by a police detective. We held there that no reasonable expectation of privacy was invaded when the police simply looked again at what they had already lawfully seen. In that the greater intrusion was justified, we concluded that the lesser related intrusion could not be said to unduly trespass upon any remaining expectation of privacy (id., at 465). That rationale controls here. While defendant urges that Perel is distinguishable because the lapse of time between the initial seizure and the "second look” was negligible there — the slips never left police custody — for present purposes that is a distinction without any meaningful difference.

The conclusion is inescapable, therefore, that no search warrant was required here.

We next turn to consideration of a discrete question: the method by which the District Attorney gained possession of the disputed items — a subpoena returnable "forthwith” to himself.

Subpoenas, of course, are process of the courts, not the parties (Bellacosa, Practice Commentary, McKinney’s Cons Laws of NY, Book 11 A, CPL 610.20, at 264; see, CPL 610.10 [2], [3]; Hagan, Impounding and the Subpoena Duces Tecum, 26 Brooklyn L Rev 199 [1960]). While by statute it is the District Attorney who issues a subpoena duces tecum (CPL 610.25 [1]), the subpoena is nevertheless a mandate of the court issued for the court (see, Matter of Spector v Allen, 281 NY 251, 259; People ex rel. Drake v Andrews, 197 NY 53).

It has long been recognized that District Attorneys may not issue subpoenas except through the process of the court, and they exercise the power to compel witnesses to produce physical evidence only before a Grand Jury or a court where a proceeding is pending (CPL 610.20; People v Hamlin, 58 AD2d 631, 632; People v Boulet, 88 Misc 2d 353, 354; People v Arocho, 85 Misc 2d 116). CPL 610.25 (1) makes clear that where the District Attorney seeks trial evidence the subpoena should be made returnable to the court, which has "the right to possession of the subpoenaed evidence.” It is for the court, not the prosecutor, to determine where subpoenaed materials should be deposited, as well as any disputes regarding production (CPL 610.25; People v Hasson, 86 Misc 2d 781; Matter of Nwamu, 421 F Supp 1361 [SD NY]).

By circumventing the court, the District Attorney avoided all the protections provided against abuse of the subpoena process, and succeeded in transforming a court process into a function of his own office (see generally, American Bar Assn. Standards Relating to Administration of Criminal Justice, Prosecution Function § 3.1 [d] [1974]). Such conduct is all the more disturbing in light of apparent prior admonitions by Trial Judges to the District Attorney concerning similar misuse in other cases.

As for the appropriate remedy in this case, we cannot agree with defendant that — even if the subpoenaed evidence were precluded — reversal would be required. Defendant was unequivocally identified by an eyewitness (indeed, he conceded his presence near the crime scene) and the evidence of guilt was overwhelming (see, People v Crimmins, 36 NY2d 230). Despite our affirmance of defendant’s conviction, it hardly needs stating that the District Attorney’s subpoena practice should not be replicated.

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

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

Order affirmed.

       We need not reach defendant’s additional contention that the subpoena was per se defective in that it was returnable "forthwith” (compare, e.g., United States v Lartey, 716 F2d 955, with Matter of Remy Sportswear, 16 Misc 2d 407). Nor do we intend any criticism of — or imply any wish to chill —the appropriate uses of subpoena authority, including so-called office investigatory subpoenas.


author: Bellacosa, J.

text:
    In the Matter of Louis Heimbach, as County Executive of the County of Orange, Appellant, v Metropolitan Transportation Authority, Respondent.
    Argued February 6, 1990;
    decided March 27, 1990

      POINTS OF COUNSEL

      James G. Sweeney, Special County Attorney, for appellant.

      Anthony P. Semancik, Susan E. Weiner and Lester G. Freundlich for respondent.
   OPINION OF THE COURT

Bellacosa, J.

