text:
    Gibraltar Industries, Inc., Appellant, v Lexington Insurance Company, Respondent.
    Submitted July 8, 1985;
    decided September 10, 1985
   Motion for renewal and reargument of motion for leave to appeal denied, with $20 costs and necessary reproduction disbursements. (See, Cohen and Karger, Powers of the New York Court of Appeals § 14, at 60-65 [rev ed]). [See, 64 NY2d 775.]


source: Caselaw Access Project

license: Public Domain

text:
    Frank Matarrese, Appellant, v Frank De Cesare, Sr., et al., Respondents.
    Submitted July 8, 1985;
    decided September 10, 1985
   Motion to vacate the Court of Appeals order of dismissal dated June 19, 1985 denied. [See, 65 NY2d 811.]

Judge Titone taking no part.


text:
    In the Matter of Gary Pomeranz, Appellant, v Daniel W. Joy, as Commissioner of the Department of Housing Preservation and Development, Office of Rent and Housing Maintenance, Rent Control Division, Respondent. Park Royal Associates, Inc., Intervenor-Respondent.
    Submitted July 1, 1985;
    decided September 10, 1985
   Motion for leave to appeal dismissed as untimely (CPLR 5513 [b]), with $20 costs to respondent and intervenor-respondent.


text:
    H & J Blits, Inc., et al., Appellants, v Hannah Blits et al., Respondents, et al., Defendants.
    Decided September 12, 1985

      APPEARANCES OF COUNSEL

      Arnold Y. Kapoloff for appellants.

      Wilbur G. Silverman for respondents.
   OPINION OF THE COURT

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order reversed, with costs, and case remitted to Supreme Court, New York County, for full reconsideration of defendants’ motions to dismiss the complaint. Whether an action should be dismissed on the ground of forum non conveniens is a matter of discretion for the trial court and the Appellate Division, and the exercise of that discretion will not be interfered with by this court unless there has been an abuse of discretion, or, in exercising its discretion, the court has failed to take into account the various factors entitled to consideration. (See, Belachew v Michael, 59 NY2d 1004; Irrigation & Indus. Dev. Corp. v Indag S.A., 37 NY2d 522.) Here, it would appear, as the dissenters at the Appellate Division found, that the trial court, on whose reasoning the Appellate Division affirmed, did not consider all the relevant factors which would best serve the ends of justice and convenience of the parties.

Concur: Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye, Alexander and Titone.


text:
    Margaret M. Scharnweber, Respondent, v Karl H. Scharnweber, Appellant.
    Decided September 12, 1985

      APPEARANCES OF COUNSEL

      William J. Cunningham, Jr., for appellant.

      David A. Shapiro for respondent.
   OPINION OF THE COURT

Memorandum.

The judgment appealed and the order of the Appellate Division brought up for review should be affirmed, with costs.

We agree with appellant that parties may, in a separation agreement, condition a husband’s obligation to support his wife solely on her refraining from living with another man without the necessity for the husband to also prove that she habitually holds herself out as the other man’s wife as Domestic Relations Law § 248 requires (see, Northrup v Northrup, 43 NY2d 566). If the wife has voluntarily entered into the agreement then the court may not refuse to enforce it absent some overriding public policy reason, not presented here, or alter its provisions without the consent of the parties.

In this case, the parties agreed that the husband’s obligation was to be terminated only if the wife lived with an unrelated male at the former marital residence and the evidence in the record more nearly comports with the Appellate Division’s view that defendant failed to establish the cohabitation required by the agreement.

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

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), judgment appealed from and order of the Appellate Division brought up for review affirmed, with costs, in a memorandum.


text:
    Augustin Lopez, Appellant, v Mark Senators et al., Respondents.
    Decided September 12, 1985

      APPEARANCES OF COUNSEL

      Glenn E. Kushel for appellant.
    A. Paul Goldblum for respondents.
   OPINION OF THE COURT

Memorandum.

The judgment insofar as appealed from and order of the Appellate Division insofar as brought up for review should be reversed, with costs, and the order of Supreme Court, Kings County, insofar as it denied both parties summary judgment on the first cause of action reinstated.

In this action to recover damages for personal injuries sustained when defendants’ car backed into plaintiff’s parked car, defendants sought summary judgment on the ground that there was no “serious injury” within the meaning of Insurance Law § 671 (4) (now § 5102 [d]). Plaintiff offered the affidavit of his treating physician stating that, based on the doctor’s examination and treatment of plaintiff over the course of one year, his medical opinion was that plaintiff continued to suffer from “[t]rauma to the left side of the skull, with contusions, pain, cerebral concussion and post-concussion, cepahlgia and vertigo; [c]ervical derangement with sprain, strain, severe spasms and torticollis, with painful and significantly limited rotation to the right or left of only 10 deg. with pain radiating into the left shoulder and left arm, along the ulnar nerve due to nerve irritation and damage, and causing hypesthesias, paresthesias and ‘pins and needles’ in the 4th and 5th fingers of the left hand with weakened grasp of the left hand; and [pjaravertebral muscle spasms with pain”; that all of the foregoing injuries were produced by the automobile accident; that based on the existence of the injuries and their sequellae for more than one and a half years, the injuries were permanently disabling; that plaintiff’s neck, back and left hand were permanently injured and would have a permanent limitation of motion, and thus fit the definition of serious injury under Insurance Law § 671 (4) (now § 5102 [d]) as an injury resulting in a permanent consequential limitation of use of a body organ or member, or a significant limitation of use of a body function or system. Attached to this affidavit were the doctor’s medical report, including diagnosis, dates and descriptions of eight months of treatment, and the prognosis “guarded permanent disability with restriction of motion.” Defendants, in opposition to plaintiff’s motion for partial summary judgment and in support of their own cross motion for summary judgment, submitted reports by two other doctors disputing the conclusions of plaintiff’s doctor as to the extent of the injuries and disabilities.

Special Term denied summary judgment to both parties, finding that the conflicting medical opinions presented triable issues, but the Appellate Division reversed, holding that “the conclusory allegations contained in the affidavit of plaintiff’s physician as to the permanency of plaintiff’s injuries are, without more, insufficient as a matter of law to establish a prima facie case of ‘serious injury’ ”. (97 AD2d, at p 788.)

We agree with the Appellate Division that mere repetition of the word “permanent” in the affidavit of a treating physician is insufficient to establish “serious injury,” and that summary judgment should be granted for defendant where the plaintiff’s evidence is limited to conclusory assertions tailored to meet statutory requirements. While in general summary judgment can neither be awarded nor defeated on the basis of conclusory assertions (see, Winegrad v New York Univ. Med. Center, 64 NY2d 851, 853), the insufficiency of conclusory assertions of “serious injury” is underscored in cases under the No-Fault Law, where “the purpose of enacting an objective verbal definition of serious injury was to ‘significantly reduce the number of automobile personal injury accident cases litigated in the courts, and thereby help contain the no-fault premium.’ ” (Licari v Elliott, 57 NY2d 230, 236.)

Here the affidavit of plaintiff’s treating physician, in addition to assertions of “permanent” injury found insufficient by the Appellate Division, purports to describe another of the eight specific categories which may constitute serious injury: a “significant limitation of use of a body function or system”. (Insurance Law § 5102 [d].) Where the treating physician, in an affidavit supported by exhibits, has set forth the injuries and course of treatment, identified a limitation of movement of the neck of only 10 degrees to the right or left, and on that predicate expressed the opinion that there was a significant limitation of use of a described body function or system, such evidence was sufficient for the denial of summary judgment to defendants. The medical reports and deposition testimony submitted by defendants at best gave rise to questions of credibility, precluding summary judgment for plaintiff.

Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye, Alexander and Titone concur in memorandum.

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), judgment insofar as appealed from and order of the Appellate Division insofar as brought up for review reversed, etc.


text:
    Albert Bialek Associates, Inc., Appellant, v Arden-Esquire Realty Company, Respondent.
    Decided September 12, 1985

      APPEARANCES OF COUNSEL

      Lionel A. Barasch for appellant.

      M. William Scherer for respondent.
   OPINION OF THE COURT

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order affirmed, with costs, for reasons stated in the memorandum at the Appellate Division (110 AD2d 578).

Concur: Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye, Alexander and Titone.


text:
    The People of the State of New York, Respondent, v Dean Brooks, Appellant.
    Decided September 12, 1985

      APPEARANCES OF COUNSEL

      Carol A. Zeldin and William E. Hellerstein for appellant.

      Mario Merola, District Attorney (Seth L. Marvin of counsel), for respondent.
   OPINION OF THE COURT

Memorandum.

The order of the Appellate Division should be affirmed.

Police officers, who as in the present case have received a report that a person answering defendant’s description was seen waving a gun on the street, and who thereafter conduct a valid stop and frisk, are not limited to a patdown of the suspect’s person and may examine personal items capable of concealing a weapon within the suspect’s grabbable reach “as an incident to an inquiry upon grounds of safety and precaution” (People v Pugach, 15 NY2d 65, 69; see, People v Davis, 64 NY2d 1143; People v Moore, 32 NY2d 67, cert denied 414 US 1011; People v Tratch, 104 AD2d 503). The factual findings made at the Appellate Division, which have support in the record and thus may not be disturbed by this court (People v Harrison, 57 NY2d 470), establish that grounds for a stop and frisk existed (e.g., People v McLaurin, 43 NY2d 902) and that the parameters of a permissible frisk were not exceeded (People v Pugach, supra; People v Tratch, supra; United States v Sims, 450 F2d 261,263; Commonwealth v Anderson, 366 Mass 394, 318 NE2d 834). People v Tucker (44 NY2d 941, revg on dissent at 58 AD2d 673, 674) involved “a full-blown search * * * [conducted] on the pretext of a stop and frisk” and is, therefore, distinguishable on its facts.

