author: Bellacosa, J.

text:
    [637 NE2d 257, 614 NYS2d 366]
    American Telephone and Telegraph Company, Respondent, v New York State Department of Taxation and Finance, Appellant.
    Argued May 4, 1994;
    decided June 16, 1994

      POINTS OF COUNSEL

      G. Oliver Koppell, Attorney-General, New York City (Frederic L. Lieberman, Jerry Boone and Lillian Z. Cohen of counsel), for appellant.
    I. Tax Law § 186-a (2-a) is constitutional within the meaning of the Commerce Clause. (Brady v State of New York, 80 NY2d 596; Matter of Klein [Hartnett], 78 NY2d 662; Alliance of Am. Insurers v Chu, 77 NY2d 573; McLeod v Dilworth Co., 322 US 327; Westinghouse Elec. Corp. v Tully, 466 US 388; Boston Stock Exch. v State Tax Commn., 429 US 318; Freeman v Hewit, 329 US 249; Goldberg v Sweet, 488 US 252; Complete Auto Tr. v Brady, 430 US 274; Amerada Hess Corp. v New Jersey Taxation Div., 490 US 66.) II. The Court below erred when it struck down all of subdivision (2-a), not just the deduction, and then granted a refund to AT&T based on a postapportionment deduction. (Matter of Westinghouse Elec. Corp. v Tully, 63 NY2d 191.)

      Edwards & Angelí, New York City (Ira G. Greenberg and Regina A. Matejka of counsel), James P. Kratochvill and Anna P. Winsett, of the New Jersey Bar, admitted pro hac vice, for respondent.
    I. The Court below correctly held that section 186-a (2-a) of the Tax Law is unconstitutional in requiring that access fees be deducted prior to apportionment. (Lewis v BT Inv. Mgrs., 447 US 27; Boston Stock Exch. v State Tax Commn., 429 US 318; Dean Milk Co. v Madison, 340 US 349; Bacchus Imports v Dias, 468 US 263; Westinghouse Elec. Corp. v Tully, 466 US 388; Maryland v Louisiana, 451 US 725;
      Northwestern Cement Co. v Minnesota, 358 US 450; American Trucking Assns. v Scheiner, 483 US 266; Hood & Sons v Du Mond, 336 US 525; Philadelphia v New Jersey, 437 US 617.) II. The Court below correctly held that AT&T was entitled to a refund of the additional taxes which it had paid on account of the unconstitutional provision. (People ex rel. Alpha Portland Cement Co. v Knapp, 230 NY 48; Association of Surrogates & Supreme Ct. Reporters v State of New York, 79 NY2d 39; Matter of Westinghouse Elec. Corp. v Tully, 63 NY2d 191; Matter of New York State Superfund Coalition v New York State Dept. of Envtl. Conservation, 75 NY2d 88; Matter of Capital Cities Communications v State Tax Commn., 65 AD2d 25.)
   OPINION OF THE COURT

Bellacosa, J.

Prior to 1990, American Telephone and Telegraph (AT&T) included, as part of its New York taxable income, access fees which represented charges imposed by local telephone carriers at each end of a long-distance intrastate telephone call. AT&T charged its customers for the access fee and then transmitted those receipts directly to the appropriate local exchange carrier (Tax Law § 184 [4]; § 186-a). Long-distance carriers, like AT&T, however, were not given a deduction for these pass-through transactions, and local telephone carriers were not required to report receipt of the access fees as part of their tax base.

In 1990, the Legislature amended Tax Law § 186-a by requiring local telephone carriers to include in their tax base the access service fees, and correspondingly permitted the long-distance carriers to deduct those access fees from their income (Tax Law § 186-a [2], [2-a], as amended by L 1990, ch 190).

AT&T paid taxes to New York State in accordance with the amended provision requiring that AT&T deduct its New York carrier access expense from its total interstate and international receipts prior to apportionment. AT&T subsequently sought a refund of taxes based upon its recalculation of its tax liability applying the deduction for carrier access expenses only to its New York revenues. AT&T’s refund claim was denied and it commenced this action seeking, in part, a declaratory judgment that Tax Law § 186-a (2-a) is unconstitutional. Supreme Court denied AT&T’s motion for summary judgment, but the Appellate Division reversed and granted the motion. On this appeal, taken as of right on constitutional grounds, AT&T contends that the method of calculating the tax deduction under the 1990 amendment offends the Commerce Clause of the United States Constitution (art I, § 8). We agree with the Appellate Division that the State’s method of calculating the deduction violates the United States Constitution Commerce Clause (191 AD2d 61).

