author: Kaye, J.

text:
    In the Matter of the Dissolution of Seagroatt Floral Company, Inc., Appellant. James H. Riccardi et al., Respondents. In the Matter of the Dissolution of Henry J. Seagroatt Co., Inc., Appellant. James H. Riccardi et al., Respondents.
    Argued October 9, 1991;
    decided November 19, 1991

      POINTS OF COUNSEL

      Thomas G. Collins, Howard Sprow and Patrick J. MacKrell for appellants.
    I. Under settled law, a discount for lack of marketability was required in this case; the Referee’s credibility determination that petitioners’ expert did not include the required discount is supported by the evidence and should have been respected by the court below. (Amodia v Amodio, 70 NY2d 5; Matter of Raskin v Walter Karl, Inc., 129 AD2d 642; Matter of Joy Wholesale Sundries, 125 AD2d 310; Matter of Blake v Blake Agency, 107 AD2d 139, 65 NY2d 609; Matter of Fleischer, 107 AD2d 97; Amend v Hurley, 293 NY 587; Matter of Liccione v John H., 65 NY2d 826; York Mtge. Corp. v Clotar Constr. Corp., 254 NY 128.) II. The single judgment imposing joint and several liability is not authorized by Business Corporation Law § 1118 or CPLR 602; the result in this case conflicts with many decisions of the court below and is grossly unfair. (Matter of Pace Photographers [Rosen], 71 NY2d 737; Kelley v Galina-Bouquet, Inc., 155 AD2d 96; Mars Assocs. v New York City Educ. Constr. Fund, 126 AD2d 178; Wallach Agency v Bank of N. Y., 75 AD2d 878; Vidal v Sheffield Farms Co., 208 Misc 438; Kobak v Schultz, 117 AD2d 714; Singer v Singer, 33 AD2d 1054.) III. There is no evidence to support the inclusion in petitioners’ tangible asset value of amounts (totaling $846,805) for vehicles, "supplies not booked,” or the greenhouse equipment owned by another entity. (Schubtex, Inc. v Allen Snyder, Inc., 49 NY2d 1.)

      Jonathan P. Harvey for respondents.
    I. A discount for lack of marketability is improper and the evidence fails to sustain such a discount. (Matter of Fleischer, 107 AD2d 97; Matter of Joy Wholesale Sundries, 125 AD2d 310; Matter of Blake v Blake Agency, 107 AD2d 139, 65 NY2d 609; Amodio v Amodio, 70 NY2d 5; Matter of Raskin v Walter Karl, Inc., 129 AD2d 642.) II. The court below properly valued respondent corporations as a single entity and appellants waived their objection to the de facto consolidation of the dissolution proceedings by failing to object at trial. (Telaro v Telaro, 25 NY2d 433; Horowitz v Incorporated Vil. of Roslyn, 144 AD2d 639.) III. The values included for vehicles, "supplies not booked” and new range systems are supported by the evidence.
   OPINION OF THE COURT

Kaye, J.

In this appeal by two closely held corporations — Seagroatt Floral Company and Henry J. Seagroatt Company — we are called upon to answer two questions. First, was the lack of a public market for the corporations’ shares taken into account in valuing the companies for purposes of buying out petitioners’ minority stockholdings under Business Corporation Law § 1118, and second, was it error to impose joint and several liability on the two corporations. We conclude that, while lack of marketability was considered in valuing the stock, the imposition of joint and several liability was error that requires modification of the Appellate Division order.

I.

In the early 1920s, petitioners’ grandfather founded a rose-growing operation, Henry J. Seagroatt, in Berlin, New York. A wholesale business, Seagroatt Floral, was added in 1948. Today, Henry J. Seagroatt sells all of its cut flowers to Seagroatt Floral. Seagroatt Floral distributes cut flowers purchased from Henry J. Seagroatt and other growers, as well as florist supplies.

In 1960 Henry J. Seagroatt and Seagroatt Floral were incorporated as separate entities. Henry J. Seagroatt in 1984 obtained "subchapter S” status pursuant to Federal tax regulations.

All common stock in the two corporations is owned by the founder’s seven grandsons. In addition to common stock, Seagroatt Floral has outstanding 280 shares of preferred stock, owned by individuals other than the seven grandchildren. The two petitioning grandsons, James H. Riccardi and Edward A. Seagroatt, each own approximately 17% of the outstanding common shares of each corporation.

In 1987, petitioners became embroiled in a controversy with the managing shareholders, and sought dissolution of the corporations pursuant to Business Corporation Law § 1104-a. The petitions alleged that the directors had taken "oppressive action” against petitioners.

Each corporation separately elected to purchase petitioners’ shares pursuant to Business Corporation Law § 1118. As a result, Supreme Court stayed the dissolution proceedings and, the parties having been unable to agree upon a price, referred the matter to a Referee to ascertain the fair value of the stock.

Extensive proceedings ensued before the Referee, including testimony from the shareholders and expert witnesses for both sides. The Referee held that, in order to determine a fair price for petitioners’ shares, the corporations had to be valued as a single business with one consolidated financial statement. He specifically rejected the methods employed by the corporations’ two valuation experts — one using liquidation value and the other assuming that the corporations operated independently.

Based on his findings as to the best method, the proper valuation of tangible assets, and the correct treatment of certain capital disbursements, the Referee adopted the conclusions tendered by petitioners’ expert, with two exceptions. The Referee refused to accept the suggested valuation of the preferred shares (which no one contests), and he rejected as incredible the witness’s testimony that he had taken lack of marketability into account.

While accepting petitioner’s expert’s opinion that the combined net asset value of the two businesses was $9,467,975, the Referee held that a lack-of-marketability discount had erroneously been ignored in the calculation; and on a theory that "a willing buyer would invest in the Seagroatt business only if he could buy a bargain,” the Referee proceeded to discount the expert’s combined net asset value by 25%. He then divided the discounted number ($7,096,481) by the total number of common shares in both corporations (692) to obtain a per-share value, and thus concluded that the 120 shares owned by each petitioner were worth $1,230,603. The Referee further held that each petitioner was entitled to judgment against the corporations, jointly and severally, in that amount. After setoffs and interest, judgment was entered accordingly.

Both sides appealed. Petitioners challenged the 25% lack-of-marketability discount; the corporations argued that it was error to impose joint and several liability. The Appellate Division upheld the imposition of joint and several liability based on the interrelated operation of the businesses. From its own review of the record, however, the court concluded that there was no evidence to support the conclusion that petitioners’ expert had failed to take lack of marketability into account, and it set aside the 25% discount. The corporations now seek to overturn the Appellate Division’s holdings both as to the discount and as to joint and several liability.

We agree with the Appellate Division as to the discount; its holding that illiquidity had indeed been considered by petitioners’ expert more closely comports with the weight of the evidence than that of the trial court adopting the Referee’s findings. However, the imposition of joint and several liability — in effect making each separate corporation liable for the purchase of the other’s shares — cannot stand.

II.

Section 1104-a of the Business Corporation Law, enacted in 1979, provides minority shareholders in close corporations with protection from oppressive conduct by majority interests (see generally, Matter of Pace Photographers [Rosen], 71 NY2d 737, 744-745; see also, Sponsor’s Mem in support of A 4408 [L 1979, ch 217], 1979 NY Legis Ann, at 144 ["This legislation will do much to bring fair play and equal rights to corporate shareholders.”]).

The statute allows holders of 20% or more of the outstanding shares of a corporation to present a petition for dissolution based on any of several enumerated grounds, including oppressive acts by the directors or those in control of the corporation (Business Corporation Law § 1104-a [a] [1]). In order to afford the other shareholders the option to continue the enterprise as a going concern, a buyout provision was concomitantly added as section 1118 of the Business Corporation Law. Under that provision, those interested in maintaining the business — a class of "prospective purchasers” explicitly limited to the other shareholders or the corporation itself —may within 90 days of the filing of an 1104-a petition elect to purchase the shares owned by the petitioners (Business Corporation Law § 1118 [a], [b]). Thus, the Business Corporation Law protects both the right of the allegedly oppressed shareholder to liquidate an investment at fair value and the right of the remaining shareholders to preserve an ongoing— and likely prosperous — business (see generally, O’Neal, "Squeeze-Outs” of Minority Shareholders, at 613-614 [1975]; Davidian, Corporate Dissolution in New York: Liberalizing the Rights of Minority Shareholders, 56 St John’s L Rev 24 [1981]).

Given these complementary sections of the Business Corporation Law, the ultimate issue for the courts often becomes fixing the fair value of the minority interest being purchased (see, e.g., Matter of Joy Wholesale Sundries, 125 AD2d 310; Matter of Blake v Blake Agency, 107 AD2d 139, lv denied 65 NY2d 609; Matter of Fleischer, 107 AD2d 97). In that the valuation proceeding avoids dissolution and allows the continuation of an operating business, the value to be ascertained is that of an interest in a going concern rather than a share of a business in the throes of liquidation (Matter of Pace Photographers [Rosen], 71 NY2d, at 748, supra).

Thus, once Seagroatt Floral and Henry J. Seagroatt elected to buy out petitioners, the misconduct charges became irrelevant. The issue became one of valuation.

Business Corporation Law § 1118 offers no definition of fair value and no criteria by which a court is to determine price or other terms of the purchase (see also, Business Corporation Law § 623). Rather, fair market value, being a question of fact, will depend upon the circumstances of each case; there is no single formula for mechanical application (see, Amodio v Amodio, 70 NY2d 5, 7; see also, Weinberger v UOP, Inc., 457 A2d 701, 712-713 [Del]).

The objective of a proceeding under Business Corporation Law § 1118 — including the one now before us — is to determine what a willing purchaser in an arm’s length transaction would offer for petitioners’ interest in the company as an operating business (Matter of Pace Photographers [Rosen], 71 NY2d, at 748, supra; Matter of Blake v Blake Agency, 107 AD2d 139, 146, supra).