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

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order affirmed in a memorandum.


text:
    John Sexton & Co., a Division of Beatrice Foods, Inc., Appellant-Respondent, v Law Foods, Inc., Defendant. Lorraine Chusid, Respondent-Appellant.
    Decided September 12, 1985
   On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), appeal and cross appeal dismissed, without costs, upon the ground that the order appealed from does not finally determine the action within the meaning of the Constitution.


text:
    Jorge Agudelo A., Appellant, v Third World Resources, Ltd., et al., Respondents.
    Submitted July 22, 1985;
    decided September 12, 1985
   Motion for leave to appeal dismissed upon the ground that the order sought to be appealed from does not finally determine the action within the meaning of the Constitution.

Cross motion dismissed as academic insofar as it seeks dismissal of the motion for leave to appeal; cross motion otherwise denied.


text:
    Arthur A. D., Respondent, v Karen D., Appellant.
    Submitted July 22, 1985;
    decided September 12, 1985
   Motion for leave to appeal denied, with $20 costs and necessary reproduction disbursements. On the court’s own motion, appeal taken as of right from the judgment entered July 17, 1985 dismissed, without costs, upon the ground that the Appellate Division order sought to be reviewed does not “satisf [y] the requirements of subdivision (a) [of CPLR 5601]” (CPLR 5601 [d]) in that the modification at the Appellate Division is not in a “respect which is within the power of the court of appeals to review” (CPLR 5601 [a] [iii]; Patron v Patron, 40 NY2d 582).

Judge Titone taking no part.


text:
    Ernest Holzberg, Appellant, v The Mutual Life Insurance Company of New York, Respondent.
    Decided September 12, 1985
   Appeal dismissed, without costs, by the Court of Appeals sua sponte, upon the ground that the modification at the Appellate Division is not substantial (CPLR 5601 [a] [iii]; Jadam Assoc. v Felomer, Inc., 29 NY2d 795).

Judge Titone taking no part.


text:
    Milsay Leasing and Parking Corp., Appellant, v New York City Department of General Services et al., Respondents. (Action No. 1.) The City of New York, Respondent, v Milsay Leasing and Parking Corporation et al., Appellants. (Action No. 2.)
    Decided September 12, 1985
   Appeal dismissed, without costs, by the Court of Appeals sua sponte, upon the ground that the order appealed from does not finally determine the consolidated action within the meaning of the Constitution (see, Pantlin v Heicklen Farms, 49 NY2d 760).


text:
    Monroe-Livingston Sanitary Landfill, Inc., Appellant, v Carroll Bickford, as Supervisor of the Town of Caledonia, et al., Respondents.
    Submitted July 22, 1985;
    decided September 12, 1985
   Motion for leave to appeal dismissed upon the ground that the order sought to be appealed from does not finally determine the proceeding within the meaning of the Constitution and it is not a nonfinal order of the type which is within the meaning of CPLR 5602 (a) (2).


text:
    In the Matter of Wayne Prospect et al., Respondents, v Peter F. Cohalan, as County Executive of Suffolk County, Appellant. Long Island Lighting Company, Intervenor-Appellant. In the Matter of the Town of Southampton et al., Respondents, v Peter F. Cohalan, as County Executive of Suffolk County, Appellant. Long Island Lighting Company, Intervenor-Appellant.
    Submitted August 19, 1985;
    decided September 12, 1985
   Motion for clarification and cross motion for reargument each denied, with $20 costs and necessary reproduction disbursements. [See, 65 NY2d 867.]


text:
    Scarsdale Manor Owners, Inc., Respondent, v Zygfryd B. Wolloch et al., Appellants, et al., Defendants.
    Submitted July 29, 1985;
    decided September 12, 1985
   Motion to vacate this court’s order of dismissal dated June 6, 1985 denied. [See, 64 NY2d 1130.]


author: Jasen, J.

text:
    In the Matter of Russell M. Pecoraro, Appellant, v Edward J. Mahoney et al., Constituting the Board of Elections of the County of Erie, et al., Respondents.
    Argued August 26, 1985;
    decided August 28, 1985

      APPEARANCES OF COUNSEL

      Dennis E. Ward for appellant.

      H. Kenneth Schroeder, Jr., and Thomas J. Szymanski for respondents.
   OPINION OF THE COURT

Memorandum.

The order of the Appellate Division should be reversed, without costs, and the judgment of Special Term, Erie County, invalidating respondents’ joint designating petition reinstated.

Respondents, Stanley M. Bolas and Richard J. Arcara, together with Alfreda Slominski, submitted a joint designating petition for the Conservative Party nominations for Erie County Sheriff, District Attorney and Comptroller. Volume 1 indicated on its cover sheet that it consisted of one volume containing 87 pages and 1,006 signatures, and that it contained pages 1 through 87. Volume 2, filed two days later, has been disavowed by the candidates. As found by Special Term, respondents’ cover sheet does not set forth the number of signatures for each of the candidates; it understates the total number of signatures; several sheets of an unrelated designating petition are intermingled with the pages of respondents’ petition; the pages of the petition are not consecutively numbered, some being out of order and one unnumbered; and the statement of one subscribing witness is illegible.

Although the statute permits petitions of several candidates to be joined, each candidate’s petition is a petition for a separate office, and if the joint petition consists of more than 10 sheets the cover sheet must set forth the total number of signatures designating the candidate for each office and the pages on which they may be found (see, Election Law § 6-134 [2]; Matter of Delle Cese v Black, 63 NY2d 694). This requirement is not a mere formalism. Unless the data supporting each candidacy is supplied and identified, the notice and informational purposes of the statute are completely frustrated. The figures supplied on the cover sheets of these volumes identified only the total number of signatures contained without identifying those supporting the individual candidates. Faced with this lack of specificity, election officials and interested parties had no choice except to search through the volumes page by page to determine the sheets designating each candidate and the validity of the signatures contained on them.

Nor can the several additional defects found in respondents’ petition, when considered in the aggregate, be dismissed as inconsequential. While “there is room for judicious decision-making within the confines marked” by Matter of Hargett v Jefferson (63 NY2d 696) and Matter of Jonas v Black (63 NY2d 685, affg 104 AD2d 466) (Matter of Staber v Fidler, 65 NY2d 529), that process cannot nullify the requirements of the Election Law (see, Matter of Sheehan v Scaringe, 60 NY2d 795, 796).

Jasen, J.

(dissenting). Because in my view the decision reached today exalts hypertechnical form over substantive merit and exacts a draconian penalty wholly disproportionate to the supposed mistake on respondents’ designating petition, I respectfully dissent.

The designating petition in question named respondents Slominski, Arcara and Bolas as candidates for the Conservative Party nominations for Erie County Comptroller, Erie County District Attorney and Erie County Sheriff, respectively. The cover sheet stated the public office sought by each respondent, their names and addresses, the total number of pages in the attached volume, the number of the first and last pages of the volume, and the number of signatures contained therein.

The majority deems the designating petitions invalid and, thereby, removes respondents from the primary election ballot as candidates for the Conservative Party nomination, on the seemingly incongruous ground that the very same number of signatures contained within the petition was not repeated three separate times — once for each respondent. Such a ruling is neither supported by statute nor is it mandated by the decisional law of this court. Moreover, the disqualification of respondents’ candidacies on this rigidly formalistic and entirely unnecessary ground effectuates an arbitrary and far too drastic interference with respondents’ and their supporters’ fundamental 1st Amendment rights.

The statutory provision in question, Election Law § 6-134, sets forth in relevant part the following pertinent rules governing designating petitions:

“1. A designating petition may designate candidates for nomination for one or more public offices or for nomination for election to one or more party positions, or both, but designations or nominations for which the petitions are required to be filed in different offices, may not be combined in the same petition.

“2. Sheets of a designating petition shall be bound together in one or more volumes. The sheets in each volume shall be numbered consecutively at the foot of each sheet, beginning with number one. There shall be a cover sheet attached to each petition consisting of ten or more sheets and each volume thereof. Each cover sheet shall indicate the office for which each designation and nomination is being made, the name and residence address of each candidate, the total number of pages comprising the petition, and the total number of signatures contained in such petition. If the petition is filed in two or more volumes, the cover sheet for each volume shall also contain the following additional information: the number of the volume, the total number of pages in the volume, the total number of signatures contained in the volume, and the numbers of the first and last pages contained therein.

* * *

“8. A signer need only place his signature upon the petition, and need not himself fill in the other required information.” (Emphasis added.)