This appeal addresses the effort of the Metropolitan Transportation Authority (MTA) to shift to Orange County the cost of MTA’s $369,733 settlement of a negligence action brought by a commuter who was seriously injured in a slip and fall on an icy platform at the Goshen Metro North station. MTA relied on Public Authorities Law § 1277 to certify a "total cost” of $568,975 for the operation, maintenance and use of the seven Metro North (an MTA subsidiary) passenger stations in Orange County for the fiscal year ending March 1986. Sixty-five percent of the total was attributable to the Goshen station for the one-time negligence settlement of the action arising out of the 1982 accident and underlying this offshoot litigation. MTA billed Orange County $47,671 for snow and ice removal for the fiscal year at issue; $8,350 for the station where the accident occurred. Officials of Orange County first learned of the settlement when they received the MTA bill charging the county for the ultimate payment.

The lean legal question is whether the MTA settlement cost is part of the statutorily reimbursable "total cost * * * of operation, maintenance and use”. We hold it is not.

Public Authorities Law § 1277 pertinently provides: "The total cost to the authority and each of its subsidiary corporations of operation, maintenance and use of each passenger station within the district serviced by one or more railroad facilities of the authority or of such subsidiary corporation, including the buildings, appurtenances, platforms, lands and approaches incidental or adjacent thereto, shall be borne by the city of New York if such station is located in such city or, if not located in such city, by such county within the district in which such station is located.” This statute allows MTA to determine annually the "total cost” and to certify the amount for payment to the appropriate municipal government. If unpaid, the MTA may intercept unrelated State aid to counties by certification that the State Comptroller withhold the due sums.

In this case, Orange County objected to the inclusion of the settlement in the "total cost” calculation. MTA rejected the objection and exercised its enforcement and collection authority, directing the Comptroller to withhold and pay over to MTA $568,975 from Orange County’s next State aid allotment. The county brought this article 78 proceeding challenging as arbitrary and capricious the MTA’s inclusion of the settlement cost. Supreme Court dismissed the county’s petition and the Appellate Division affirmed, without opinion. We granted leave to appeal and reverse.

Petitioner Orange County concedes its statutory fiscal responsibility for the "total cost * * * of operating], maintaining] and us[ing]” the MTA passenger stations within its borders. It protests the proposition that the Legislature, in enacting the "total cost” pass-through of Public Authorities Law § 1277, intended to include also the amounts for settlement of personal injury suits arising out of negligent operation, maintenance or use of a station.

This case turns solely on statutory interpretation. Since "specialized knowledge is not necessarily implicated,” the lower courts erroneously deferred to MTA’s interpretation of this statute as their rationale for dismissing the county’s article 78 proceeding (Matter of Industrial Liaison Comm. v Williams, 72 NY2d 137, 144; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459).

The Legislature did not precisely define the "total cost” phrase of Public Authorities Law § 1277. Indeed, the term is not susceptible to precise definition, "[r]ather it [is] a responsible political determination as to the fair apportionment of the economic burden of the costs of mass transportation.” (Metropolitan Transp. Auth. v City of New York, 39 NY2d 953, 954, affg 47 AD2d 10.)

In construing the "total cost” language, we must reflect that a totality is not necessarily all encompassing. Words of limitation follow the phrase in this statute which, by their plain meaning and unambiguous usage (see, Matter of State of New York [Abrams] v Ford Motor Co., 74 NY2d 495, 500 [and cases cited]), show that only the "total cost * * * of operation, maintenance and use” (emphasis added) of the station is certifiable. To allow "total cost” to be operative as if in some vacuum alone, without considering the intended meaning of these words of limitation, is illogical and unreasonable. Otherwise, the words of limitation, referable to an actuarially predictable cost framework based on previous years’ cost of operation, maintenance and use and based on comparable station operations, would be lost. Worse still, exposure to negligence awards and unilateral settlements of lawsuits, which are notoriously open-ended, would preclude prudent planning by municipalities in their budgetary and tax obligations. Adopting the MTA’s position in this case therefore results in an overreach and a distortion of the "fair” political distribution of fiscal burden. We cannot attribute to the Legislature a reallocation of this magnitude by implication or by afterthought.