Tax Law § 186-a imposes a flat tax on the adjusted gross receipts of all long-distance carriers. Under Tax Law § 184 (4), long-distance carriers that are unable to directly account for their New York revenues are required to apportion to New York a percentage of their entire gross domestic and international income based upon the proportion of the carrier’s property in New York. AT&T is challenging Tax Law § 186-a (2-a), which states that the access fee deduction relating directly to services performed in New York "shall be allowed against interstate and international revenues prior to apportionment to New York” (Tax Law § 186-a [2-a] [emphasis added]). AT&T argues that the preapportionment deduction under Tax Law § 186-a (2-a) discriminates against long-distance carriers engaged in interstate and foreign commerce because a wholly intrastate long-distance carrier may claim an absolute dollar-for-dollar deduction. By contrast, a long-distance carrier like AT&T which engages in interstate commerce may only benefit in proportion to the percentage of their property within the State.

The Commerce Clause, phrased as a grant of regulatory power to Congress, has also been interpreted as effecting a " 'negative’ aspect that denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce” (Oregon Waste Sys. v Department of Envtl. Quality, 511 US —, —, 114 S Ct 1345, 1349, 128 L Ed 2d 13, 20 [Apr. 4, 1994]). This precept is premised on the " 'principle that our economic unit is the Nation, which alone has the gamut of powers necessary to control of the economy’ ” (C & A Carbone v Town of Clarkstown, 511 US —, —, 114 S Ct 1677, 1688, 128 L Ed 2d 399, 414 [May 16, 1994] [O’Connor, J., concurring], citing Hood & Sons v Du Mond, 336 US 525, 537-538). The term " 'discrimination’ simply means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter” (Oregon Waste Sys. v Department of Envtl. Quality, 511 US, at —, 114 S Ct, at 1350, 128 L Ed 2d, at 21, supra). A tax law is unconstitutionally discriminatory if the differential tax treatment of two entities results solely from the situs of their activities and provides a commercial advantage to local business (see, American Trucking Assns. v Scheiner, 483 US 266, 286; Westinghouse Elec. Corp. v Tully, 466 US 388; Northwestern Cement Co. v Minnesota, 358 US 450, 458). Judicial scrutiny focuses on the practical operation of a challenged statute, since the validity of the State laws must be judged chiefly in terms of its actual effect (see, C & A Carbone v Town of Clarkstown, supra; Maryland v Louisiana, 451 US 725, 756; Lewis v BT Inv. Mgrs., 447 US 27, 37; Hughes v Oklahoma, 441 US 322, 336).

In computing the allowable access fee deduction, the statute requires apportionment of access fees only by long-distance carriers which engage in interstate commerce. By requiring the interstate long-distance carrier to calculate the deduction before apportionment, the statute has the practical and real effect of treating differently long-distance carriers similarly situated in all respects except for the percentage of their property located within New York State. While a wholly intrastate long-distance carrier may deduct all of its New York access fees, AT&T is limited to 5.04%, its 1990 apportionment percentage, even though both companies are reporting 100% of their New York taxable income. The access fees are fixed and easily traceable to New York. Consequently, the access fees are already apportioned to the State. Requiring the deduction to be taken before apportionment plainly creates a direct commercial advantage to intrastate long-distance carriers. The State’s computation method diminishes the tax deduction intended as an equal benefit and designed to remedy a pre-1990 gap in actual tax transaction interrelationships.

Moreover, no showing has been made by the State that the discriminating methodology "advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives” (New Energy Co. of Ind. v Limbach, 486 US 269, 278). Where formulary apportionment is required to measure the amount of income to be reported by interstate carriers in New York, which otherwise cannot be traced nor recorded, the New York access fees are quantifiable and easily measured. Thus, the discriminatory calculation method, with its apportionment of the deduction, is not practically necessary as well as being constitutionally offensive.

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

Chief Judge Kaye and Judges Titone, Smith and Ciparick concur; Judges Simons and Levine taking no part.

Order affirmed, with costs.


source: Caselaw Access Project

author: Simons, J.

license: Public Domain

text:
    [637 NE2d 260, 614 NYS2d 369]
    In the Matter of Solomon A. Sutton et al., Appellants, v David S. Sutton, Respondent.
    Argued April 27, 1994;
    decided June 21, 1994

      POINTS OF COUNSEL

      Rosenman & Colin, New York City (Gerald Walpin and Mary B. Fisher of counsel), for appellants.
    The Court below erred when it determined that the resolution striking the unanimity provisions was not validly adopted by a vote of more than two thirds of the voting shares; a two-thirds shareholder vote is sufficient since the certificate of incorporation does not provide specifically for a greater vote to amend or strike out a unanimity provision. (Matter of State of New York [Abrams] v Ford Motor Co., 74 NY2d 495; Sanders v Winship, 57 NY2d 391; Benintendi v Kenton Hotel, 294 NY 112; Matter of Morse [Bank of Am.] 247 NY 290; Moller v Peoples Natl. Bank, 258 NY 373; Gimbel Bros, v Brook Shopping Ctrs., 118 AD2d 532; Zion v Kurtz, 50 NY2d 92, 1060; Adler v Svingos, 80 AD2d 764; Garson v Garson, 105 AD2d 726, affd sub nom. Garson v Rapping, 66 NY2d 928; Dubin v Muchnick, 108 Misc 2d 1042, 87 AD2d 508.)