As is clear from a reading of the statute, one petition may serve to designate more than one candidate, each running for a different office (subd 1). As is just as clear, the cover sheet of the signed petition must state the office being sought by each candidate, their respective names and addresses, and the total number of pages and the total number of signatures contained in that single petition (subd 2). The statute says absolutely nothing about additional requirements regarding the total number of signatures when the same petition designates more than one candidate. There is certainly no requirement that the same number of total signatures contained in the same petition be recited several different times on the same cover sheet whenever more than one candidate is named on a single petition. Indeed, this is made increasingly clear from the identical provision contained in the same statutory subdivision regarding the total number of signatures in each volume. Likewise, it would be entirely unwarranted to require that the same number of signatures for the same volume be repeated once for each candidate on the same cover sheet. (See, Matter of Delle Cese v Black, 63 NY2d 694, 695 [Meyer, J., dissenting in part].)

So here, it seems entirely unreasonable and unnecessary to require that respondents state the total number of signatures in their one-volume designating petition three different times on the same cover sheet. The requirement adds no information, prevents no fraud or mistake, creates no differentiation among the signatures, and, indeed, serves none of the policy purposes legitimately underlying the Election Law. Certainly, enforcement of such a mechanically formalistic requirement does not warrant invalidation of the designating petition and removal from the ballot.

Matter of Delle Cese v Black (63 NY2d 694, supra) upon which the majority rely, is distinguishable. In Delle Cese, candidates for the public positions of judicial delegate and party positions of Bronx County Committee submitted a joint designating petition. In that case, there existed differing minimum signature requirements necessary to qualify candidates for public and party positions. Here, in contrast, the public positions of Erie County District Attorney, Erie County Sheriff and Erie County Comptroller have identical minimum signature requirements. In view of this “unity of interest” among the candidates for public positions in Erie County, and the lack of any realistic risk of administrative confusion (Matter of Staber v Fidler, 65 NY2d 529) the single recitation of the total number of signatures satisfied the statutory requirement. (See, Matter of Seda v Richards, 89 AD2d 952, affd 57 NY2d 737; Matter of Castillo v Maclara, 63 NY2d 682; Matter of Grancio v Coveney, 60 NY2d 608.)

The other minor discrepancies in respondent’s petition, noted by the majority, whether viewed individually or collectively, are, as found by the Appellate Division, insignificant and inconsequential. This is particularly true here where it is conceded that the designating petition contains nearly three times the required number of signatures. To invalidate the entire designating petition containing 1,049 valid signatures, where only 367 are required, does not effectuate the policy of avoiding the risk of confusion and deception in our electoral process. (See, Matter of Staber v Fidler, 65 NY2d 529, supra.)

For all these reasons, I would affirm the order of the Appellate Division.

Chief Judge Wachtler and Judges Simons, Kaye, Alexander and Titone concur; Judge Jasen dissents and votes to affirm in an opinion in which Judge Meyer concurs.

Order reversed, without costs, and judgment of Supreme Court, Erie County, reinstated in a memorandum.

      . Although respondents actually submitted two separate volumes, the first volume alone is deemed by the court to be respondents’ designating petition and, consequently, only the cover sheet attached to that volume is at issue.

      . The majority can point to no language in the statute which mandates such a requirement. Rather, authority is derived solely from an unwarranted extension of the holding in Matter of Delle Cese v Black (63 NY2d 694). (See, discussion infra.)


text:
    Edward Schick et al., Appellants, v Park Royal Associates, Inc., Respondent. Division of Housing and Community Renewal, Intervenor.
    Decided September 17, 1985

      APPEARANCES OF COUNSEL

      David Rosenberg for appellants.

      Gary M. Rosenberg for respondent.

      Edward Chazin for intervenor.
   OPINION OF THE COURT

Memorandum.

The order of the Appellate Division should be reversed, with costs, judgment granted to plaintiffs declaring that they are entitled to apply to the New York State Division of Housing and Community Renewal for a classification of defendant’s building as a hotel or apartment house pursuant to Rent Stabilization Law § YY51-3.1 (a) and (b), and for a determination of the status of plaintiffs’ dwelling units under the Rent Stabilization Law.

This appeal involves the interpretation of New York City’s Rent Stabilization Law (RSL) (Administrative Code of City of New York § YY51-3.1 [a], [b]), as amended by the Omnibus Housing Act of 1983 (L 1983, ch 403, eff June 30, 1983) and of plaintiff tenants’ rights to the renewal of their leases under the provisions of that law.

On July 28, 1983, defendant served 30-day notices on plaintiffs terminating their tenancies on the ground that, as occupants of decontrolled dwelling units in a hotel, they did not possess a right to renew their leases. In response, plaintiffs commenced an action in Supreme Court, New York County, seeking a judgment that the building was not a residential hotel, but rather an apartment building subject to RSL coverage. Alternatively, the plaintiffs requested that the status of the building be referred to New York City’s Conciliation and Appeals Board (CAB) for determination of the building’s status under RSL. Thereafter, plaintiffs moved for a preliminary injunction enjoining defendant from terminating their tenancies.

Special Term denied plaintiffs’ motion and granted defendant’s cross motion to dismiss the complaint, holding that the building was exempt from the RSL under section YY51-3.1. The Appellate Division affirmed, without opinion.

In April 1984, the New York State Division of Housing and Community Renewal (DHCR) assumed the responsibility, previously exercised by CAB, to regulate New York City rents. On February 20, 1985, the DHCR, in an unrelated proceeding, had determined that the subject building was an apartment house, and that all dwelling units therein were subject to RSL coverage. Based upon this ruling, plaintiffs moved for reargument before the Appellate Division and submitted DHCR’s ruling for the court’s consideration. The Appellate Division denied reargument.

Defendant, and the lower courts, construed section YY51-3.1 (a) to exempt certain hotel dwelling units from RSL coverage if those units exceeded the statutory rental ceiling of $350 per month or $88 per week on May 31,1968. Implicit in their rulings is a finding that amended section YY51-3.1, enacted as part of the Omnibus Housing Act in 1983, does not permit the Division to classify properties as apartment houses or hotels. We disagree. Section YY51-3.1 (b) expressly vests authority in the DHCR to classify buildings as hotels or apartment houses and to promulgate standards for such classification. It contains no language, either in subdivision (a) or subdivision (b), limiting its determination of coverage only to those units previously covered by the RSL before the enactment of the Omnibus Housing Act in 1983. Rather, a determination that certain hotel units are exempt can be made, pursuant to section YY51-3.1 (a), only after the building has been classified as a hotel by DHCR under subdivision (b).

Whether the tenants’ rights to renew their leases is protected by the RSL requires an initial determination by DHCR of the building’s status. Only if the building is classified a hotel under the standards promulgated by DHCR should the rate ceiling exemption be applied to bar plaintiffs’ requested relief.

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

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order reversed, with costs, and judgment granted in accordance with the memorandum herein.


text:
    Bernice C. Lenahan et al., Respondents, v Robert A. Goucher, Appellant.
    Decided September 17, 1985

      APPEARANCES OF COUNSEL

      Thomas N. O’Hara for appellant.
    S. James Matthews for respondents.
   OPINION OF THE COURT

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order reversed, with costs, and the jury’s verdict reinstated for the reasons stated in the dissenting memorandum of Justice Paul J. Yesawich, Jr., at the Appellate Division (111 AD2d 546, 548).

Concur: Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye, Alexander and Titone.


text:
    Home Insurance Company, Appellant, v Ann Corcoran, Individually and as Administratrix of the Estate of Richard Corcoran, Deceased, Respondent, et al., Defendants.
    Decided September 17, 1985

      APPEARANCES OF COUNSEL

      C. Raymond Nelson for appellant.

      Joseph Kelner and Martin J. Rubenstein for respondent.
   OPINION OF THE COURT

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order reversed, with costs, and order of Supreme Court, New York County, reinstated for reasons stated in the dissenting memorandum of Justice Joseph P. Sullivan at the Appellate Division (107 AD2d 561, 563-565).

Concur: Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye, Alexander and Titone.


text:
    Niagara Frontier Transportation Authority et al., Appellants, v Tri-Delta Construction Corporation et al., Respondents.
    Decided September 17, 1985

      APPEARANCES OF COUNSEL

      John J. Sullivan, Jr., for appellants.

      George M. Gibson for respondents.
   OPINION OF THE COURT

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order affirmed, with costs, for reasons stated in the opinion by Justice M. Dolores Denman at the Appellate Division (107 AD2d 450).

Concur: Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye, Alexander and Titone.


text:
    The People of the State of New York ex rel. Carlos DeLeon, Appellant, v Charles Scully, as Superintendent of Green Haven Correctional Facility, Respondent.
    Decided September 17, 1985
   Appeal transferred, without costs, by the Court of Appeals sua sponte, to the Appellate Division, Second Department. A direct appeal does not lie where questions other than the constitutional validity of a statutory provision are involved (NY Const, art VI, § 3 [b] [2]; § 5 [b]; CPLR 5601 [b] [2]).


text:
    Iroquois Gas Corporation, Respondent-Appellant, v Daniel R. Gernatt et al., Appellants-Respondents.
    Submitted July 15, 1985;
    decided September 17, 1985
   Motion for leave to appeal dismissed upon the ground that the order appealed from does not finally determine the action within the meaning of the Constitution. Cross motion denied as unnecessary insofar as it seeks statutory costs and, insofar as it seeks relief otherwise, denied.