Still, we acknowledge that the salaries of "employees whose work is in connection with the use of the stations by passengers” and expenditures for cleaning tracks wholly within a station are clearly within the statutory "total cost” (Metropolitan Transp. Auth. v City of New York, 32 AD2d 197, 199-200, mod on other grounds 26 NY2d 817). Also, revenues derived by MTA from its stations by way of concession fees, real estate income and contributions from out-of-State transportation authorities may not be deducted from MTA’s "total cost” of operating, maintaining and using its passenger stations (Metropolitan Transp. Auth. v City of New York, 39 NY2d, supra, at 954). On the other hand, expenses — very large ones — can arise at rail stations without being attributable to the station’s operation, maintenance or use (see, Matter of Pattison v Metropolitan Transp. Auth., 133 Misc 2d 592, 605, affd 143 AD2d 191, lv denied 73 NY2d 703 [cost of settling wrongful death claim resulting from negligent railroad, as contrasted to station, operation not certifiable under Public Authorities Law § 1277]).

Undaunted, MTA asserts that because section 1277 states the station costs "shall” be borne by the county in which the station is located, MTA has no choice but to bill a county for what MTA determines to be "total” costs, even if those costs are significantly increased by unforeseen events such as harsh weather or labor unrest. Assuming the latter examples are correct, they have no relevancy to the inclusion of settlements of negligence actions in "total cost” certifications. Here, we are dealing not with an unforeseeable event, but with an expenditure necessitated by an alleged act of negligence, the essence of which is foreseeability (Palsgraf v Long Is. R. R. Co., 248 NY 339, 344).

To transfer the fiscal burden of negligence settlements would add a significant unarticulated dimension to Public Authorities Law § 1277 — that of an indemnification nature. There is no legislative history or evidence that the Legislature understood or wished to confer such an additional benefit on the MTA at the expense of helpless local municipalities and their taxpayers. Indemnification creates a substantially different juridical and political relationship between a myriad of municipalities and a super entity, the MTA. Had the Legislature wished to do this, giving MTA’s theory some arguable weight in this regard, the Legislature would have and should have expressed that choice, with its fundamental fiscal impact, in unmistakably clear and specific language, as it has done elsewhere (see, e.g., General Municipal Law §§ 50-b, 50-d). Since the Legislature has erected a definitive notice of claim protection for municipalities before tort claims against them may succeed (see, General Municipal Law § 50-e), it would be grossly anomalous to allow indirectly what would be blocked directly. Had the injured plaintiff sued Orange County in the corresponding time frames involved here, he would surely have been barred by failure to timely notify the county (General Municipal Law § 50-e) and perhaps even by the applicable Statute of Limitations (General Municipal Law § 50-i [1] [c]). MTA would effectively bypass and undermine especially the notice protection by simultaneously notifying and billing the county four years after the claim was made in this case.

In disclaiming the payment responsibility for the settlement it negotiated, MTA also points a finger at Consolidated Rail Corporation (Conrail), which operated the Goshen station at the time of the accident. MTA customarily paid Conrail to operate the station and then certified expenses to the counties. MTA did not purchase liability insurance for the Goshen station until it took over direct operation from Conrail. MTA urges that because it assumed Conrail’s tort liability, the county must a fortiori assume MTA’s tort liability (respondent’s brief, at 21, n 6). However, MTA’s argument backfires because MTA expressly assumed tort responsibility pursuant to its separate service contract with Conrail. There was no such contractual assumption between MTA and Orange County. Moreover, had there been such an agreement, the contractual language would have to have evinced an "unmistakable intention” to indemnify before a court would enforce such an obligation (see, e.g., Hooper Assocs. v AGS Computers, 74 NY2d 487, 491-492; Levine v Shell Oil Co., 28 NY2d 205, 210). By parallel analysis, the statute at issue surely lacks that specificity requirement and broad interpretative strokes cannot fill the gap.

To be sure, certain liability insurance premiums are also within the statutory "total cost” of station operation (Metropolitan Transp. Auth. v County of Nassau, 35 AD2d 739, affd 28 NY2d 385). They are reasonably predictable and containable for cost planning purposes and projections and are thus quite different in kind, not just in amount, from what MTA has attempted to recoup here by operation of section 1277, which is to make the counties insurers of MTA and self-insurers as to themselves and their taxpayers. This practical fallout is especially repugnant inasmuch as the county was given neither notice, opportunity, nor even the courtesy of participating in the negotiation of the settlement itself which it was ordered to pay (see, and compare, the protections of General Municipal Law § 50-e).