III.

Valuing a closely held corporation is not an exact science. Accordingly, courts in such proceedings confront a variety of evidence and methods aimed at determining the price of minority interests in closely held corporations — legal entities that by their nature contradict the concept of a "market” value (see, e.g., Matter of Raskin v Walter Karl, Inc., 129 AD2d 642, 644; see also, Donahue v Rodd Electrotype Co., 367 Mass 578, 328 NE2d 505). The 1979 amendments to the Business Corporation Law were motivated, in part, by recognition of the fact that shareholders in closely held corporations, as contrasted with shareholders in public companies, are unlikely to find prospective buyers for their shares (see, Sweet and Mallis, Standing to Petition for the Judicial Dissolution Under the New York Business Corporation Law: A Needed Change, contained in Bill Jacket, L 1979, ch 217). It follows that, whatever the method of valuing an interest in such an enterprise, it should include consideration of any risk associated with illiquidity of the shares (see generally, Haynsworth, Valuation of Business Interests, 33 Mercer L Rev 457 [1982]; 2 O’Neal and Thompson, O’Neal’s Close Corporations § 9.34, at 162-163 [3d ed]).

Petitioners’ expert testified that the method he employed was "capitalization of earnings.” As he explained, he first found average annual earnings for the combined enterprise and next assessed the relative certainty with which those earnings could be counted upon to continue — in effect, he determined the value of those future earnings. The witness testified that he applied a 16% capitalization rate — within the range of Revenue Ruling 68-609, governing valuation of closely held companies for taxation purposes — to what he calculated as the entities’ annual "excess earnings,” and then combined that value with his "tangible asset” value to arrive at the total value for both businesses. He further testified that he did not thereafter apply an illiquidity discount to the value so determined, as he would have done if he had compared respondent corporations with publicly traded companies or over-all industry averages — because his method did not involve such comparisons.

Before us, respondent corporations do not challenge the methodology employed by petitioners’ witness. Rather, their sole contention is that the witness did not properly consider the key risk factor of lack of marketability. They point to language in Amodio to the effect that whatever "method [of valuation] is used * * * must take into consideration inhibitions on the transfer of the corporate interest resulting from a limited market” (70 NY2d, at 7, supra). Based on this language, the corporations argue that an identifiable discount must in all cases be applied against the value found — that the factor of illiquidity cannot be "buried” in the capitalization rate.

While lack of a public market for the shares of a closely held corporation should certainly be considered in determining what a willing purchaser would pay for such shares— which is the purport of the quoted language from Amodio, involving contractual restrictions on transfer — there is no single method for calculating that factor (see generally, Lyons and Whitman, Valuing Closely Held Corporations and Publicly Traded Securities with Limited Marketability: Approaches to Allowable Discounts from Gross Values, 33 Bus Law 2213 [1978]). Certainly, this Court has never mandated one. Thus, to the extent respondent corporations suggest that illiquidity can only be taken into account by the application of a percentage discount against value — such as the Referee applied — the argument fails as a matter of law.

The corporations’ second argument is essentially factual: the Referee rejected as incredible the testimony of petitioners’ expert that he factored the risk associated with lack of marketability into his formula to determine over-all value. The Appellate Division, on its review of the testimony, concluded otherwise. Our role in such a situation is to determine which findings more closely comport with the weight of the evidence (CPLR 5501 [b]).

Petitioners’ expert testified that he used a capitalization rate he believed was reasonable in the circumstances for pretax earnings for a closely held corporation, taking into account its "position in the industry, its earnings and also lack of marketability, the fact it’s a closely held company.” Despite the Referee’s statement that there was nothing in the record to justify the conclusion that the witness considered lack of marketability, on half-dozen or more occasions the witness repeatedly asserted and explained that lack of marketability had been a factor in his choice of capitalization rate.

The corporations point to what they consider the expert’s outright denial that he had considered illiquidity. An examination of the record, however, indicates that the witness was in the process of explaining his decision not to value the corporations by comparison to publicly traded companies, and the consequent lack of necessity for any discount relevant to such a comparison. The witness’s very next response makes clear that, although a comparative discount was not appropriate, he did indeed factor lack of marketability into his capitalization rate.

Thus, as to the only challenged valuation point, we conclude that there was no error of law, and that the Appellate Division’s findings more closely comport with the weight of the evidence and should be sustained.

IV.

The corporations next argue that imposition of joint and several liability contravenes the explicit statutory grant to an issuing corporation and its shareholders of the right to purchase the company’s own shares (Business Corporation Law § 1118). Further, they contend that compelling Seagroatt Floral to satisfy the judgment would imperil both the interests of Seagroatt Floral’s preferred shareholders and Henry J. Seagroatt’s status as an "S” corporation. We agree that the imposition of joint and several liability was error.

At the outset, we note that the corporations do not challenge the Referee’s finding that, owing to the business relationships between them, the financial statements of the two companies had to be considered on a consolidated basis in order to portray the fair value of the business. Instead, the corporations argue that consolidation for the purpose of determining value does not require or justify joint and several liability, and that separate values should have been assigned to each entity for purposes of a judgment against them. This argument was advanced at several points during the proceeding, most particularly in the companies’ trial briefs urging that the ultimate issue was to value each entity separately.

Joint and several liability, primarily a tort law concept, imposes on each wrongdoer responsibility for the entire damages awarded, even though a particular wrongdoer’s conduct may have caused only a portion of the loss (see generally, Siegel, NY Prac § 168A, at 247 [Prac 2d ed]). The rationale for such liability is that the wrongdoers are considered part of a joint enterprise and a mutual agency “such that the act of one is the act of all and liability for all that is done is visited upon each” (Ravo v Rogatnick, 70 NY2d 305, 309). The concept of wrongdoing is, of course, alien to a proceeding under Business Corporation Law § 1118, which seeks to determine the fair value of petitioning shareholders’ interests, not their initial allegations of misconduct.

As a general matter, moreover, joint and several liability is inconsistent with the language and goals of Business Corporation Law § 1118.

Section 1118 gives any shareholder or the corporation itself the "absolute right to avoid the dissolution proceedings and any possibility of the company’s liquidation by electing to purchase petitioner’s shares” (Matter of Pace Photographers [Rosen], 71 NY2d, at 744-745, supra). The statute is quite specific as to which parties may exercise the buy-out option. Unless a second corporation is a shareholder in the company against whom the 1104-a petition has been filed, it does not have standing to make an election to purchase under Business Corporation Law § 1118. It follows from the language of the statute that an entity lacking standing to make the election to purchase cannot be forced to repurchase those very shares through the imposition of joint and several liability.

This reading of section 1118 is supported by sound policy considerations. The purpose behind enactment of a buy-out provision was to provide the corporation or its shareholders with a mechanism for preserving the enterprise as a going concern. Allowing a third party — by satisfying the entire "joint and several” judgment — to purchase the shares of the petitioning shareholder injects an element of uncertainty, a new ownership interest, into the continued operation of the enterprise.

While that consideration may pose less of a problem in cases like the present one, where management and operations overlap, there are other threatened effects on the status of these separate entities. Seagroatt Floral, for example, has an additional class of preferred shareholders; were Seagroatt Floral forced to satisfy the full judgment, the expenditure could affect its ability to pay preferred dividends or, in the event of liquidation, the ability of those shareholders to recoup their investment. Related to such financial concerns is respondents’ argument that this substantial liability — making each potentially liable for the full price of petitioners’ shares in both corporations — harms each entity in its efforts to obtain financing, as each carries the full burden of the judgment.

Similarly, Henry J. Seagroatt claims that purchase of its shares by Seagroatt Floral would jeopardize its status as an "S” corporation for Federal tax purposes. Under Federal regulations, close corporations must meet specific requirements in order to qualify for subchapter S standing, including the requirement that all shareholders must be individuals, estates, voting trusts, temporary conduit trusts, or trusts whose income is taxed to the grantor (see generally, 26 USC § 1361).

Petitioners contend, and the Appellate Division agreed, that imposition of joint and several liability is appropriate here because of the "numerous organizational, operational and financial” links between the companies, making them "in reality a single business” (167 AD2d 586, 587). While bearing on the propriety of consolidating the financial statements of the two entities in order to find the true value of petitioners’ shares, those links do not mandate joint and several liability.

Imposition of joint and several liability, in practical effect, disregarded the fact that two legal entities stood before the court. Under ordinary circumstances, a corporation’s independent existence cannot be ignored (see, Port Chester Elec. Constr. Corp. v Atlas, 40 NY2d 652, 656). Allowing a court— through joint and several liability — to in effect pierce the corporate veils, without the proper inquiry and proof according to established guidelines, undermines bedrock principles of corporate law.

While concluding that it was error to impose joint and several liability on respondents, we do not determine whether the record must be supplemented in order to apportion the total value found, or whether that calculation can be made by the trial court on the present evidence. We note that the parties in their briefs have suggested that there is sufficient basis in the present record upon which the trier of fact might premise separate judgments against each corporation.

Finally, the corporations contend that certain asset valuations were not supported by the record. These valuations, having been found by the trial court, affirmed by the Appellate Division and supported by evidence in the record, are beyond our review (Humphrey v State of New York, 60 NY2d 742).

Accordingly, the order of the Appellate Division should be modified, without costs, by reversing so much of the order as affirmed the imposition of joint and several liability, and remitting the matters to Supreme Court, Rensselaer County, for further proceedings in accordance with this opinion, and as so modified, affirmed.