Judge Jasen taking no part.


text:
    The People of the State of New York, Respondent, v Frederick Jackson, Appellant.
    Submitted August 5, 1985;
    decided September 17, 1985
   Motion to vacate the Court of Appeals order of dismissal dated June 9, 1980 denied.


text:
    In the Matter of the Adoption of Sarah K. Timmy S. et al., Appellants; Warren K. et al., Respondents; Attorney-General of the State of New York, Intervenor-Appellant.
    Submitted September 9, 1985;
    decided September 17, 1985
   Motion for a stay denied as unnecessary (CPLR 5519 [a] [1]).


text:
    In the Matter of Kenneth M. Piazza, Appellant, v Gordon M. Ambach, as Commissioner of Education of the State of New York, et al., Respondents.
    Decided September 17, 1985
   Appeal dismissed, without costs, by the Court of Appeals sua sponte, upon the ground that the dissent at the Appellate Division is not on a question of law and no substantial constitutional question is directly involved.

Judge Jasen taking no part.


text:
    Edith Salm, Appellant, v Edward A. Sammito, Respondent, et al., Defendants.
    Submitted August 19, 1985;
    decided September 17, 1985
   Motion for leave to appeal denied upon the ground that an appeal lies as of right (CPLR 5601 [a] [iii]).


text:
    John R. Tenney et al., Appellants, v Robert J. Sise, as Chief Administrative Judge of the State of New York, Respondent.
    Decided September 17, 1985
   Appeal transferred, without costs, by the Court of Appeals sua sponte, to the Appellate Division, Third Department. A direct appeal does not lie where questions other than the constitutional validity of a statutory provision are involved (NY Const, art VI, § 3 [b] [2]; § 5 [b]; CPLR 5601 [b] [2]).

Chief Judge Wachtler and Judge Simons taking no part.


text:
    Leslie Wiley, Sr., as Administrator of the Estate of Leslie Wiley, Deceased, Respondent, v The City of New York, Defendant. New York State Commission of Correction, Nonparty Appellant.
    Submitted July 15, 1985;
    decided September 17, 1985
   Motion for leave to appeal dismissed, with $20 costs and necessary reproduction disbursements, upon the ground that the order sought to be appealed from does not finally determine the action within the meaning of the Constitution (Cohen and Karger, Powers of the New York Court of Appeals § 38, at 156-157).


text:
    Alscot Investing Corp., Appellant, v Albert Laibach, as Assessor of the Village of Rockville Centre, et al., Respondents.
    Decided September 19, 1985

      APPEARANCES OF COUNSEL
    A. Thomas Levin for appellant.

      James J. Seward for respondents.
   OPINION OF THE COURT

Memorandum.

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

Only a departure in substance from the formula prescribed by statute will invalidate a municipal enactment (Quick v Town of Owego, 8 NY2d 1144, affg 11 AD2d 285, 287; see, Municipal Home Rule Law § 51; Bareham v City of Rochester, 246 NY 140, 151). The departures here claimed to invalidate are that the local law was not introduced by any member of the Village Board, that the Board had not properly voted to hold a hearing on the law, that the text of the law as adopted was not in possession of Board members for the period required by Municipal Home Rule Law § 20 (4) prior to adoption, and that the text as adopted and contained in the minutes differs from the text filed with the Secretary of State.

The record establishes that a proposed local law with the same text as was filed with the Secretary of State was forwarded by the Village Attorney to the Mayor and members of the Board on September 29, 1976, that the Village Attorney was directed at the October 14,1976 meeting of the Board to proceed with notice of public hearing, and that on October 18, 1976 he sent the Mayor and Board members the same text of the proposed local law with notice that the public hearing was calendared for November 1,1976. The October 14,1976 direction of the Board to the Village Attorney to prepare notice of hearing of the local law, the text of which was in the possession of all of its members, was a “substantial and sufficient compliance” with the requirement that such a law be introduced by a member of the Board at a meeting of the Board, and a sufficient vote to hold a public hearing (Commission of Public Charities v Wortman, 279 NY 711, affg 255 App Div 241, 245). The more particularly is this so in view of the unanimous vote for adoption at the November 1, 1976 meeting (Brechner v Incorporated Vil. of Lake Success, 25 Misc 2d 920, 924, affd 14 AD2d 567, appeal dismissed 11 NY2d 929; see, Village of Mill Neck v Nolan, 259 NY 596, affg 233 App Div 248; Marcus v Incorporated Vil. of Spring Val., 24 AD2d 1021; Iannorone v Caso, 59 Misc 2d 212). Nor, in view of the above facts, is there any question that the text of the law as adopted was in the possession of the Board members well in advance of the 10-day period provided for in Municipal Home Rule Law § 20 (4).

Plaintiff’s argument that the text as filed with the Secretary of State differs from that adopted November 1,1976 turns on the fact that the minutes of that meeting omitted the specific language reducing to 0% the exemption of business improvements that would otherwise apply pursuant to Real Property Tax Law § 485-b (7). Although the text of the law as set forth in the minutes did not state that it reduced the section 485-b exemption to zero, the minutes stated that a public hearing was opened on a local law “to reduce to zero the percentum of exemption,” contained a copy of the notice of public hearing which stated that the proposed local law would “reduce to zero the percentum of exemption,” and the title of the law adopted by the Board as recorded in the minutes stated that it “would change, supersede and amend Sec. 485-b of the Real Property Tax Law to reduce to zero the percentum of exemption for certain business improvements.” The minutes, thus, sufficiently summarize the matter unanimously adopted that there can be no question what was intended. Here, as in Matter of Jewett v Luau-Nyack Corp. (31 NY2d 298) and Northern Operating Corp. v Town of Ramapo (26 NY2d 404), plaintiff’s arguments are “technical at best, and even at a technical level” (31 NY2d, at p 307) provide no basis for invalidation of the local law in question.

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

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order affirmed, with'costs, in a memorandum.


text:
    The People of the State of New York, Respondent, v Anthony Robles, Appellant.
    Decided September 19, 1985

      APPEARANCES OF COUNSEL

      Susan Hofkin Salomon and William E. Hellerstein for appellant.

      John J. Santucci, District Attorney (Susan C. Kramer of counsel), for respondent.
   OPINION OF THE COURT

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order affirmed (see, People v Castro, 65 NY2d 683, affg 101 AD2d 392).

Concur: Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye and Alexander. Taking no part: Judge Titone.


text:
    The People of the State of New York, Respondent, v Lafayette McNatt, Also Known as Lafayette Alexander, Appellant.
    Decided September 19, 1985

      APPEARANCES OF COUNSEL

      William E. Hellerstein and Bobette M. Masson for appellant.

      Robert M. Morgenthau, District Attorney (Jeffrey Scott Sarokin of counsel), for respondent.
   OPINION OF THE COURT

Memorandum.

The order of the Appellate Division should be reversed, the judgment of conviction vacated, the motion to suppress physical evidence granted and the indictment dismissed.

Although there was reasonable suspicion justifying the police officer’s initial approach and inquiry of defendant, there was no basis under which the subsequent search of defendant’s bag can be upheld. There was no probable cause to believe that defendant had committed, was committing or was about to commit a crime and no claim is made that the officer entertained a reasonable fear that he was in danger of physical injury by virtue of defendant being armed (see, People v Brooks, 65 NY2d 1021; People v Davis, 64 NY2d 1143). Unlike the cases relied on by the Appellate Division majority, defendant in this case did not consent to the search. Absent a showing of the existence of one of “ ‘a few specifically established and well-delineated exceptions’” (Schneckloth v Bustamonte, 412 US 218, 219; Katz v United States, 389 US 347, 357; People v De Santis, 46 NY2d 82, 87, cert denied 443 US 912) to the constitutional proscription on warrantless searches, such action, undertaken without probable cause, will not be upheld.

Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye, Alexander and Titone concur in memorandum.

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order reversed, etc.


text:
    Joyce Tomaka, Appellant, v Evans-Brant Central School District, Sued as Lake Shore Central School District, Respondent.
    Decided September 19, 1985

      APPEARANCES OF COUNSEL

      Ronald L. Jaros for appellant.

      Phillip Brothman for respondent.
   OPINION OF THE COURT

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order affirmed, with costs, for the reasons stated in the memorandum at the Appellate Division (107 AD2d 1078).