Local municipalities and their taxpayers were not meant to be at the unilateral mercy of a super public benefit corporation in this respect. MTA, under its self-defining arrangement and implementation, has no incentive to employ vigorous methods of investigation of claims, reduction of settlement amounts or resistance to the ultimate point of trial — so long as it can pass along the full uninsured cost (at the time of this accident) to some other entity without worry to itself. Direct accountability in government and in tort responsibility is key to a reasonable interpretation and application of the statute under review. That principle would be severely compromised were we to uphold MTA’s argument and the lower courts’ rulings.

The order of the Appellate Division should be reversed, with costs, and the petition granted.

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

Order reversed, etc.


text:
    Planet Insurance Company, Respondent, v Bright Bay Classic Vehicles, Inc., Doing Business as Budget Rent-A-Car, et al., Defendants, and Frank Catalano et al., Appellants. Jose Montez-Deoca, Appellant, v Planet Insurance Company, Respondent.
    Argued February 6, 1990;
    decided March 27, 1990

      POINTS OF COUNSEL

      Allan Ross for Frank Catalano, appellant.

      Martin A. Lemer for Jose Montez-Deoca, appellant.

      Warren A. Herland and Steven H. Kaplan for respondent.
   OPINION OF THE COURT

Hancock, Jr., J.

We must decide whether a liability insurer under a fleet insurance policy covering rental automobiles leased for less than 12 months can properly disclaim coverage for an accident involving one of the rental cars which was leased for 24 months. This is the determinative question in the two declaratory judgment actions before us — one brought by the injured plaintiff and one by the insurance company. The Appellate Division, reversing Supreme Court, held that the insurance company was under no obligation to defend or indemnify because the 24-month rental term had placed the automobile outside the policy definition of covered rental cars. It reasoned, relying on Zappone v Home Ins. Co. (55 NY2d 131), that coverage had never existed and that, indeed, a disclaimer was unnecessary (see, 147 AD2d 368, 370). For reasons hereinafter stated, we disagree.

I

The automobile involved in the accident was a rental car owned by defendant Bright Bay Classic Vehicles, Inc., doing business as Budget Rent-A-Car (Bright Bay) and leased to defendant Catalano. On May 14, 1985 the automobile was being driven by defendant DeVito with Catalano’s permission when it struck and injured plaintiff Montez-Deoca.

Plaintiff Planet Insurance Company (Planet) was the insurer of Bright Bay’s short-term car rental business in a policy which afforded fleet insurance coverage for Bright Bay’s rental cars. The Auto Rental Endorsement under which such coverage was provided defined covered rental cars as follows: "Autos held by the Insured for rental on a short term basis (less than twelve months) or used in connection with the Insured’s business of short term rental of autos, or used for other than rental purposes by the Insured or any employee of the Insured with the Insured’s permission.” (Emphasis added.)

The lease of the automobile from Bright Bay to Catalano, made in December 1984, was for a period of 24 months. As part of the stipulated monthly rental charge Catalano paid an amount to cover liability insurance premiums. At all times during the rental period, the car was duly registered with the State of New York and Catalano was in possession of a copy of the required certificate which had been filed by Planet with the Motor Vehicles Department indicating that the car was insured.

After being advised of Montez-Deoca’s personal injury and property damages claims, Planet paid Montez-Deoca for his property damage on January 7, 1986 and later assumed the defense of the personal injury actions which Montez-Deoca had commenced against DeVito, Bright Bay and Catalano. On May 28, 1987, Planet advised Bright Bay by letter that it was formally denying coverage for the accident because the involved vehicle did "not fit the description of 'short-term rental vehicle,’ [and was not] considered a covered auto as defined in [the] policy.” Planet first learned that the car had been rented for a 24-month period in June 1986 when, after several requests to Bright Bay, it received a copy of the rental agreement with Catalano.