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

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

       [4] Petitioners argue that the joint and several liability issue has been mooted by payment of the judgment. Payment by a losing party does not terminate its right to appeal unless made by way of compromise or agreement not to pursue an appeal (see, Hayes v Nourse, 107 NY 577; see also, CPLR 5523 [court reversing judgment may order restitution]). Moreover, respondents point out that, as a practical matter, they each remain liable for the full amount of the indebtedness that was incurred to satisfy the judgment and stop the running of interest on the judgment.


source: Caselaw Access Project

author: Simons, J.

license: Public Domain

text:
    In the Matter of the Estate of Roberta W. Seaman, Deceased. Charlotte L. Gaynor, Appellant; William H. Baxter et al., Respondents.
    Argued October 9, 1991;
    decided November 21, 1991

      POINTS OF COUNSEL

      Robert K. Weiler, Laurence G. Bousquet, Seth B. Weinshenker and Philip S. Bousquet for appellant.
    I. Under EPTL 4-1.1, Charlotte, as the sole niece of Roberta, is Roberta’s sole distributee and therefore entitled to letters of administration of Roberta’s estate. (Carpenter v Buffalo Gen. Elec. Co., 213 NY 101; Matter of Meyer, 204 Misc 265, 282 App Div 860; Matter of Gustafson, 74 NY2d 448; Bourne v Dorney, 184 App Div 476; Dodin v Dodin, 16 App Div 42, 162 NY 635; Matter of Fienga, 75 Misc 2d 233; Matter of Landers, 100 Misc 635; Matter of Robert Paul P., 63 NY2d 233; Matter of Burk, 299 NY 308.) II. The decision and orders below should be reversed because the result below contravenes the legislative intent to equate intestate and testamentary rights. (Matter of Horchler, 37 AD2d 28, 30 NY2d 725; Braschi v Stahl Assocs. Co., 74 NY2d 201; Matter of Allstate Ins. Co. v Libow, 106 AD2d 110, 65 NY2d 807.) III. The language of Domestic Relations Law § 117 reflects the legislative intent to craft consistent and parallel frameworks for testamentary and intestate rights. (Matter of Allstate Ins. Co. v Libow, 106 AD2d 110, 65 NY2d 807; Matter of Horchler, 37 AD2d 28, 30 NY2d 725.) IV. The decision should be reversed because it violates the legislative policy favoring inheritance by close natural relatives. (Low v Bankers Trust Co., 270 NY 143, 271 NY 615; Matter of Fleischer, 126 AD2d 805; Matter of Getman, 30 AD2d 257.) V. Upon reversal of the first order of the court below, the court should vacate the Baxter decree. (Halpern v Amtorg Trading Corp., 292 NY 42; Butler v Eaton, 141 US 240; Ciminelli Constr. Co. v City of Buffalo, 110 AD2d 1075; Matter of Winburn, 270 NY 196; Altman v Hofeller, 152 NY 498.)

      David M. Garber, John E. Morrissey, Jr., Richard P. James and William G. Bauer for respondents.
    I. Since appellant Charlotte Lindner Gaynor is not a "distributee” of Roberta Seaman, Surrogate Wells properly denied her applications for letters of administration. (Matter of Chase, 127 AD2d 415; Matter of Heye, 149 Misc 890, 241 App Div 907; People ex rel. Sibley v Sheppard, 54 NY2d 320; Carpenter v Buffalo Gen. Elec. Co., 213 NY 101; Ryan v Sexton, 191 App Div 159; Eaton v New York City Conciliation & Appeals Bd., 56 NY2d 340; Matter of Hospital Assn. v Axelrod, 165 AD2d 152; Matter of Best, 66 NY2d 151; Matter of Shupack, 158 Misc 873; Matter of Whitcomb, 170 Misc 579.) II. Appellant Charlotte Lindner Gaynor’s contention that she is a "distributee” of Roberta Seaman is based upon an erroneous interpretation of the EPTL and the Domestic Relations Law. (Matter of Albano v Kirby, 36 NY2d 526; Matter of Gregory B., 74 NY2d 77; People v Olah, 300 NY 96.) III. The determinations of Surrogate Wells and the court below should be affirmed, with costs. (Matter of Robert Paul P., 63 NY2d 233; Carpenter v Buffalo Gen. Elec. Co., 213 NY 101; Matter of Gregory B., 74 NY2d 77; Matter of Gardiner, 69 NY2d 66; Betz v Horr, 276 NY 83; Matter of Chase, 127 AD2d 415; Matter of Trainor, 45 Misc 2d 316; Matter of Meyer, 204 Misc 265, 282 App Div 860; Matter of Adler, 202 Misc 1100; People v Freidman, 302 NY 75, 341 US 907.)
   OPINION OF THE COURT

Simons, J.

The novel question presented by this appeal is whether the right of an adopted-out child to inherit from his natural family extends to his daughter, the petitioner in this proceeding, who is otherwise qualified to inherit under EPTL 4-1.1, or whether the daughter is precluded by Domestic Relations Law § 117 from sharing in a natural family member’s estate. At stake is an estate of approximately $1 million to be distributed either to petitioner, the half niece of decedent, or to objectants, decedent’s first cousins. The Surrogate found that petitioner was not a distributee of decedent and the Appellate Division affirmed for the reasons stated in his opinion (see, Matter of Seaman, 144 Misc 2d 84, affd 163 AD2d 870). We granted leave to appeal.

I

Petitioner was related to decedent as follows.

Lloyd I. Seaman (petitioner’s grandfather) married twice. His first wife, Gladys, gave birth to Lloyd Dudley Seaman (Dudley), petitioner’s father. Lloyd I. Seaman’s second wife, Mary, gave birth to a daughter (Roberta), the decedent. Thus, Dudley was Roberta’s half brother. Dudley predeceased Roberta leaving as his only issue the petitioner, Charlotte, a half niece of decedent. The objectants, the only other possible distributees, are children of Roberta’s aunt and uncles (her mother’s sister and her father’s brothers).

On these facts, and absent Dudley’s adoption, Charlotte would be the sole distributee of Roberta because half-blood relatives are considered whole and she is closer in degree of kinship to decedent than the cousins. Because Dudley was adopted by his mother’s second husband, however, the Surrogate held that petitioner was foreclosed from inheriting as an intestate distributee under Domestic Relations Law § 117 (1) (e) and (f) in the absence of language expressly extending Dudley’s rights to his "issue”. Respondents contend that the Surrogate’s reading of the statute is not only correct but is supported by policy reasons stated by this Court in Matter of Best (66 NY2d 151, 155-157).

We conclude that neither the language of Domestic Relations Law § 117, the legislative history preceding it, nor policy reasons advanced in Matter of Best, support the result. Accordingly, the order should be reversed and the matter remitted to Surrogate’s Court for entry of a decree in conformance with this decision (see, SCPA 2702).

II

Intestate succession is governed by EPTL 4-1.1. As relevant here, the statute provides that if the decedent is survived by "[brothers or sisters or their issue, and no spouse, issue or parent,” the whole of the decedent’s estate shall be distributed to the brothers and sisters or their issue per stirpes (EPTL 4-1.1 [a] [7]). The statute also provides that half-blood relatives are to be treated as if they were relatives of the whole blood (EPTL 4-1.1 [d]). Thus, decedent’s half brother, Dudley, would be considered her full brother for purposes of intestate distribution and if he had not been adopted-out, petitioner would qualify as sole distributee since she is his only living issue.

EPTL 4-1.1 (f) provides, however, that "[t]he right of an adopted child to take a distributive share and the right of succession to the estate of an adopted child continue as provided in the domestic relations law.” Inasmuch as petitioner is related to the decedent through decedent’s adopted-out half brother, we turn to the Domestic Relations Law to determine what limitations, if any, that statute imposes on her right to inherit as an intestate distributee.

Domestic Relations Law § 117 (1) (b) terminates "[t]he rights of an adoptive child to inheritance and succession from and through [the] natural parents”. There are exceptions, however, and relevant here is the exception which provides for inheritance if: (1) the decedent is the adoptive child’s natural grandparent or is a descendant of such grandparent, and (2) an adoptive parent is married to the child’s natural parent (Domestic Relations Law § 117 [1] [e]). Petitioner’s father Dudley came within this provision because Roberta was a descendant of Dudley’s natural grandparents (Lloyd I. Seaman’s parents), and Dudley’s adoptive father married his natural mother. Thus, Dudley’s right to inherit from or through either natural parent, as provided in EPTL 4-1.1, did not terminate upon his adoption. From this, it would seem that petitioner’s right to so inherit is equally preserved because her right is contingent, in part, on her father’s ability to inherit from the natural family following the adoption. This conclusion is supported by the language of the statutes and the legislative history preceding their enactment.

ra

Adoption was unknown to the common law of England: it exists in New York only by statute (see, Second Report of Temp St Commn on Modernization, Revision and Simplification of Law of Estates, "Intestate Succession and the Adopted Child”, 1963 NY Legis Doc No. 19, Appendix E, at 148-160; 9 Rohan, NY Civ Prac ¶ 4-1.1 [11]). Because of this, a legal adoption does not automatically terminate the children’s right to inherit from their natural kindred, nor grant them the right to inherit from their adoptive family (see, Second Report of Temp St Commn on Modernization, Revision and Simplification of Law of Estates, "Intestate Succession and the Adopted Child”, 1963 NY Legis Doc No. 19, Appendix E, at 148-152). Rather, these inheritance rights are controlled by statute.