Concur: Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye, Alexander and Titone.


text:
    In the Matter of James Emmick, Appellant, v Warren Enders, as Area Supervisor of the Division of Parole of the Executive Department of the State of New York, Respondent.
    Argued September 6, 1985;
    decided September 19, 1985
   Appeal dismissed, without costs, for mootness.


text:
    Allstate Insurance Company, Respondent-Appellant, v Farmers Insurance Group et al., Defendants, and U. S. Fire Insurance Company, Appellant-Respondent.
    Decided September 19, 1985
   Plaintiff’s cross appeal dismissed, without costs, by the Court of Appeals sua sponte, upon the ground that cross appellant is not aggrieved by the modification at the Appellate Division.


text:
    Mendel Bobker et al., Appellants, v Department of Housing Preservation and Development of the City of New York et al., Respondents.
    Decided September 19, 1985
   Appeal transferred to the Appellate Division, Second Department, without costs, by the Court of Appeals sua sponte. A direct appeal does not lie where questions other than the constitutional validity of a statutory provision are involved (NY Const, art VI, § 3 [b] [2]; § 5 [b]; CPLR 5601 [b] [2]).


text:
    Benjamin Karlin, Respondent, v Stella Menon, Appellant.
    Decided September 19, 1985
   Appeal dismissed, without costs, by the Court of Appeals sua sponte, upon the ground that it does not lie as of right (NY Const, art VI, § 3; CPLR 5601).


text:
    Regeen Kiernan, Respondent, v Thomas Kiernan, Appellant.
    Decided September 19, 1985
   Appeal dismissed, without costs, by the Court of Appeals sua sponte, upon the ground that the appellant is not aggrieved by the modification at the Appellate Division.


text:
    Spring Realty Co. et al., Appellants, v New York City Loft Board et al., Respondents.
    Decided September 19, 1985
   Appeal transferred by the Court of Appeals sua sponte, to the Appellate Division, First Department, without costs, upon the ground that a direct appeal does not lie (NY Const, art VI, § 3 [b] [2]; § 5 [b]; CPLR 5601 [b] [2]).


author: Per Curiam.

text:
    In the Matter of Tammie Z. and Others, Alleged to be Neglected Children. Chemung County Department of Social Services, Respondent; Owen Dennis Z., Appellant.
    Decided October 8, 1985

      POINTS OF COUNSEL

      John J. Ryan, Jr., for appellant.
    I. The preponderance of evidence standard in a neglect proceeding is unconstitutional. (Matter of Bennett v Jeffreys, 40 NY2d 543; Santosky v Kramer, 455 US 745; Matter of Marie B., 62 NY2d 352; Mathews v Eldridge, 424 US 319; Matter of Linda C., 86 AD2d 356; Lassiter v Department of Social Servs., 452 US 18; Stanley v Illinois, 405 US 645; Addington v Texas, 441 US 418.) II. As a matter of law, the evidence presented was insufficient to sustain a finding of neglect. (Matter of Darlene T., 28 NY2d 391; Matter of Bennett v Jeffreys, 40 NY2d 543.) III. The Family Court, as a matter of law, abused its discretion by placing the children with the county. (Matter of Darlene T., 28 NY2d 391; Matter of Urdianyk, 27 AD2d 122.) IV. Appellant, as a matter of law, was denied a fair hearing. (Lutwak v United States, 344 US 604; Matter of Mertens, 56 AD2d 456.)

      John F. O'Mara, County Attorney (Robert A. Groff, Jr., of counsel), for respondent.
    I. The standard of proof employed by the court was constitutional. (Matter of Linda C., 86 AD2d 356.) II. Proof was sufficient to support a finding of neglect based upon a preponderance of the evidence. (Matter of C. B., 81 Misc 2d 1017.) III. The court did not abuse its discretion in removing the children from the home. (Matter of Katherine C., 122 Misc 2d 276.) IV. Respondent-appellant was not denied a fair hearing.

      I. Robert Abrams, Attorney-General (Robert J. Schack and Robert Hermann of counsel), in his statutory capacity under Executive Law § 71.
    This court need not address the constitutionality of Family Court Act § 1046 (b) (i) if, as a matter of law, the evidence fails to meet the preponderance of the evidence standard of proof. (New York City Tr. Auth. v Beazer, 440 US 568; People v Mobil Oil Corp., 48 NY2d 192; Matter of Peters v New York City Hous. Auth., 307 NY 519; Matter of Hime Y., 54 NY2d 282; Tucker v Tucker, 55 NY2d 378; Matter of Sylvia M., 82 AD2d 217, 83 AD2d 925, 57 NY2d 637.) II. Due process does not require that child neglect be proven by more than a fair preponderance of the evidence. (Santosky v Kramer, 455 US 745; Matter of Linda C., 86 AD2d 356; Matter of Christine H., 114 Misc 2d 475; Lassiter v Department of Social Servs., 452 US 18; University of Cal. Regents v Bakke, 438 US 265; St. Pierre v United States, 319 US 41; Addington v Texas, 441 US 418; Matter of Millar, 40 AD2d 637; Matter of Fred S., 66 Misc 2d 683; Finlay v Finlay, 240 NY 429.)
   OPINION OF THE COURT

Per Curiam.

In a fact-finding hearing to determine whether a child is abused or neglected, the provision of Family Court Act § 1046 (b) that a finding of neglect "must be based on a preponderance of the evidence” affords due process under the Federal Constitution.

This proceeding was brought by respondent Department of Social Services pursuant to Family Court Act article 10, alleging that appellant father, the custodial parent, was neglecting his three children. Article 10 sets forth a two-step procedure to identify and protect abused or neglected children. The first step is a fact-finding hearing at which abuse or neglect must be established by a preponderance of the evidence (Family Ct Act § 1012 [e], [f]; § 1044). If a child is determined to be abused or neglected, the court must thereafter hold a dispositional hearing to determine what order of disposition should be made (Family Ct Act § 1045). Among the dispositional options is placement out of the home for a period of 18 months.

Here, the trial court, applying a preponderance standard, found that appellant’s children were neglected, and issued an order placing them with the Department of Social Services for 18 months. Appellant, citing Santosky v Kramer (455 US 745), contends that the fact-finding hearing was constitutionally infirm because the trial court should have applied a standard of clear and convincing evidence. In Santosky, the Supreme Court addressed the burden of proof required by the Constitution at the fact-finding stage in a permanent neglect proceeding held pursuant to article 6 of the Family Court Act, concluding that, "[bjefore a State may sever completely and irrevocably the rights of parents in their natural child, due process requires that the State support its allegations by at least clear and convincing evidence” (455 US, at pp 747-748).

Without doubt "[a] parent’s concern for the liberty of the child, as well as for his care and control” is a "fundamental * * * interest and right”, and due process must be afforded in article 10 proceedings (Matter of Ella B., 30 NY2d 352, 356). Determining how much process is due involves balancing "the private interests affected by the proceeding; the risk of error created by the State’s chosen procedure; and the countervailing governmental interest supporting use of the challenged procedure” (Santosky v Kramer, supra, at p 754; see, Mathews v Eldridge, 424 US 319). The balance of interests here differs materially from Santosky.

A neglect proceeding pursuant to Family Court Act article 6 may result in permanent termination of "the natural parents’ rights in the child. * * * Termination denies the natural parents physical custody, as well as the rights ever to visit, communicate with, or regain custody of the child.” (Santosky v Kramer, supra, at p 749.) By contrast, in an article 10 proceeding, the maximum initial period of placement is 18 months. An even more fundamental difference, however, relates to the risk of error. In an article 6 termination proceeding, the child has been in the care of an authorized agency for a period of more than one year (Social Services Law § 384-b [7]) and, as the court in Santosky observed, even if an article 6 termination proceeding fails for lack of proof, "a judge has ample discretion to ensure that * * * a child will not return to a hostile environment” (455 US, at p 766, n 16). The court noted that in Santosky itself, "when the State’s initial termination effort failed for lack of proof * * * the court simply issued orders under Fam. Ct. Act § 1055 (b) extending the period of the child’s foster home placement” (id.). Accordingly, "[f]or the child, the likely consequence of an erroneous failure to terminate is preservation of an uneasy status quo” (id., at pp 765-766). In article 10 proceedings, however, an erroneous failure to place the child may have disastrous consequences. If abuse or neglect is not proved, the court must dismiss the petition (Family Ct Act § 1051 [c]). While the court may authorize temporary placement or protection (Family Ct Act § 1027 [a]), that placement or protection remains in effect only pending a final order of disposition, at which time the child is returned to the parents.

Accordingly, the order of the Appellate Division should be affirmed, without costs.

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

Order affirmed, without costs.

      . While the initial placement may be extended for additional periods of one year each (Family Ct Act § 1052 [a]; § 1055 [b]) — and indeed the placement here was extended for one year — no challenge to the extension order is before us, and we thus do not consider any issue relating to the additional periods.

        . We reach appellant’s constitutional argument after having determined that his other contentions are without merit. We agree with the conclusions of the Appellate Division (a) that the evidence as reflected in the affirmed findings was sufficient to support the trial court’s finding of neglect, and (b) that appellant failed to support his charge that the trial atmosphere was not fair and impartial. Moreover, Family Court’s dispositional order, entered by the same judge two weeks after his extensive fact-finding determination and referring to the interests of the children as well as the situation created for them by appellant, adequately stated the grounds for the disposition (Family Ct Act § 1052 [b]; cf. Matter of Darlene T., 28 NY2d 391), and its disposition was not an abuse of discretion as a matter of law.


author: Kaye, J. Titone, J.

text:
    Michael L. Colon, Respondent, v Aetna Life and Casualty Insurance Company, Appellant.
    Argued September 9, 1985;
    decided October 15, 1985
    POINTS OF COUNSEL

      Randall J. Ezick for appellant.
    I. A policy of insurance issued to an owner of a vehicle does not provide coverage in the first instance to a person merely alleged to be operating the vehicle with the owner’s permission where it has been determined through investigation that there was no permission or consent by the owner. (Zappone v Home Ins. Co., 55 NY2d 131; Katz v Allstate Ins. Co., 96 AD2d 930.) II. Where a complaint alleges operation of a vehicle with the permission of the owner, the operator is not entitled to a defense under the owner’s policy in the absence of clear and uncontroverted proof that he was using the motor vehicle with the permission and consent of the owner. (Robb v Royal Globe Ins. Co., 48 AD2d 935.)