In the declaratory judgment actions which followed, Supreme Court — citing the public policy considerations in Rosado v Eveready Ins. Co. (34 NY2d 43, 47-49) and Motor Vehicle Acc. & Indemnification Corp. v Continental Natl. Am. Group Co. (35 NY2d 260, 265) — held that the fact that the automobile was leased for 24 months and not for "less than twelve months”, as provided in the auto rental car coverage definition, was not a valid basis for the disclaimer. Accordingly it granted summary judgment to DeVito and Catalano against Planet declaring that Planet’s disclaimer was invalid and that it was obligated to defend and indemnify Bright Bay and Catalano. As noted, the Appellate Division, in reversing and declaring that Planet had no obligation under the policy, held that no contract of insurance covering the automobile under the 24-month lease had ever existed. The Appellate Division granted leave to this court and certified the question of whether its order was properly made. We now reverse and answer the question in the negative.

II

Our analysis must commence with an examination of Rosado v Eveready Ins. Co. (34 NY2d 43, supra) and the contention made by DeVito and Catalano that our holding in that case dictates the outcome here. In Rosado, an insurance policy issued to a car rental company contained an endorsement excluding coverage for "Drive-Yourself private passenger vehicles (except leased on annual basis)”. (Emphasis added.) When one of the rental cars which had been leased for a shorter term (i.e., less than one year) was involved in an accident, the insurance company disclaimed on the ground that the shorter term brought it within the policy exclusion. We held the disclaimer invalid as contrary to the public policy underlying our State’s legislation requiring compulsory automobile insurance (see, Insurance Law former § 167, now § 3420): i.e., "to assure the protection of members of the public, who are innocent victims of motor vehicle accidents, by providing compensation for and protection from tortious wrongs committed against them.” (Id., at 47.) We noted, moreover, that the exclusion being claimed — based on the length of the rental term — was not one of the exclusions expressly permitted by the controlling regulation of the Superintendent of Insurance (see, 11 NYCRR 60.2; Rosado v Eveready Ins. Co., supra, at 46-48).

Catalano and DeVito argue that the identical policy considerations which compelled our decision in Rosado apply here. They point out that like the lessee-driver in that case, they had no "reason to believe that by leasing and operating the car [they were] exposing [themselves] to the risk of operating an uninsured vehicle.” (Rosado v Eveready Ins. Co., supra, at 49.) Like the insurer in Rosado, they emphasize, Planet was paid for coverage of the rented vehicle and "its attempt to limit or withdraw such coverage, based not upon any improper or special use of the vehicle, but solely upon the time limit of the rental agreement, is contrary to and in conflict with the public policy of this State.” (Id., at 49.)

Planet, however, would have us distinguish Rosado because what is involved here is not a claimed exclusion from coverage as in Rosado but a claim of noncoverage by reason of lack of inclusion. Planet correctly points out that the rental period limitation on which it relies is not contained in one of the policy exclusions. Rather, the limitation appears in the definition of rental autos set forth in the "Auto Rental Endorsement” which brings rental autos within the coverage of the policy. Thus, Planet argues that its refusal of coverage was based upon the lack of an insurer-insured relationship with respect to the car leased to Catalano. It maintains that there is nothing wrong in affording coverage which, at its very inception, is limited specifically to automobiles rented for less than one year, as its coverage was, and that a denial of coverage on the basis of such a limitation — as opposed to a denial based on an exclusion from coverage — is not contrary to public policy.

Planet notes that we have recognized the significant distinction between a denial of coverage for failure of inclusion and one based on a policy exclusion. It cites Zappone v Home Ins. Co. (55 NY2d 131, supra) where we held that the statutory requirements for notice of disclaimer were intended to apply only in situations where "a policy of insurance that would otherwise cover the particular accident is claimed not to cover it because of an exclusion in the policy.” (Emphasis added; id., at 138; see, Matter of Prudential Prop. & Cas. Ins. Co. v Hobson, 67 NY2d 19.) That is not the situation here, Planet maintains. It argues that to follow Rosado in this case would blur the distinction between an exclusion of coverage and a failure to extend coverage and would result in a rewriting of its insurance contract to provide coverage where none ever existed. We disagree.