In 1887, the Legislature granted adopted children and their heirs the right to inherit from their adoptive parents; their right of inheritance from the natural parents were not altered, however, because the statute failed to sever them (see, L 1887, ch 703; see generally, 9 Rohan, NY Civ Prac ¶ 4-1.1 [11]; Note, When Blood Isn’t Thicker Than Water: The Inheritance Rights of Adopted-out Children In New York, 53 Brooklyn L Rev 1007, 1011-1012 [1988]). Indeed, in 1896, the Legislature amended the Domestic Relations Law to state explicitly that an adopted child’s "rights of inheritance and succession from his natural parents remain unaffected by such adoption” (L 1896, ch 272, § 64). That remained the law until 1963, when the Legislature severed the adopted child’s right to inherit from biological kindred, except from a custodial and natural parent who had remarried and consented to the child’s adoption by the stepparent (L 1963, ch 406, § 1 [now found in Domestic Relations Law § 117 (1) (b), (d)]; see also, Second Report of Temp St Commn on Modernization, Revision and Simplification of Law of Estates, "Intestate Succession and the Adopted Child”, 1963 NY Legis Doc No. 19, Appendix E, at 148-160; 9 Rohan, NY Civ Prac ¶ 4-1.1 [11]; Note, When Blood Isn’t Thicker Than Water: The Inheritance Rights of Adopted-out Children In New York, 53 Brooklyn L Rev 1007, 1011-1012 [1988]). In 1987, the Legislature amended the Domestic Relations Law again, this time to restore an adopted child’s right of intestate inheritance from and through either natural parent under limited circumstances (see, L 1987, ch 499 [now found in Domestic Relations Law § 117 (1) (e)]). It is this amendment which authorized Dudley to inherit from his half-, sister’s estate.

However, this case concerns the inheritance rights of Dudley’s issue, petitioner. Her right to inherit is contingent on her father’s ability to inherit from the natural family. This is so because prior to the 1963 amendment, the issue of a predeceased adopted child also retained the right to inherit from the natural family. There are no decisions directly on point, but the prevailing view of the commentators is that the issue of an adopted child retained a right to inherit from the natural family to the extent that the adopted child did because the issue of the predeceased adopted child occupied the same status as the parent would have had he or she survived (see, 9 Rohan, NY Civ Prac ¶ 4-1.1 [11]; Second Report of Temp St Commn on Modernization, Revision and Simplification of Law of Estates, "Intestate Succession and the Adopted Child”, 1963 NY Legis Doc No. 19, Appendix E, at 150, 156; see also, Binavince, Adoption and the Law of Descent and Distribution: A Comparative Study and a Proposal for Model Legislation, 51 Cornell LQ 152, 165; Legislation, New York’s Law of Estates and Distribution: The New York Status of the Adopted Child, 38 St Johns L Rev 380, 383; cf., Matter of Whitcomb, 170 Misc 579). The issue’s right to inherit from the natural family was severed, however, in 1963 when the Legislature severed the adopted child’s right to so inherit (see, Domestic Relations Law § 117 [1] [b]). From this, it follows that when the Legislature restored the right of the adopted-out child to inherit from the natural family under the circumstances specified in Domestic Relations Law § 117 (1) (e), it also restored the right of the adopted-out child’s issue to do so (see generally, 9 Rohan, NY Civ Prac ¶ 4-1.1 [11]; Second Report of Temp St Commn on Modernization, Revision and Simplification of Law of Estates, "Intestate Succession and the Adopted Child”, 1963 NY Legis Doc No. 19, Appendix E, at 150, 156; Recommendation of NY Law Rev Commn to 1986 Legislature, 1986 NY Legis Doc No. 65 [B], reprinted in 1986 McKinney’s Session Laws of NY, at 2560, 2568-2576). Thus, petitioner’s right to inherit through her father from decedent is preserved under Domestic Relations Law § 117 (1) (e).

The Surrogate concluded that the Legislature did not intend to extend rights granted to the adopted-out child under Domestic Relations Law § 117 (1) (e) to the child’s issue because the Law Revision Commission failed to mention the "descendants” or "issue” of the adopted-out child in its recommendation to the Legislature and because the Legislature excluded any reference to "descendants” or "issue” when it enacted the section. It was unnecessary for the Legislature to expressly refer to the adopted-out child’s "issue” when it enacted that provision, however: it implicitly restored those rights to the issue of the adopted-out child when it restored them to the child (see generally, 9 Rohan, NY Civ Prac ¶ 4-1.1 [11]; Second Report of Temp St Commn on Modernization, Revision and Simplification of Law of Estates, "Intestate Succession and the Adopted Child”, 1963 NY Legis Doc No. 19, Appendix E, at 150, 156; Recommendation of NY Law Rev Commn to 1986 Legislature, 1986 NY Legis Doc No. 65 [B], reprinted in 1986 McKinney’s Session Laws of NY, at 2560, 2568-2576).

This conclusion is further supported by an examination of the language of the provisions of Domestic Relations Law § 117 (1) relating to the severance and restoration of the adopted child’s right to inherit from the natural family. Paragraph (b) of section 117 (1) states that the adopted child’s right to inherit from or through the natural family "shall terminate” upon the making of the order of adoption except as otherwise provided in that section. The "issue” of the adopted child is not mentioned but it follows logically that the section also implicitly severed the right of the "issue” to take (cf., Matter of Adler, 202 Misc 1100, 1103 [adoption statute which severed the natural parents’ right to inherit from the adopted child also implicitly severed the natural kindred and blood relatives rights to do so because the substructure which joined the blood relatives with the adopted child was removed and, therefore, anyone who must trace his or her relationship through a natural parent may not inherit from the adopted child]). Paragraph (e) of section 117 (1) states that the adopted child’s right to inherit from or through the natural family "shall not terminate,” in limited circumstances, upon the making of the order of adoption. "Issue” of the adopted child is not mentioned in that section either but, because the provisions of section 117 (1) (b) and (e) are symmetrical, it follows that the issue’s right to inherit was implicitly restored under that provision (cf., Matter of Monroe, 132 Misc 279, 281 [foster child’s right to inherit from blood relative was preserved because the adoption statute did not expressly dissolve the child’s right to inherit from the natural parents and, therefore, the foundation which joined that child to his blood relatives remained unaltered by adoption]).

Moreover, inclusion of the word "issue” in Domestic Relations Law § 117 (1) (e) was unnecessary because whether the issue of a predeceased adopted child inherits through that child from the natural family is determined Iby the provisions in EPTL 4-1.1, unless otherwise expressly limited in the Domestic Relations Law (see, Carpenter v Buffalo Gen. Elec. Co., 213 NY 101, 104 [adoption statute must be read in connection with the provisions of the Decedent Estate Law]; Matter of Landers, 100 Misc 635; EPTL 4-1.1 [f]; see generally, 9 Rohan, NY Civ Prac ¶ 4-1.1 [6]). The adoption statute and the descent and distribution statute are in pari materia, and should be read and construed together whenever possible. This is so, because the adoption statute does not completely define the incidents of the relation between the adopted child and its natural kindred, but merely determines what limitations, if any, are imposed on that relationship (see generally, 46 NY Jur 2d, Domestic Relations, §§ 506-513; 2 NY Jur, Adoption, §§ 13-22). Indeed, the Law Revision Commission reports on the enactment of Domestic Relations Law § 117 (1) (e) support this reading of the statutes by referring to EPTL 4-1.1, indicating the Commission’s intent to continue the rights of an adopted child and those inheriting by representation, i.e., the surviving issue, to take from the natural family in accordance with the Estates, Powers and Trusts Law (see, Mem of NY Law Rev Commn, 1987 McKinney’s Session Laws of NY, at 1926; Recommendation of NY Law Rev Commn to 1987 Legislature, 1987 NY Legis Doc No. 65 [E], reprinted in 1987 McKinney’s Session Laws of NY, at 1929; Recommendation of NY Law Rev Commn to 1986 Legislature, 1986 NY Legis Doc No. 65 [B], reprinted in 1986 McKinney’s Session Laws of NY, at 2560, 2585-2586).

It is also noteworthy that the Law Revision Commission, in its 1987 recommendation for enactment of the current Domestic Relations Law § 117 (1) (e), stated that it believed "there should be no distinction between the right of inheritance under the laws of intestacy and that under the law of wills and other instruments where the adopted-out person remains within the natural family unit” (Recommendation of NY Law Rev Commn to 1987 Legislature, 1987 NY Legis Doc No. 65 [E], reprinted in 1987 McKinney’s Session Laws of NY, at 1930, 1941-1942; see also, 1986 McKinney’s Session Laws of NY, at 2560, 2586-2587). Under section 117 (2) (b) of the Domestic Relations Law, a class gift in a will or lifetime instrument includes the adopted children and their issue. While distinctions exist between the laws of intestacy and the laws of wills, the Commission sought consistency between them to the extent possible in the case of adopted-out persons who remain within the natural family unit, even absent an express reference to "issue” in Domestic Relations Law § 117 (1) (e).

Finally, the Surrogate concluded that petitioner was not qualified to take because Domestic Relations Law § 117 (1) (f) permitted distributees of an adopted-out child to inherit solely through the adoptive parent, and not through the replaced natural parent. His conclusion rested on the statutory language that "[t]he right of inheritance of an adoptive child extends to the distributees of such child and such distributees shall be the same as if he were the natural child of the adoptive parent.” The manifest purpose of this provision is to ensure that the distributees of the adopted child are determined in relation to the child’s adoptive family members, and not his natural family members whose ties have been severed pursuant to the Domestic Relations Law (see, Carpenter v Buffalo Gen. Elec. Co., 213 NY 101, supra; Matter of Riggs, 109 Misc 2d 644; see also, Second Report of Temp St Commn on Modernization, Revision and Simplification of Law of Estates, "Intestate Succession and the Adopted Child,” 1963 NY Legis Doc No. 19, Appendix E, at 148, 150). We find no support for the contention that it was intended to limit the distributees’ right of inheritance to the adoptive family. Thus, absent an express provision to the contrary in Domestic Relations Law § 117, petitioner could inherit through her adopted-out father under EPTL 4-1.1 (a) (7).

IV

The policy considerations advanced in Matter of Best (66 NY2d 151, 155-157, supra) do not require a different construction of the statute.