      Harold Friedman and Wayne M. Fielder for respondent.
    I. The question of coverage under an insurance policy is quite distinctive and apart from the insurer’s initial and continuing duty to defend under the terms of that insurance policy. (J.G.A. Constr. Corp. v Charter Oak Fire Ins. Co., 66 AD2d 315; Touchette Corp. v Merchants Mut. Ins. Co., 76 AD2d 7.) II. The only possible way for an insurer to be relieved of the duty to defend is, if it is concluded, as a matter of law, that there does not exist any factual or legal basis that might require compliance with this critical obligation. (Downey v Merchants Mut. Ins. Co., 30 AD2d 171, 23 NY2d 989.) III. The duty of an insurance company to defend is determined in the first instance by the allegations contained in the complaint. (Touchette Corp. v Merchants Mut. Ins. Co., 76 AD2d 7; Calkins v Merchants Mut. Ins. Co., 59 AD2d 1052; International Paper Co. v Continental Cas. Co., 35 NY2d 322.) IV. The obligation of an insurance company to defend is broader than its duty to pay. (International Paper Co. v Continental Cas. Co., 35 NY2d 322; United States Fid. & Guar, v Copfer, 48 NY2d 871; Seaboard Sur. Co. v Gillette Co., 64 NY2d 304.)
   OPINION OF THE COURT

Kaye, J.

Where the complaint in a personal injury action against the owner and the driver of a vehicle alleges that the driver was operating the vehicle with the owner’s permission, and where the issue of permission has not been judicially resolved prior to trial of the personal injury action, the vehicle’s insurer has a duty to defend the driver as well as the owner in that action even though the insurer itself reasonably concludes that the driver did not have the owner’s permission and the jury ultimately so finds. In this action by the driver against the insurer to recover attorneys’ fees incurred in his defense of the personal injury action, we therefore affirm the Appellate Division order upholding summary judgment for the driver.

On December 4,1977, plaintiff, Michael Colon, while driving a van owned by Palmier Oil Company and insured by defendant, Aetna Life & Casualty Insurance Company, struck an automobile killing Timothy and Karen Morris. The van had been entrusted by Palmier to its employee, Colon’s half-brother (Robert Clark), and Colon was apparently using the van with Clark’s knowledge, to deliver a bed to their parents. Following the accident, Aetna conducted an investigation and notified Colon by letter dated January 25,1978 that it was denying coverage to him for any death or bodily injury claims arising out of the accident because Aetna’s investigation had determined that he had been operating the vehicle without Palmier’s permission or consent. The letter further stated that Aetna understood that Colon owned a private passenger motor vehicle and urged him to turn over Aetna’s letter and any summons he might receive to his own insurance carrier.

In March 1978, the Morris estates sued both Palmier and Colon for wrongful death. Aetna defended Palmier, but not Colon, although the complaint alleged that at the time of the accident Colon was operating the vehicle with Palmier’s' 'knowledge and consent.” Colon appeared in the action by an attorney and admitted liability. The sole questions to be determined were the issue of permission, and an assessment of damages. Witnesses for Palmier testified that Clark had explicitly been instructed that the van was to be used only by him, and only for company business. Both the witnesses’ credibility and the extent to which Palmier was aware that Clark occasionally had used the vehicle for personal use were considered in that proceeding (Morris v Palmier Oil Co., 94 AD2d 911). The jury found that Colon did not have Palmier’s express or implied consent to drive its vehicle on the date of the accident, and awarded the estates $80,000 damages as against Colon only. On appeal by the estates from the portion of the judgment dismissing its claim against Palmier, the Appellate Division unanimously affirmed, concluding that the evidence was sufficient to support the jury’s determination that Colon had been operating the vehicle without Palmier’s consent (Morris v Palmier Oil Co., supra).

Colon thereafter brought this action for attorneys’ fees incurred in connection with the Morris action, predicated on Aetna’s claimed wrongful failure to defend him. On Aetna’s motion to dismiss for failure to state a cause of action or for summary judgment, and on Colon’s cross motion for partial summary judgment on the issue of liability, Special Term granted the cross motion and directed a trial to assess damages. The Appellate Division, one justice dissenting, affirmed and certified to us the question, "Was the order of Special Term, as affirmed by this court, correct as a matter of law?”

We begin with a proposition acknowledged by both parties: an insurer’s duty to defend is exceedingly broad, which is in the interest of the insured. The duty arises whenever the allegations of the complaint, for which the insured may stand liable, fall within the risk covered by the policy. The ultimate responsibility of the insured is not a consideration. "If, liberally construed, the claim is within the embrace of the policy, the insurer must come forward to defend its insured no matter how groundless, false or baseless the suit may be.” (Ruder & Finn v Seaboard Sur. Co., 52 NY2d 663, 670.) Here there is no question that the allegations of the complaint, as to both the owner and the driver of the van, fall within the risk covered by the policy. The question then becomes whether there should be a departure from the established rule that, irrespective of ultimate liability, the insurer must defend both.

Aetna urges, first, that the cases imposing a duty to defend on the insurer all involve the insurer’s duty to its own insured and not, as here, to a third party with whom the insurer has no contractual relationship and, second, that our decision in Zappone v Home Ins. Co. (55 NY2d 131) compels a different result in this case.

In Zappone, we held that an automobile liability insurer’s failure to disclaim coverage in writing in accordance with Insurance Law § 167 (8) did not obligate the insurer to indemnify persons with whom it had no contractual relationship with respect to the vehicle involved in the accident. Zappone is distinguishable because it involved the insurer’s duty to indemnify, not the broader duty to defend. There, a holding against the insurer would in effect have created a new contract of insurance, for which no premiums had been paid, a result which we concluded would be unreasonable and unfair to the insurer, and would not further the purpose of Insurance Law § 167 (8) to avoid prejudice to the insured, the injured claimant and the Motor Vehicle Accident Indemnity Corporation. That same contention cannot be made here.

Moreover, sound policy considerations support adherence to the established principle obligating the insurer to furnish a defense. So long as the issue of permission remains unresolved, effective defense of the driver is in the interest of the insured, who stands at risk both on the issue of permission and on the underlying issue of negligence. While the named insured may have an incentive to take the litigation position that the driver was operating the vehicle without consent, he also has a strong interest in seeing that the driver obtains a competent defense, so as to avoid prejudice to himself — should permission be found — on the issue of negligence. Additionally, Aetna’s decision not to defend Colon was based solely on its own investigation. While there is no allegation of bad faith, a contrary holding here might encourage refusals to defend where the circumstances were less clear, because there would be little risk in doing so. If the person denied a defense were subsequently found to have been operating the vehicle without consent, the insurer would have incurred no cost, and if consent were found the insurer would merely reimburse the attorneys’ fees it would have incurred anyway. While the dissent suggests that any abuses by insurers could be redressed in litigation by their insureds (dissenting opn, at p 14), as a policy matter we prefer the course that places the duty of defense initially on the insurer, for the benefit of the insured.

For these reasons, the insurer should have a duty to defend a driver who is alleged to have operated an insured vehicle with the owner’s consent. Where the issue is clearcut, the insured or the insurer should be entitled to obtain a prompt judicial determination, whether by summary judgment, declaratory judgment or otherwise that, contrary to the allegations of the personal injury plaintiff’s complaint, the driver actually did lack permission of the insured, and that the insurer is not obligated by its contract of insurance to furnish a defense to the driver (see, Spoor-Lasher Co. v Aetna Cas. & Sur. Co., 39 NY2d 875,876-877).

Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative. <

Titone, J.

(dissenting). I cannot accept the notion that an insurance carrier is obligated to provide a defense to a stranger simply because the plaintiff alleges facts which, if true, would bring the stranger within the ambit of an omnibus clause providing coverage for persons operating a vehicle with its policyholder’s permission. Therefore, I am compelled to dissent.

At the outset, the background facts deserve some emphasis. Plaintiff, Michael L. Colon, was involved in an automobile collision on December 4, 1977, resulting in the death of another driver. At the time, he was operating a vehicle owned by Palmier Oil Co., Inc., the employer of his half-brother, Robert Clark. Despite the fact that Palmier Oil had given Clark explicit instructions not to allow anyone else to operate the vehicle, which was to be used only on company business, Clark allowed Colon to use it for a family errand. Defendant Aetna, the insurance carrier for Palmier Oil, accordingly disclaimed any coverage to Colon under the standard omnibus clause.

Colon admitted liability at the commencement of the trial of the wrongful death action, but claimed that he was operating the vehicle with the implied permission of Palmier Oil, which was also named as a defendant. A jury verdict against Colon, and in favor of Palmier Oil, explicitly rejecting the claim of implied permission by special interrogatory, was upheld on appeal (94 AD2d 911). Colon then commenced this suit against Aetna seeking to recover the attorneys’ fees expended in defense of the wrongful death action.

Special Term granted Colon partial summary judgment on the issue of liability, reasoning that Aetna owed a duty to defend. A divided Appellate Division affirmed, but granted leave to appeal. I would reverse.