We concur with Catalano and DeVito that although Planet’s claim of lack of coverage is based not on language in the exclusions section of the policy but on limiting language in the definition of coverage, the limiting language amounts to an exclusion and, thus, the rule in Rosado governs. The effect of the language in the Rosado policy and in the policy here is identical. In neither case does the clause operate to rewrite the policy to provide coverage when "the policy as written could not have covered the liability in question under any circumstances.” (Zappone v Home Ins. Co., 55 NY2d 131, 134, supra.)

As in Rosado, the car in question when rented to Catalano by Bright Bay in December 1984 was then covered as part of Bright Bay’s fleet of rental cars under the Planet policy which had been issued on November 1, 1984. It is not disputed that the car was registered, that Catalano as its lessee had a certificate signifying that it was insured, or that Planet had received a premium based on the car’s being part of Bright Bay’s fleet of rental autos. It is in this respect that cases such as Zappone v Home Ins. Co. (supra) and Matter of Prudential Prop. & Cas. Ins. Co. v Hobson (supra) differ significantly. Here, like the insurer in Rosado, Planet claims that a car which was originally covered under a fleet policy became "uncovered” upon the happening of a subsequent event: i.e., the rental of Bright Bay’s car for a lease period other than that prescribed in the policy. Thus, it cannot be said that there was never a policy in effect covering the involved automobile as in Zappone v Home Ins. Co. (55 NY2d 131, supra [policies in question could not by any construction have ever extended coverage to the driver who was not the named insured in either policy and was not driving one of the covered automobiles]) or covering the particular type of accident giving rise to the claim as in Matter of Prudential Prop. & Cas. Ins. Co. v Hobson (67 NY2d 19 [uninsured motorist endorsement could not have covered the no-contact injury alleged since, by definition, uninsured motorist coverage exists only when there is physical contact]).

The compelling policy considerations underlying the result in Rosado apply equally here. Like the owner-driver in Rosado, DeVito and Catalano had no reason to suspect that they were putting either the public or themselves at risk by causing an uninsured automobile to be operated on the highway. The probability that DeVito and Catalano would believe that the automobile was covered and that such a risk to the public would result is not lessened by reason of the fact that the rental period limitation is contained in a provision describing what rental autos are covered rather than in one describing what rental autos are not covered, as in Rosado. The effect of such a limitation and of invoking it after an accident to deny coverage is the same. In either case, the denial directly contravenes "the public policy that victims of automobile accidents should have recourse to a financially responsible defendant.” (Motor Vehicle Acc. & Indemnification Corp. v Continental Natl. Am. Group Co., 35 NY2d 260, 265, supra; see, Tom Sawyer Country Day School v Providence Washington Ins. Co., 108 AD2d 810, 811-812, lv denied 65 NY2d 608 [insurer of automobile rental company cannot avail itself of a lessee’s violation of a rental agreement for the purpose of escaping liability to indemnify innocent third parties for injuries].)

Moreover, denying Planet the right to disclaim, as in Rosado, does not produce the unfair result that our holding in Zappone obviated: i.e., imposing on the insurer "an added source of indemnification which had never been contracted for and for which no premium had ever been paid.” (Zappone v Home Ins. Co., supra, at 137.)

Planet concedes that, assuming its policy does cover the accident, Supreme Court properly granted Catalano summary judgment on its third counterclaim for attorneys’ fees and costs incurred in defending this action. We have reviewed Catalano’s and Planet’s remaining claims and find them unpreserved. Accordingly, the order of the Appellate Division should be reversed, the certified question answered in the negative and the case remitted to Supreme Court for an assessment of attorneys’ fees and costs.

Chief Judge Wachtler and Judges Simons, Kaye, Alexander and Bellacosa concur; Judge Titone taking no part.

Order reversed, with costs, certified question answered in the negative, and case remitted to Supreme Court, New York County, for further proceedings in accordance with the opinion herein.

       Although the caption includes BRAG Vehicle Leasing, Inc. as a defendant and Planet’s complaint alleges that its policy was issued on or about November 1, 1984 to Bright Bay and to BRAG Vehicle Leasing, Inc., it appears from the record that the policy was issued in the name of Bright Bay only, and that the lessor of the automobile was Bright Bay. In this opinion, Bright Bay is treated as the owner and lessor of the automobile and the only insured. Only Planet, Montez-Deoca and Catalano have appeared in the declaratory judgment actions.