In Best, we held that a child born out of wedlock and adopted out of the biological family at birth was not entitled to share in a trust estate devised by his biological grandmother to her daughter’s issue. In so holding, we identified several policy considerations militating against the child’s claim: we concluded that recognition of a right to inherit would be inconsistent with the child’s complete assimilation into the adoptive family, would undermine the stability and finality of administration of estates because there would always lurk the possibility of uncited and unknown persons, would lead to a breach of confidentiality of adoption records, and would allow the child to inherit from both the biological and adoptive families (see, Matter of Best, 66 NY2d 151, 155-157, supra).

Respondents maintain that these policy considerations apply equally here, where an adopted-out child’s issue seeks to inherit from the biological family that has been replaced by the adoptive family. Best is distinguishable, however, because it involved a child who was born out of wedlock and adopted by strangers. In the case before us, the adopted child was adopted by his mother’s second husband following her divorce from the child’s father — a form of adoption over which we reserved decision expressly in Matter of Best (supra, at 155, n 1). It is clear that the Legislature considered the distinction between these types of cases when it revised the Domestic Relations Law in 1986 and 1987, following our decision in Best, and restored the inheritance rights of children adopted by close natural kindred concluding that cases such as this, involving the exceptions contained in Domestic Relations Law § 117 (1) (e), should be treated differently from other adoptions because they invariably involve situations in which natural family ties are maintained (see, Recommendation of NY Law Rev Commn to 1986 Legislature, 1986 NY Legis Doc No. 65 [B], reprinted in 1986 McKinney’s Session Laws of NY, at 2560, 2562-2565; 1987 McKinney’s Session Laws of NY, at 1928, 1930-1931).

The Law Revision Commission, in its report on the Domestic Relations Law amendment, acknowledged the various policy concerns raised in Matter of Best (supra) and specifically addressed each. On the issue of disrupting the adopted child’s assimilation into the adoptive family, it concluded that complete severance of the natural relationship was not necessary when the adopted person remained within the natural family unit as a result of an intrafamily adoption (see, 1986 McKinney’s Session Laws of NY, at 2560, 2573, 2582-2583; 1987 McKinney’s Session Laws of NY, at 1928, 1931-1935, 1941-1942). The Commission further concluded that the amendments would not create "uncertainty” in titles of property because in most cases there would be knowledge within the family of the identity of all the parties since only children adopted by closely related persons are eligible to inherit under the amendments to Domestic Relations Law § 117, and that this knowledge of the adoption would also prevent the need to breach the privacy of the adoption proceedings (see, 1986 McKinney’s Session Laws of NY, at 2560, 2574-2575, 2584-2585; 1987 McKinney’s Session Laws of NY, at 1928, 1940-1942). Finally, it discussed the problem of allowing inheritance from both the natural and adoptive family and concluded that this was a logical consequence when there are adoptions within the natural family unit (see, 1986 McKinney’s Session Laws of NY, at 2560, 2575-2576; 1987 McKinney’s Session Laws of NY, at 1928, 1940-1941). Thus, the policy concerns raised in Matter of Best were thoroughly addressed by the Commission when it proposed that the Legislature amend the Domestic Relations Law and reinstate the rights of an adopted child to inherit from the natural family under limited circumstances. Inasmuch as the Legislature by enacting these amendments chose to set aside the concerns of Best, and it did so without limiting the right of the issue of the adopted-out child to inherit from the natural family, we conclude it intended no limitation.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the matter remitted to Surrogate’s Court for the entry of a decree in accordance with this opinion.

Chief Judge Wachtler and Judges Kaye, Alexander, Ti-tone, Hancock, Jr., and Bellacosa concur.

Order reversed, with costs to all parties appearing separately and filing separate briefs payable out of the estate, and matter remitted to Surrogate’s Court, Onondaga County, for further proceedings in accordance with the opinion herein.

      . It is noteworthy that Domestic Relations Law § 117 (1) (d), which preserves the inheritance rights of the adopted child from and through a custodial natural parent when the child is adopted by a stepparent, does not expressly refer to the "issue” of an adopted child. Yet, it would seem indisputable that the rights of the "issue” would be implicitly preserved (§ 117 [1] [d]) in that situation, to the extent not otherwise expressly limited by Domestic Relations Law § 117.

      . Intrafamily adoptions are the type of adoptions covered by Domestic Relations Law § 117 (1) (e) and (2) (b), and typically include situations where an orphaned child is adopted by a blood relative; where one biological parent dies while still married to the other, and the surviving biological parent eventually marries a new spouse who adopts the child; or where, as here, following divorce of the biological parents the custodial parent remarries and the stepparent adopts the child with the consent of, or after the death of, the noncustodial parent (Recommendation of NY Law Rev Commn to 1987 Legislature, 1987 NY Legis Doc No. 65 [E], reprinted in 1987 McKinney’s Session Laws of NY, at 1928, 1931-1932). In these types of cases, the Legislature has chosen not to cut off inheritance ties between the adopted-out child and the natural family that has been replaced because of the likelihood of continued contact with that family. It is true, as noted by the Surrogate, that in the case at bar petitioner apparently had no contact with her father’s natural family. However, this fact is irrelevant for purposes of determining whether petitioner is qualified to inherit as a distributee of the decedent. The quantum of contacts or closeness between a distributee and a decedent was already considered by the Legislature when it defined the degree of kinship necessary to qualify adopted-out children and their issue as distributees under Domestic Relations Law § 117 and EPTL 4-1.1.


author: Alexander, J.

text:
    Gerard A. Dolan, Appellant, v Lois A. Dolan, Respondent.
    Submitted October 9, 1991;
    decided November 19, 1991

      POINTS OF COUNSEL

      Michael W. Kirshon for appellant.
    An ordinary disability pension, payable to a former employee who was ineligible to receive normal retirement benefits due to nonvesting, is not marital property subject to equitable distribution. (West v West, 101 AD2d 834, 115 AD2d 601; Mylette v Mylette, 140 Misc 2d 607; Damiano v Damiano, 94 AD2d 132.)

      Myron Kahn and Steve S. Efron for respondent.
    I. Plaintiff’s ordinary disability pension was properly found to be deferred compensation in substantial part, indistinguishable from a retirement pension and thus subject to equitable distribution. (Newell v Newell, 121 Misc 2d 586; West v West, 101 AD2d 834; Lanzano v City of New York, 71 NY2d 208; Winston v City of New York, 759 F2d 242; Mylette v Mylette, 140 Misc 2d 607; Waller v United States, 180 F2d 194.) II. The award of child support was reasonable. (Parry v Parry, 93 AD2d 989; Berzins v Berzins, 64 AD2d 881; Tsoucalas v Tsoucalas, 140 AD2d 333.) III. There was no error in the court below’s calculation of arrears in child support. (O’Brien v O’Brien, 136 AD2d 531; Neumark v Neumark, 120 AD2d 502; Dobransky v Dobransky, 89 AD2d 614; Kohn v Kohn, 133 AD2d 670.) IV. The direction that plaintiff pay the mortgage on the marital residence, until its sale, was entirely reasonable under the circumstances of this case. (Price v Price, 113 AD2d 299; Rodgers v Rodgers, 98 AD2d 386.)
   OPINION OF THE COURT

Alexander, J.

On this appeal, plaintiff husband challenges the Appellate Division’s affirmance of Supreme Court’s determination that a portion of his ordinary disability pension received from the New York City Employees Retirement System is marital property and thus subject to equitable distribution pursuant to part (B) of section 236 of the Domestic Relations Law. We conclude that inasmuch as a portion of that ordinary disability pension represents deferred compensation related to length of employment occurring during the marriage, it constitutes marital property subject to equitable distribution. Thus, there should be an affirmance.

I

The parties to this litigation were married on July 23, 1966. Three children were born of the union. In 1969, plaintiff became employed by the New York City Department of Sanitation. Nine years later he injured his back when he fell from a sanitation truck. He could not work at all for approximately five weeks and was unable to perform his normal work routine when he returned to work. Eventually, he was retired on an ordinary disability pension pursuant to section 13-167 of the Administrative Code of the City of New York, effective April 17, 1980. At the time of his retirement, he had accumulated approximately 11 years of service with the Department of Sanitation, thus entitling him to pension benefits of $811.84 per month from the New York City Employees Retirement System. He subsequently became employed by Marist College where he then enrolled as a full-time student.

Plaintiff commenced this divorce proceeding in 1987, having left the marital home in 1985. Defendant wife counterclaimed for divorce charging abandonment. At trial, plaintiff withdrew his reply to the counterclaim and introduced no proof in the divorce action. Supreme Court granted defendant a divorce upon her counterclaim, and the equitable distribution issues were tried. The court concluded that 47.62% of plaintiff’s ordinary disability pension was marital property subject to equitable distribution and that the remaining 52.38% was a disability payment, and thus, was separate property not subject to equitable distribution.

In order to determine the allocation between retirement benefits and disability benefits, the court compared the pension benefit plaintiff would have received had he retired normally with the allowance plaintiff received under the ordinary disability retirement provision. If plaintiff had 15 years of service, he would have had vested regular pension benefits (see, Administrative Code § 13-173.1) computed under the formula for determining normal retirement allowances, and his pension would have been considerably less — it would have equalled 47.62% of what he received under the ordinary disability plan. Supreme Court concluded that 47.62% of the ordinary disability pension was pure pension, and thus was marital property of which defendant was entitled to 50%. The court also determined that defendant was entitled to 23.81% of any future increase in the monthly pension payment as well as retroactive pension payments from the date of the commencement of the action.

The Appellate Division affirmed Supreme Court’s determination in all respects concluding that because the ordinary disability pension benefits plaintiff was receiving had a 10-year service requirement, such benefits were not solely compensation for injuries but were, in part, an award for length of service. It also concluded that the method used by Supreme Court to determine defendant’s award was proper (167 AD2d 654). For the reasons set forth below, we affirm.