The majority relies heavily upon the aphorism that the duty to defend is broader than the duty to indemnify. Like many aphorisms, however, it is an overgeneralization which can be misleading, and, blind adherence to it distorts proper analysis. The duty to defend, though broader than the duty to indemnify, is nevertheless likewise owed only to an insured or covered party. Indeed, until today, this court has recognized such a duty only where the party seeking enforcement was a named insured under the policy. (See, e.g., Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 310; Utica Mut. Ins. Co. v Cherry, 38 NY2d 735; Sturges Mfg. Co. v Utica Mut. Ins. Co., 37 NY2d 69; International Paper Co. v Continental Cas. Co., 35 NY2d 322, 326; Prashker v United States Guar. Co., 1 NY2d 584, 590; Goldberg v Lumber Mut. Cas. Ins. Co., 297 NY 148, 154.) In those cases, the policyholder paid a premium for the carrier’s contractual obligation to supply a defense, and our decisions recognized that it ill behooves the carrier to avoid that obligation by becoming an adversary before the underlying facts are fully developed.

Different considerations apply, however, where a stranger is attempting to create coverage that never existed initially. In such a circumstance, the carrier fulfills its duty to its insured — again the person or entity that paid the premium — by asserting a defense that the stranger is without the ambit of the policy, here by the stranger’s lack of permission to operate the vehicle after the carrier’s investigation establishes that to be a viable defense.

Under the approach followed by the majority, the carrier will have to allow the stranger to select his own counsel and pay the fee for otherwise there will be a conflict of interest (see, Public Serv. Mut. Ins. Co. v Goldfarb, 53 NY2d 392, 401; American Employers Ins. Co. v Goble Aircraft Specialties, 205 Misc 1066, 1075, appeal withdrawn 1 AD2d 1008; Code of Professional Responsibility DR 5-107 [B]; EC 5-17; NY State Bar Assn, Ethics Opinion No. 519 [1980]). That counsel, to be worth his salt, will have to vigorously assert that permission to operate the vehicle was at least implicitly granted in order that the stranger to the policy be afforded coverage — precisely what plaintiff attempted to do here.

Taken to its logical conclusion, the majority would require a carrier to supply counsel to a thief. Depending upon how cleverly the complaint is drafted — and form book complaints routinely as-, sert the magic words concerning the owner’s "consent and permission” (see, e.g., 5 Carmody-Wait 2d, NY Prac § 29:522, at 37)— the thief can always assert some sort of implied consent, as, for example, claiming that the motorist left the key in the ignition (Vehicle and Traffic Law § 1210 [a]; cf. Epstein v Mediterranean Motors, 109 AD2d 340). The possibility is hardly farfetched for a thief is not necessarily judgment-proof and it certainly would be in the interest of both the thief and the personal injury plaintiff to make such assertions as the carrier may well be encouraged to settle. This unacceptable prospect was previously unthinkable (see, Katz v Allstate Ins. Co., 96 AD2d 930, lv denied 61 NY2d 608; Robb v Royal Globe Ins. Co., 48 AD2d 935).

From whatever prospective, the carrier, in protecting the interests of the stranger to the contract, will be compelled to take steps that are injurious to the policyholder. In other words, the principle that the duty to defend is broader than the duty to indemnify is literally turned on its head.

The undesirable consequences cannot be avoided through a declaratory judgment action or summary judgment (see, Downey v Merchants Mut. Ins. Co., 30 AD2d 171, affd 23 NY2d 989; Nationwide Mut. Ins. Co. v Dennis, 14 AD2d 188). The plaintiffs in the underlying action are certainly interested in keeping the carrier involved as a potential source of payment of any damages awarded. Unless they are made parties to the declaratory judgment action, the determination could not be binding on them, and if they are made parties, it would amount to a full fledged trial of a major question in the personal injury action, with the resultant duplication of litigation (see, Holland Am. Ins. Co. v National Indem. Co., 75 Wn 2d 909, 454 P2d 383, 386). It thus has been settled " 'policy in this State * * * to deny the declaratory judgment where the matter in dispute can be determined in the basic negligence action * * * [and only] to permit the action when the dispute is such that it depends on matters outside of the negligence action or will not arise in the negligence action as part of the lawsuit.’ ” (Allstate Ins. Co. v Santiago, 98 AD2d 608, quoting Nationwide Mut. Ins. Co. v Dennis, supra, at p 189; see also, Cordial Greens Country Club v Aetna Cas. & Sur. Co., 41 NY2d 996; Du Pont de Nemours & Co. v Russo, 84 AD2d 532; Everlast Sporting Goods Mfg. Co. v Aetna Ins. Co., 23 AD2d 641; Stuyvesant Ins. Co. v Perfetto, 37 Misc 2d 739, affd 20 AD2d 676.)

Nor could a motion for summary judgment be made by the carrier. Permission is presumed from ownership (Leotta v Plessinger, 8 NY2d 449, 461), so, at best, whether or not permission had been granted is an issue of fact, not susceptible of summary resolution (Aetna Cas. & Sur. Co. v Brice, 50 NY2d 958, affg 72 AD2d 927; Basile v Huntington Utils. Fuel Corp., 47 AD2d 625; Blunt v Zinni, 32 AD2d 882, 883). More important, the carrier is not a party to the underlying personal injury action. It could not, pick up the telephone, so to speak, and advise either the attorney for its policyholder or the stranger to make a motion for summary judgment. An attorney cannot allow a nonclient to direct the management of litigation (see, Code of Professional Responsibility DR 5-107 [B]; EC 5-23; State Farm Mut. Auto Ins. Co. v Walker, 382 F2d 548, 552, cert denied 389 US 1045; American Employers Ins. Co. v Goble Aircraft Specialties, 205 Misc 1066, 1075, supra). Besides, at that point counsel for the stranger has already been engaged so little would be gained from the carrier’s perspective even if it could resolve the issue of permission by summary judgment.

Courts elsewhere have focused on the question of whether a carrier is obligated to provide a defense to a stranger to the contract under the omnibus clause where the complaint makes an allegation of implied permission. Most, including those of the neighboring States of Connecticut (Keithan v Massachusetts Bonding & Ins. Co., 159 Conn 128, 267 A2d 660) and New Jersey (Ricciardi v Bernasconi, 105 NJ Super 525, 253 A2d 487 [Mountain, J.]), hold that the stranger must first establish that he or she is within the ambit of coverage so that if no prior declaratory judgment action be brought by the stranger and it is determined in the underlying personal injury suit that the stranger lacked permission to operate the vehicle, the carrier perforce had no duty to defend the stranger and is not liable for counsel fees (see, Southern Underwriters v Dunn, 96 F2d 224; Butler v Maryland Cas. Co., 147 F Supp 391; Navajo Frgt. Lines v Liberty Mut. Ins. Co., 12 Ariz App 424, 471 P2d 309; Williams v Community Drive-In Theatre, 3 Kan App 2d 352, 595 P2d 724; Smith v Insurance Co. of State of Pa., 161 So 2d 903 [La App], cert denied 246 La 344,164 So 2d 350; 7A Appleman, Insurance Law and Practice § 4683, at 447-448; 7C Appleman, Insurance Law and Practice § 4685.02, at 155-156 [Berdal ed]). These courts hold, in other words, that boiler-plate allegations do not control the rights of nonpolicyholders.

Butler v Maryland Cas. Co. (supra) is illustrative. After recognizing the general principle that the insurer’s obligation to provide a defense is ordinarily determined by the allegations of the complaint, even though the allegations are groundless, the court explained: "But before that principle applies, it must be shown that the defendant in the personal injury action is in fact an assured, named or omnibus, under the policy. Obviously, the insurer’s obligation is not to provide a defense for a stranger merely because the plaintiff alleges that the strange defendant is an assured or alleges facts which, if true, would make him so. Conversely, the insurer may not renege on its obligation to provide a defense, even for an omnibus insured, merely because the allegations in the complaint are groundless. For example, where a person is driving the named insured’s car with his permission, the permittee is an omnibus assured under the policy and the insurer owes him a defense when sued even though the charge of negligence against him cannot be proved. On the other hand, if permission was not granted for the use of the car, the user thereof is not entitled to a defense under the policy irrespective of proof of negligence. In short, allegations in the plaintiff’s petition cannot create an obligation on the part of the insurer to defend where none previously existed.” (147 F Supp, at p 395.)

This analysis makes eminent sense and should be followed by us. Moreover, I cannot accept the majority’s argument that this approach operates as an incentive for a carrier to unreasonably refuse to defend. The stranger will select his or her counsel in any event, and the only question will be whether the carrier must pay the fee (see, Public Serv. Mut. Ins. Co. v Goldfarb, 53 NY2d 392, 401, supra). In addition, the stranger can probably bring a declaratory judgment action to obtain a judicial determination of the carrier’s obligations (see, Downey v Merchants Mut. Ins. Co., 30 AD2d 171, affd 23 NY2d 989, supra). Be that as it may, as noted by the Arizona Court of Appeals, "If an insurer erroneously takes the position that notwithstanding the allegations of the complaint it has no obligation to defend, and facts subsequently establish that such duty did exist, then we are confident that the law will allow the injured party an adequate remedy for the breach by the insurer of its obligations under the policy. (See the many cases affording such a remedy cited in Annot., 50 A.L.R2d 461 (1956)). On the other hand, if the insurer’s position is ultimately shown to be correct, then it should not be penalized by being forced to bear an expense which it did not contractually obligate itself to incur” (Navajo Frgt. Lines v Liberty Mut Ins. Co., 12 Ariz App 424, 431, 471 P2d 309, 316, supra; accord, Williams v Community Drive-In Theatre, supra).