II

The New York Legislature has determined that marital property shall include "all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action” (Domestic Relations Law § 236 [B] [1] [c]). This Court has previously determined that pension benefits or vested rights to those benefits, except to the extent that they are earned or acquired before marriage or after commencement of a matrimonial action, constitute marital property (see, Majauskas v Majauskas, 61 NY2d 481, 490). That determination was consistent with the intent of the Legislature as embodied in Domestic Relations Law § 236 (B) (5) (d) (4) and accords with our understanding that a pension benefit is, in essence, a form of deferred compensation derived from employment and an asset of the marriage that both spouses expect to enjoy at a future date (Damiano v Damiano, 94 AD2d 132, 137). Allowing one spouse to share the pension benefit the other obtains through employment and considering such benefits to be marital property is also consistent with the concept of equitable distribution which rests largely on the view that marriage is, among other things, an economic partnership to which each party has made a contribution (id., at 138).

However, any compensation a spouse receives for personal injuries is not considered marital property and is not subject to equitable distribution (Domestic Relations Law § 236 [B] [1] [d] [2]). Thus, a number of courts in this State have distinguished a "retirement pension” from a pure "disability pension” noting that the former is subject to equitable distribution whereas the latter, received as compensation for personal injuries, is not (see, e.g., Mylett v Mylett, 163 AD2d 463, revg 140 Misc 2d 607; West v West, 101 AD2d 834, after remittitur 115 AD2d 601; Newell v Newell, 121 Misc 2d 586).

Plaintiff argues that his disability pension should not be subject to equitable distribution. He points to the fact that he was not eligible to receive a normal retirement pension because he had not been employed a sufficient number of years to be vested. Thus, had he retired without a disability in April 1980, he would have received no pension benefit. He contends that the pension benefits he receives are based merely upon his disability and should not be considered marital property. These arguments are unavailing.

Plaintiff was retired pursuant to the retirement for ordinary disability provision of section 13-167 of the Administrative Code, which entitles a member of the city civil service to receive an ordinary disability pension if he or she "is physically or mentally incapacitated for the performance of duty and ought to be retired,” provided he or she "has had ten or more years of city-service and was a member or otherwise in city-service in each of the ten years next preceding his or her retirement” (Administrative Code § 13-167 [a] [1]). Thus, an employee may receive an ordinary disability pension even if the disability was not the result of a job-related accident, provided the employee satisfies the length of service requirement.

By contrast, a civil service member qualifying for a pension for "accident disability” does not have to satisfy a length of service requirement. Rather, the only requirement for entitlement to an "accident disability” pension is that the employee be "physically or mentally incapacitated for the performance of city-service, as a natural and proximate result of such city-service,” and that the "disability was not the result of wilful negligence” on the part of the employee (Administrative Code § 13-168 [a]). Thus, the statutory scheme distinguishes between eligibility for "regular,” "ordinary disability” and "accident disability” pensions on the basis of length of service; entitlement to a "regular” pension vests upon 15 years of service (Administrative Code § 13-173.1) and an "ordinary disability” pension upon 10 years of service (Administrative Code § 13-167 [a] [1]), whereas there exists no length of service requirement for an "accident disability” pension.

As indicated previously, it is firmly established in our jurisprudence that an employee’s interest in " 'pension rights,’ the rights commonly accorded an employee and his or her spouse in a pension plan * * * except to the extent that [that interest] is earned before marriage or after commencement of a matrimonial action, is marital property” (Majauskas v Majauskas, 61 NY2d 481, 490, supra), the pension benefits constituting a form of deferred compensation derived from employment (West v West, 101 AD2d 834, supra). In the typical pension plan, the employee’s rights are incremental in that for each month or year of service, the employee receives credit which will enter into the computation of what the pension plan will pay to the employee (Majauskas v Majauskas, supra, at 490).

It is clear from the length of service requirement for the ordinary disability pension at issue here that plaintiff is being compensated for his length of service to the Department of Sanitation in addition to being compensated for the injuries he sustained. Indeed, implicit in the service requirement for this ordinary disability pension is the desire to provide employees whose injuries have prevented them from working until normal retirement age with some form of compensation for their injuries while also awarding them a portion of the deferred compensation to which they would have been entitled but for the injuries (see, e.g., Mylett v Mylett, 163 AD2d 463, 465, supra). Thus, to the extent plaintiff’s ordinary disability pension represents deferred compensation, it is indistinguishable from a retirement pension and therefore, to that extent, is subject to equitable distribution (see, e.g., Mylett v Mylett, 163 AD2d 463, supra; West v West, 101 AD2d 834, supra; Newell v Newell, 121 Misc 2d 586, supra; see generally, Annotation, Pension or Retirement Benefits as Subject to Award or Division by Court in Settlement of Property Rights Between Spouses, 94 ALR3d 176, § 13).

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

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

Order affirmed, with costs.


author: Bellacosa, J.

text:
    Joseph Dowd et al., Respondents, v Ernest Ahr et al., Defendants, and Richard Drake et al., Appellants.
    Argued October 10, 1991;
    decided November 19, 1991

      POINTS OF COUNSEL

      John Connor Jr. for appellants.
    I. Dock rights are real property interests that are entitled to the priority of title guaranteed under the recording system. (Smith v Mayor of City of N. Y., 68 NY2d 552; Matter of City of New York [Harlem Riv. Dr.] 199 Misc 281, 280 App Div 787, 305 NY 624; City of New York v Mississippi Holding, 126 Misc 2d 865; People v American Sugar Ref. Co., 98 Misc 703, 182 App Div 212; People ex rel. Ward v Kelsey, 38 Barb 269; Bedlow v Stillwell, 91 Hun 384, 158 NY 292; Doyle v Lazarro, 33 AD2d 142, 33 NY2d 981.) II. A dock easement by express grant lacking a specific description upon which the grantee thereafter constructs a dock cannot be unilaterally relocated by the grantor of the easement. (Onthank v Lake Shore & Mich. S. R. R. Co., 71 NY 194; Evangelical Lutheran St. John’s Orphan Home v Buffalo Hydraulic Assn., 64 NY 561; Hines v Hamburger, 14 App Div 577; Burlew v Hunter, 41 App Div 148; Peabody v Chandler, 42 App Div 384; Rivlin v Sigalos, 9 Misc 2d 373; Queensboro Farm Prods. v State of New York, 6 Misc 2d 445; Hydraulic Power Co. v Pettibone Cataract Paper Co., 112 Misc 528; Anthony v Bardeschewski, 49 Misc 2d 1030.) III. An easement by express grant cannot be terminated by the owner of the easement joining a homeowners’ association that possesses another easement that is subordinate to the property rights of a third person or by acquiring title after another entity has obtained a subordinate easement. (Murphy v Sigalos, 8 Misc 2d 633; Wood v Simon, 43 Misc 2d 500; Rochester Poster Adv. Co. v Smithers, 224 App Div 435; Anthony v Bardeschewski, 49 Misc 2d 1030; Gerbig v Zumpano, 7 NY2d 327; Thyhsen v Brodsky, 51 Misc 2d 1023; Vickta Realty Corp. v Purley Props., 35 Misc 2d 459; De Jong v Abphill Assocs., 121 AD2d 678; Clausi v Meddaugh, 116 AD2d 850; Consolidated Rail Corp. v MASP Equip. Corp., 109 AD2d 604.)

      Monica A. Duffy and Robert S. Stewart for respondents.
    I. The over-all scheme of the common area is for each lot owner to share in the available dock space. (Wilkinson v Nassau Shores, 1 Misc 2d 917, 278 App Div 970, 304 NY 614; Dillon v Moore, 269 App Div 1006, 296 NY 561; Wood v Simon, 43 Misc 2d 500; Chain Locations v County of Westchester, 20 Misc 2d 411, 9 AD2d 936, 7 NY2d 710; Van De Carr v Schloss, 277 App Div 475; Anthony v Bardeschewski, 49 Misc 2d 1030; Marra v Simidian, 79 AD2d 1046; O’Neill v O’Hare, 254 NY 186.) II. The individual lot owners consented and acquiesced to a relocation of docks. (Van Laak v Malone, 92 AD2d 964.)
   OPINION OF THE COURT

Bellacosa, J.

The parties are private landowners locked in a dispute over rights with respect to boat docks abutting a parcel of land fronting on Lake George. Defendants-appellants Drakes, owners of one lot, trace their rights to a 1981 deed containing an express grant of an easement to construct a dock. Plaintiffs Dowds trace their rights to a 1982 deed in which they reserved the right to construct four docks to be used in conjunction with their four lots. We conclude that the expressly deeded easement right of the Drakes has not terminated and that they have not consented to or acquiesced in any change in the location of their existing dock. The Dowds’ attempt by this declaratory judgment action to assert priority, or to accommodate their reserved rights, by demolishing or relocating the Drakes’ dock must fail as inconsistent with the expressly deeded easement in the Drakes’ chain of title, which can be traced back to the Dowds as grantors. We therefore reverse the order of the Appellate Division.

In 1969, the Dowds acquired a large parcel, bordering on Lake George. In 1974, they subdivided it into 13 lots and a common area fronting on the lake, and proceeded to sell a majority of the individual lots. The Maywalds, the Drakes’ predecessors in title, purchased a lot from the Dowds in 1981. The Maywalds’ deed contained language granting them an easement in common with the other lot owners to use the common area, which included the lakeshore frontage, for "bathing and recreational purposes”. Their deed also expressly granted them an easement to construct a 20-foot-long dock from the common area into Lake George, "at a point designated by the [Dowds].” A dock was subsequently constructed on the common area for the Maywalds’ use, with the Dowds’ knowledge and consent.

By early 1982, the Dowds had conveyed 9 of the 13 subdivided lots to various defendants or their predecessors in title, retaining ownership of four lots and the common area. Every deed from the Dowds to the lot owners contained an express easement to use the common area. Only the Maywalds’ deed also contained an express easement to build a dock for personal use. The Dowds nevertheless allowed the other lot owners to construct docks on the common area or to use existing docks.

The lot owners, including the Dowds, formed defendant Westover Homeowners’ Association, Inc. in 1982. By deed recorded September 8, 1982, the Dowds conveyed their interest in the common area to the Association. All easements which the Dowds had already conveyed to the individual lot owners were excepted from the conveyance. The Dowds also reserved the right to construct docks on the common area for four boats (one for each of the lots they retained) "at a suitable location approved by [the Association],” provided that the location chosen "shall not * * * unreasonably interfere with the common use of the existing beach and swimming area.” The Association later conveyed equal interests in the common area to the individual lot owners.

In 1984, a dispute arose between the Dowds and the lot owners concerning the location of the additional docks the Dowds wished to build. Rather than seeking a variance, the Dowds brought this action pursuant to RPAPL article 15 seeking a judgment declaring their right to construct three docks — they had sold one lot and its corresponding dock right in the interim — even if that required demolishing or reconfiguring the existing docks. The Dowds, in effect, claimed superiority or priority among the various dock rights. The Drakes acquired the Maywalds’ lot, including their express dock easement with the existing dock, just prior to commencement of the Dowds’ lawsuit.

Trial testimony established that at the time that the Dowds conveyed the common area to the Association, the configuration of the nine existing docks did not comply with Lake George Park Commission Dock Regulations. Construction of additional docks would have required either a variance or demolition and reconfiguration of the existing docks. County Court, therefore, concluded that the defendant lot owners "constructively acquiesced” to realignment of the existing docks by accepting the deed to the common area. That court declared that the Dowds had rights in accordance with a specific configuration of 13 docks which had been introduced in evidence as a diagram at trial. The expenses of obtaining a permit, demolishing the existing docks and constructing new docks were to be allocated pro rata among the parties who would be using the docks.

Only the Drakes appealed to the Appellate Division, which held that the Drakes had the "same dock rights as * * * all other purchasers of lots, at unspecified locations.” (168 AD2d 763, 766.) The court concluded that the Drakes’ 1985 purchase of the Maywalds’ lot, dock and dock easement, three years after the Dowds had deeded the common area to the Association and established their own dock rights, was "akin to their acquiescence and should be deemed a consent to any reasonable change in dock locations necessary to accommodate the dock rights of the other 12 lots and the common usage of the community area.” (168 AD2d, at 767.) This Court granted leave to appeal to the Drakes.

We note at the outset that the Dowds’ rights with respect to the individual defendants were declared at trial. Inasmuch as County Court’s adjudication was not appealed by anyone except the Drakes, it has been established that the Dowds have the right to demolish and reconfigure the docks being used by all defendants except the Drakes. The only issue before us is the Dowds’ right to relocate or realign the Drakes’ existing dock.

Easements by express grant are construed to give effect to the parties’ intent, as manifested by the language of the grant (2 Warren’s Weed, New York Law of Real Property, Easements, §§ 3.02, 17.03 [4th ed]). The deed from the Dowds to the Maywalds contained an easement by express grant to build a dock at an uncertain location, specifically, "at a point [to be] designated by the [Dowds]”. It did not give the Dowds, and they did not reserve, any subsequent right to relocate the dock (compare, Van Laak v Malone, 92 AD2d 964; 2 Warren’s Weed, op. cit, Easements, §§3.02, 17.03). Thus, once that easement was located and a dock was erected in the common area with the Dowds’ knowledge and consent, the location of that dock became fixed and certain and could not be changed without the consent of the Maywalds or their successors in interest, the Drakes (Onthank v Lake Shore & Mich. S. R. R. Co., 71 NY 194, 198; Evangelical Lutheran St. John’s Orphan Home v Buffalo Hydraulic Assn., 64 NY 561, 564; 2 Warren’s Weed, op. cit., Easements, § 17.02). Alternatively, if the expressly granted easement rights of the Maywalds/Drakes have terminated by abandonment, conveyance, condemnation or adverse possession, the location of their dock is subject to change (Gerbig v Zumpano, 7 NY2d 327, 330).

We find no basis upon which to conclude that the Drakes or the Maywalds ever consented to a change in their dock location or that their easement terminated. The legal record contains no proof of abandonment, conveyance, condemnation or adverse possession that would result in termination. Nor is there any proof of actual consent in fact or any support for the lower courts’ findings of "constructive acquiescence” or "deemed” consent.

The Maywalds’ acceptance, as members of the Association, of the deed to the common area at a time when the existing dock configuration did not comply with local regulations does not demonstrate their unequivocal intent to permanently relinquish their rights to and interest in the express dock easement in their own deed (see, Gerbig v Zumpano, supra, at 331). The circumstances surrounding the Dowds’ conveyance to the Association also cannot serve as a basis for attributing to the Maywalds a legal consent to relocation of their dock. The recorded deed conveying the common area to the Association explicitly reserved all easements the Dowds had previously conveyed to the lot owners, thus including the express dock easement granted to the Maywalds. It is undisputed that the Maywalds’ deed was recorded before the Dowds’ 1982 reservation of rights. Thus, everyone, including the other lot owners, was on notice of the Maywalds’ prior and unique dock easement (Real Property Law § 291). That reservation language could reasonably have been interpreted by the Maywalds, the Drakes and the other lot owners as an assurance that the Maywald/Drake dock, if none other, would not be relocated to accommodate the Dowds’ later reserved rights.

Moreover, although the Maywalds may have been aware that the 1982 dock configuration did not comply with applicable regulations, demolition and reconfiguration was not the only available option. The Dowds or the lot owners, or both, could have applied for a variance, which would have obviated the need to demolish the Drakes’ existing dock or those of the other owners. Thus, knowledge of the regulations, imputed or actual, does not have the inexorable legal significance and consequence attributed to it by County Court.

Contrary to the Appellate Division’s holding, the fact that the Drakes purchased the Maywalds’ lot and dock easement after the Dowds reserved their rights does not operate to extinguish the express easement in the Drakes’ chain of title. To hold otherwise would impermissibly override the certainty which inheres in, and is necessary to, a reliable system of real property conveyancing.

In sum, the express dock easement in the Drakes’ chain of title has not been terminated or altered. There is no factual or legal consent evident in this record. If the 13-dock configuration which County Court approved would require demolition or relocation of the Drakes’ dock, that solution to the controversy would violate the Drakes’ recorded and expressly protected rights.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the case remitted to Warren County Court for an appropriate declaration in accordance with this opinion.

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

Order reversed, with costs, and case remitted to Warren County Court for further proceedings in accordance with the opinion herein.


text:
    The People of the State of New York, Respondent, v Timothy B. Cooper, Appellant.
    Argued October 11, 1991;
    decided November 21, 1991

      POINTS OF COUNSEL

      Michael J. Hutter, Jr., for appellant.
    I. The trial court erred when it permitted the People to introduce proof concerning defendant’s prior driving while intoxicated charge for purposes of proving pursuant to Penal Law § 125.13 his license revocation based upon such conviction, as such proof is precluded by reason of CPL 200.60 because defendant admitted the conviction. (People v Sickles, 156 NY 541; People v De Santis, 305 NY 44; People v Koponen, 129 AD2d 838, 69 NY2d 1005; People v Miller, 142 AD2d 760.) II. The trial court erred when it permitted Investigator Shufelt to testify as to those portions of defendant’s oral statement that were not contained in the People’s notice as, by reason of these omissions, the People failed to comply with CPL 710.30 (1) (a). (People v Garrow, 151 AD2d 877; People v Ludolph, 63 AD2d 77; People v Rivera, 73 AD2d 528, 53 NY2d 1005; People v Feliciano, 139 Misc 2d 247; People v Fort, 109 Misc 2d 990; People v Cooper, 158 AD2d 743; People v Brooks, 121 AD2d 392; People v Bennett, 80 AD2d 68, 56 NY2d 837; People v St. Martine, 160 AD2d 35; People v Grandenetti, 139 Misc 2d 614.)

      Michael A. West for respondent.
    I. The trial court did not err when it permitted Investigator Shufelt to testify as to portions of defendant’s oral statement that were not contained in the "resume” of his oral statement which was attached to the People’s CPL 710.30 notice served at time of defendant’s arraignment. (People v O’Doherty, 70 NY2d 479; People v Bennett, 80 AD2d 68, 56 NY2d 837; People v Garrow, 151 AD2d 877; People v Brooks, 121 AD2d 392.) II. CPL 200.60 is inapplicable to the aggravated unlicensed operation and vehicular manslaughter charges, since defendant’s prior DWI conviction did not raise the grade of offenses charged. (People v Miller, 142 AD2d 760.)
   OPINION OF THE COURT

Kaye, J.

When a defendant’s prior conviction raises the grade of an offense, and thus becomes an element of the higher grade offense, the Criminal Procedure Law — reflecting a concern for potential prejudice and unfairness to the defendant in putting earlier convictions before the jury — specifies a procedure for alleging and proving the prior convictions (CPL 200.60). This appeal requires us to construe CPL 200.60 in the context of a prosecution for vehicular manslaughter in the first degree, where the element that raised the offense charged was not simply a prior conviction for a violation of Vehicle and Traffic Law § 1192 (Penal Law § 125.13 [2]) but defendant’s commission of the crime charged knowing that his license had been revoked following that conviction.

We conclude that the letter and sense of CPL 200.60 required that the prescribed procedure for alleging and proving earlier convictions be followed for the entire enhancing element of vehicular manslaughter in the first degree as charged against defendant.

I.