There are some contrary decisions (e.g., Holland Am. Ins. Co. v National Indem. Co., 75 Wn 2d 909, 454 P2d, at p 386, supra). Ironically, however, they offer no support for the majority holding here because they treat the allegations of the complaint in the underlying litigation as controlling, precluding the carrier from resorting to a declaratory judgment action (Holland Am. Ins. Co. v National Indem. Co., 75 Wn 2d 909, 454 P2d, at p 386, supra). In any event, these decisions apparently represent a minority view and their conclusory analysis, ignoring the policy language, is unpersuasive (see, Keithan v Massachusetts Bonding & Ins. Co., 159 Conn 128, 267 A2d 660, supra; Navajo Frgt. Lines v Liberty Mut. Ins. Co., supra; Williams v Community Drive-In Theatre, supra).

In this case, defendant fulfilled its duty to its policyholder when it successfully defended the underlying action on the basis of lack of permission. When the jury determined that plaintiff had operated without such permission, he became a stranger to the contract and defendant owed it no duty to defend or pay for his defense.

Accordingly, I would reverse the order of the Appellate Division and dismiss the complaint.

Chief Judge Wachtler and Judges Meyer, Simons and Alexander concur with Judge Kaye; Judge Titone dissents and votes to reverse in a separate opinion in which Judge Jasen concurs.

Order affirmed, etc.

       For this reason we find incomprehensible the dissent’s observation that it would be unethical for the named insured’s attorney to consider the carrier’s request to seek summary judgment based on lack of consent. To the contrary, an attorney for an insured who did not consider such a motion on his own would not be, in the dissent’s phrase, "worth his salt”. (Dissenting opn, at p 12.)


author: Kaye, J.

text:
    Westpac Banking Corporation, Respondent, v Vincent J. Deschamps et al., Defendants, and Seidman & Seidman, Appellant.
    Decided October 15, 1985
    APPEARANCES OF COUNSEL

      Mathias E. Mone for appellant.

      Michael O. Finkelstein for respondent.
   OPINION OF THE COURT

Kaye, J.

In an action at common law by a lender against accountants for negligence in the preparation of a borrower’s financial statements, where a link between the accountants and the lender is not shown a complaint is properly dismissed (Credit Alliance Corp. v Andersen & Co., 65 NY2d 536), even though the Federal securities laws provide that the accountants may have statutory liability to the public.

This action arises out of the collapse in March 1983 of Turnkey Equipment Leasing, Inc. (TEL) and its wholly owned subsidiary Turnkey Information Processing, Inc. (TIP), companies in the business of selling and leasing data processing and computer software systems. The facts stated below summarize the allegations of the complaint.

From 1979 through December 1982 TIP, TEL and their affiliates (collectively Turnkey) and officers engaged in a fraudulent scheme involving the overstatement of accounts receivable through the issuance of false sales documents and leases. In May 1982, Westpac extended a $2 million line of credit to TEL, on which Turnkey could draw in consideration of granting Westpac security interests in leases, lease payments and leased equipment. Before its collapse, Turnkey drew down $961,000 of the line, virtually all of which turned out to be uncollectible. In 1981 Turnkey, desiring to make a public offering of securities, asked Drexel, Burnham, Lambert & Co. to make an underwriting commitment. Drexel would not make a commitment until Turnkey produced financial statements certified by independent public accountants as required by the Securities Act of 1933. Turnkey retained Seidman "to perform the audit examination to provide the necessary certification, and to provide interim financial statements * * * all for the purpose of raising capital in connection with the public offering.” Seidman performed the audit between June and September 1982 and in a report dated September 17, 1982 certified Turnkey’s financial statements dated March 31, 1981 and 1982.

Following negotiations with Turnkey in August 1982, in September Westpac reviewed the certified financial statements and in reliance thereon agreed to provide a $2 million bridge loan, to be repaid from the proceeds of the proposed public offering, provided that Drexel issued an underwriting commitment. Although Drexel declined to do so, in late October the underwriters Laid-law, Adams & Peck provided a commitment, and on December 1 Westpac loaned Turnkey $2 million in consideration of Turnkey’s unsecured promissory note. When Turnkey’s fraud began to emerge, Seidman withdrew its certification in February 1983 and the proposed public offering was abandoned.

In its third cause of action, Westpac alleges that Seidman was grossly negligent or reckless in the conduct of its audit examination and its report, and in its fourth cause of action, Westpac alleges that Seidman was negligent in its audit examination and its report. Seidman’s duty to Westpac is premised upon the following:

"47. At the time it issued its report, Seidman & Seidman knew that Turnkey would seek a bridge loan from a bank to be repaid out of the public offering and it knew that the certified financial statements would be used by Turnkey in obtaining such a loan.

"48. As a result, Seidman & Seidman had a duty to potential bridge lenders, including Westpac, to use due professional care and skill in performing the audit and in issuing the report.”

Westpac claims that, both as to the third and fourth causes of action, Seidman is liable to it "in an amount exceeding $2,000,000” in compensatory damages and an equal amount in punitive damages.

Special Term denied Seidman’s motion to dismiss the third cause of action, finding sufficient specificity to state a cause of action for fraud. The court, however, granted Seidman’s motion with respect to the fourth cause of action, concluding that the allegations did not satisfy the test of Credit Alliance Corp. v Andersen & Co. (101 AD2d 231) that, in a negligence action against accountants, the class to whom a duty is owed must be limited. Special Term further struck the claim for punitive damages as to both causes of action. On an appeal taken only from that part of the order granting Seidman’s motion to dismiss the fourth cause of action, the Appellate Division reversed, reinstated the claim, and certified to us the question, "Was the order of this Court, which reversed the order of the Supreme Court, properly made?” Subsequently, we reversed the Appellate Division’s order in Credit Alliance Corp. v Andersen & Co. (65 NY2d 536, supra) and dismissed the negligence claim. Our decision in Credit Alliance compels a reversal here.

In Credit Alliance we concluded that certified public accountants may be held liable to noncontractual parties who rely on negligently prepared financial reports only where certain prerequisites are satisfied: (1) the accountants must have been aware that the financial reports were to be used for a particular purpose; (2) in furtherance of which a known party was intended to rely; and (3) there must be some conduct on the part of the accountants linking them to that party, which evinces the accountants’ understanding of that party’s reliance.

Here, the allegations of the complaint against Seidman fail to demonstrate a relationship between the parties sufficiently approaching privity. Although obtaining a bridge loan may be "a particular purpose” for which the financial statements were to be used by Turnkey — a purpose Seidman allegedly knew — the complaint does not allege that Seidman knew that Turnkey was showing the reports to Westpac. Rather, Westpac claims only that it was one of a class of "potential bridge lenders,” to which class as a whole Seidman owed a duty, and that it should be considered a "known party” because it was as of the date of the certification a substantial lender to Turnkey, and "thus a prime candidate for a bridge loan.” This is not, however, the equivalent of knowledge of "the identity of the specific nonprivy party who would be relying upon the audit reports” (Credit Alliance Corp. v Andersen & Co., 65 NY2d, at p 554, supra).

Moreover, there is no allegation that Seidman had any dealings with Westpac, had specifically agreed with Turnkey to prepare the report for Westpac’s use or according to Westpac’s requirement, had agreed with Turnkey to provide Westpac with a copy, or actually did so. Indeed, there is simply no allegation of any word or action on the part of Seidman directed to Westpac, or anything contained in Seidman’s retainer agreement with Turnkey which provided the necessary link between them (see, Credit Alliance Corp. v Andersen & Co., 65 NY2d, at pp 553-554, supra).

Westpac asserts that the purpose of the third requirement of Credit Alliance has been satisfied because, under the Federal securities laws, had a public offering been made Seidman would have been subject to liability to members of the public who purchased Turnkey stock for negligent misstatements or omissions in the certified statements (15 USC § 77k; Herman & MacLean v Huddleston, 459 US 375). Accordingly, Westpac argues, Seidman should be deemed to have accepted the risk that it could be sued by members of the public and, therefore, the risk that it could be sued by potential bridge lenders. In Credit Alliance, we concluded that the resolution of competing policy considerations embodied in Ultramares Corp. v Touche (255 NY 170) remained sound and that under the common law of this State accountants should not have a duty to the public at large. Section 11 of the Securities Act of 1933 (15 USC § 77k), addressed to different policy concerns, was enacted as part " 'of the federal regulatory scheme governing transactions in securities’ ” (Herman & MacLean v Huddleston, 459 US 375, 380, supra, quoting Ernst & Ernst v Hochfelder, 425 US 185, 206) in order "to assure compliance with the disclosure provisions of the Act by imposing a stringent standard of liability on the parties who play a direct role in a registered offering” (Herman & MacLean v Huddleston, 459 US 375, 381-382 [nn omitted], supra). Thus, the fact that Seidman might have been subject to actions under this Federal statute should not affect the scope of its duty at common law.

Accordingly, the order of the Appellate Division should be reversed, with costs, the order of Special Term dismissing the fourth cause of action reinstated, and the certified question answered in the negative.

Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Alexander and Titone concur.

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order reversed, etc.