Defendant was indicted on several counts in connection with an accident that resulted in the death of the passenger. The count charging defendant with first degree vehicular manslaughter alleged that defendant "committed said crime while knowing or having reason to know that his license or his privilege of operating a motor vehicle in the state or his privilege of obtaining a license issued by the commissioner of motor vehicles was revoked and such revocation was based upon a prior conviction for a violation of any of the provisions of section eleven hundred ninety-two of the vehicle and traffic law of the State of New York.” In addition to the indictment, the People filed a special information charging defendant with having been convicted, on July 8, 1987, of operating a motor vehicle while under the influence of alcohol (Vehicle and Traffic Law § 1192 [3], [5]). Defendant was arraigned on the special information and admitted the conviction.

The People took the position that CPL 200.60 did not prevent them from putting in evidence that defendant’s license revocation was due to his prior conviction. They argued successfully — over defendant’s objection — that the enhancing element raising the degree of the offense was not the prior conviction but the license revocation and defendant’s knowledge of the reason for that revocation. Defendant thus was not asked during his arraignment on the special information whether he knew that his prior conviction had led to revocation of his license.

At trial, the People put before the jury an abstract of defendant’s driving record showing that he had been convicted of a violation of Vehicle and Traffic Law § 1192 and that his license had been revoked. Additionally, a State Trooper testifled, based on the abstract, that defendant’s license had been revoked for a previous DWI conviction.

The Trial Judge subsequently charged the jury that an element of the crime of vehicular manslaughter in the first degree was that "at the time he operated such vehicle, the Defendant knew or had reason to know that his driver’s license had been suspended or revoked and that such revocation was based upon a conviction for a violation of the provisions of 1192 of the Vehicle and Traffic Law.” The court further charged the jury that the abstract of defendant’s driving record established the prior conviction, but instructed them that the proof of that conviction "may not be considered by you as evidence in any respect that he was so impaired or intoxicated” on the date of the fatal accident.

The jury returned a verdict of guilty, and the Appellate Division affirmed defendant’s conviction. While recognizing that defendant’s prior conviction was an "indispensable ingredient” of the higher grade offense, the Appellate Division noted that application of CPL 200.60 to the offense of first degree vehicular manslaughter "would render it impossible to achieve a conviction where, as here, the defendant has admitted the conviction but has not admitted that the license revocation was based upon such conviction.” (158 AD2d 743, 745.) We disagree, and therefore reverse the Appellate Division order and order a new trial.

II.

Though adopted in its present form m 1970, CPL 200.60 in fact has a long ancestry.

It had been common practice in this State to set forth a defendant’s previous convictions in the indictment so that they could be proven before the jury in order to qualify the defendant for enhanced sentencing as a repeat offender. A 1926 statute permitted the District Attorney to file a special information charging a defendant with a prior conviction, but that statute applied only in the special situation where a defendant’s earlier conviction was unknown at the time of the indictment (People v De Santis, 305 NY 44, 46-47, cert denied 345 US 944; Preiser, Procedure for Establishing Previous Convictions for Purposes of Increased Punishment, 1959 Report of NY Law Rev Commn, at 509).

The practice of permitting recitation of previous convictions in indictments and proving them before the jury came under strong criticism. As Judge Fuld, dissenting in De Santis, observed: "Patently unfair, unquestionably prejudicial, the practice of charging a defendant as a prior felony offender in the indictment and permitting proof thereof at the trial, should be condemned and outlawed.” (305 NY, at 47.) Indeed, many District Attorneys, also recognizing the potential unfairness and prejudice, in 1957 supported legislation that became section 275-b of the Code of Criminal Procedure, abolishing the practice (Bill Jacket, L 1957, ch 540, at 8).

The Legislature subsequently made several amendments to section 275-b. In 1959, the statute was amended to specify that a prior conviction could be set forth in the indictment when it was "an element of such crime.” (L 1959, ch 221.) A more significant amendment occurred in 1961, when the statute was changed to allow a defendant to admit or deny a prior conviction outside the jury’s presence, thus giving a defendant an option to determine whether the jury learned of the prior conviction (Bill Jacket, L 1961, ch 687, at 8-10, 17).

The history of CPL 200.60 reflects the Legislature’s abiding concern that permitting a jury to learn of prior convictions without first offering a defendant the chance to exclude them jeopardized the right of fair trial. As the sponsor of the 1961 amendment noted, the practice of charging a prior conviction in an indictment and allowing proof of it before the jury "inevitably creates some prejudice against the defendant. While it is true that the court’s charge to the jury directs that it consider the previous conviction only as an element of proof of the instant indictment or count therein, such instructions, realistically, cannot be completely effective.” (1961 NY Legis Ann, at 44-45.)

In its present form, CPL 200.60 retains the procedure adopted in 1961. A previous conviction that "raises an offense of lower grade to one of higher grade and thereby becomes an element of the latter” may not be referred to in the indictment (CPL 200.60 [1]). Instead, it must be charged by special information filed at the same time as the indictment (CPL 200.60 [2]). An arraignment must be held on the special information outside the jury’s presence. If a defendant admits a previous conviction, "that element of the offense * * * is deemed established, no evidence in support thereof may be adduced by the people, and the court must submit the case to the jury without reference thereto and as if the fact of such previous conviction were not an element of the offense.” (CPL 200.60 [3] [a].) If, however, the defendant denies the previous conviction or remains silent, the People may prove that element before the jury as part of their case (CPL 200.60 [3] [b]).

III.

The history of the statute is simple and straightforward. The more difficult question is how CPL 200.60 bears on a prosecution for vehicular homicide in the first degree — a crime first created 15 years after the enactment of CPL 200.60— where the enhancing element is a prior conviction under Vehicle and Traffic Law § 1192 plus additional facts concerning that conviction. Does CPL 200.60 apply at all? If so, does it apply solely to the conviction or also to the additional facts interwoven with the conviction?

The People, the trial court and the Appellate Division apparently perceived that the statute was in some sense pertinent. The People filed a special information alleging defendant’s prior conviction, on which he was then arraigned; as the Appellate Division acknowledged, the prior conviction was an "indispensable ingredient” of the higher grade offense. Indeed, the element raising the crime of which defendant was convicted to first degree vehicular manslaughter (a class C felony) from second degree vehicular manslaughter (a class D felony) was that the offense took place while defendant knew that his license had been revoked and the revocation followed a previous conviction. Accordingly, this offense falls within the class of offenses to which CPL 200.60 is applicable.

In practical operation, however, the procedure adopted by the People and the trial court gave no effect to the statute’s protective design.

That a special information charging the prior conviction, and arraignment on that information, could not alone constitute compliance with the statute is evident from the facts before us. When he admitted the prior offense, defendant exercised the right explicitly given him by CPL 200.60 to keep all reference to his earlier conviction from the jury’s knowledge. Nonetheless, that conviction was paraded before the jury in documentary form, in oral testimony, and ultimately in the court’s charge. The special information and arraignment became an empty gesture the moment the trial began. Plainly, that procedure did not implement the directive of CPL 200.60.

In a situation such as the one before us — where pleading and proving knowledge of a prior conviction necessarily reveals the conviction — the protection afforded by CPL 200.60 can be effectuated only by reading the statute to require resort to the special information procedure for all of the conviction-related facts that constitute the enhancing element.

Proper application of CPL 200.60 required that defendant be given an opportunity to admit — outside the jury’s presence— the element that raised his crime in grade. That opportunity could have been afforded by a special information charging him with the prior conviction, the revocation of his license, and knowledge of the conviction and revocation. If defendant chose to admit those facts, no mention of them was necessary before the jury. If defendant denied all or any of those facts, the People could have proceeded with their proof, as the statute provides.

In that the burden of proof at all times remains squarely on the People, such a procedure does nothing to relieve the prosecution of its obligation to prove charges beyond a reasonable doubt. The procedure instead affords a defendant the option to keep the jury from hearing about earlier convictions, an option the Legislature obviously believed promoted a fair trial.

Defendant suggests that CPL 200.60 can be reconciled with Penal Law § 125.13 by treating an admission of a prior DWI conviction as an admission also of license revocation based on the conviction, and permitting the People to prove "only that the license was in fact revoked and the defendant’s knowledge of such revocation.” This suggestion, however, is at variance with the principle that the People must establish the requisite culpable mental state as to every element of an offense (Penal Law § 15.15 [1]). Applying that principle here, the People must prove not only that defendant knew that his license was revoked but also that he knew the revocation was the result of the prior conviction. While the People could not satisfy their burden in the fashion suggested by defendant, they could do so consistent with the objective of CPL 200.60 by utilizing the special information procedure to establish all of the conviction-related facts that make up the enhancing element.

Finally, we find unpersuasive the People’s argument that the possibility of prejudice was eliminated by the trial court’s instruction that defendant’s prior conviction could not be used to establish he was driving under the influence of alcohol at the time of the fatal accident. As is evident in the history of section 200.60, a legislative determination has been made that such limiting instructions cannot be relied upon to eliminate the likelihood of prejudice resulting from a jury’s knowledge that the defendant is a repeat offender.

IV.

In that a new trial is ordered, we also consider defendant’s contention that portions of his oral statement to a State Police investigator were improperly admitted into evidence because the People failed to give adequate notice of their intent to use those portions of the statement (CPL 710.30 [1] [a]). The trial court found that a written version of the oral statement prepared by the investigator and provided to the defense when the People gave notice of their intent to use the oral statement was "substantially consistent” with the investigator’s testimony at the suppression hearing concerning the contents of the oral statement. The Appellate Division agreed that the oral statement and written version were "part and parcel of the single interview of defendant” by the investigator (158 AD2d 743, 744). As in People v Bennett (56 NY2d 837, 839), we conclude that there "being no basis in the record to disturb the conclusion of both courts below that the oral statement was substantially the same as the written one, we cannot say, as a matter of law, that the People failed to comply with the requirements of CPL 710.30.”

Accordingly, the order of the Appellate Division should be reversed and a new trial ordered.

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

Order reversed, etc.