      Kronish, Lieb, Weiner & Heilman, New York City (Adam Walinsky and Christine Fahey of counsel), for respondent.
    I. The unanimity provisions of the company’s certificate of incorporation may not be amended by a less than unanimous vote of the shareholders. (Dubin v Muchnick, 108 Misc 2d 1042, 87 AD2d 508; Model, Roland & Co. v Industrial Acoustics Co., 16 NY2d 703; Zion v Kurtz, 50 NY2d 92; Adler v Svingos, 80 AD2d 764; Garson v Garson, 105 AD2d 726; Millspaugh v Cassedy, 191 App Div 221.) II. Should there be the slightest doubt that the unanimity provisions are effective, the certificate of incorporation should be reformed to provide specifically that they may be removed only by a unanimous vote of the shareholders. (Zion v Kurtz, 50 NY2d 92; Adler v Svingos, 80 AD2d 764; Telaro v Telaro, 25 NY2d 433; Millspaugh v Cassedy, 191 App Div 221.) III. The attempted removal of the unanimity provisions was prohibited under Business Corporation Law § 803 because the amendment was not first approved by the directors. (Alpert v 28 Williams St. Corp., 63 NY2d 557.)
   OPINION OF THE COURT

Simons, J.

In this CPLR article 78 proceeding, petitioners seek (1) a declaration that an amendment to the certificate of incorporation of Bag Bazaar, Ltd. is valid and (2) to compel respondent David S. Sutton, as a director of the corporation, to sign and deliver a certificate of amendment to petitioners for filing. Respondent has refused to execute the certificate, contending it is not valid because the amendment had the support of only 70% of the shareholders when the certificate of incorporation required unanimous approval. The appeal requires an interpretation of section 616 (b) of the Business Corporation Law which states that supermajority provisions in a certificate of incorporation may be amended by a two-thirds vote unless the certificate "specifically” provides otherwise.

Petitioners contend that notwithstanding the general unanimity provision contained in Bag Bazaar’s certificate, a two-thirds vote to amend is sufficient under this statute unless the certificate explicitly provides unanimous consent is required to amend the supermajority provision. As they see it, prior to a 1962 statutory amendment, which added the word "specifically”, a general requirement of a unanimous vote for any amendment of the certificate — i.e., a provision like the one here — would be read to apply to the supermajority provision. Thus, they reason that the Legislature, by adding the word "specifically” in the 1962 amendment, intended to require an amendment provision explicitly directed at the procedure for changing a supermajority provision. The Appellate Division disagreed and held that the provision in Bag Bazaar’s certificate of incorporation was sufficiently specific and that the amendment was not valid because it lacked unanimous shareholder approval (196 AD2d 411). We now affirm.

In 1963, the certificate of incorporation of Bag Bazaar, Ltd. was amended to provide that "[t]he unanimous vote or consent of the holders of all the issued and outstanding shares of Common Stock of the corporation shall be necessary for the transaction of any business * * * of the corporation, including amendment to the certificate of incorporation”. At that time the business was run by Abraham Sutton and none of the parties to this litigation was a shareholder. In 1971 Abraham’s brother, respondent David S. Sutton, purchased 30 shares. Two years later Abraham’s son, petitioner Solomon A. Sutton, joined the business and subsequently acquired 30 shares. On Abraham’s death, in 1987, his widow, petitioner Yvette Sutton, inherited Abraham’s remaining 40 shares. Thus, petitioners now own 70% of the outstanding shares of the corporation and respondent and his wife own 30 shares. Petitioner Solomon A. Sutton serves as one of the two directors of the company and respondent David S. Sutton as the other.

The corporation was run without incident for nearly 30 years under Abraham’s leadership. After he relinquished control of the company, however, disputes arose between Solomon and David Sutton concerning the management of the corporation. These disputes culminated in an April 1992 shareholders’ meeting, where petitioners voted their 70% of the shares in favor of a resolution to strike the unanimity provision, while respondent’s 30% of the shares voted against the resolution.

Respondent, as a director of the corporation, refused to sign a certificate of amendment reflecting the deletion of the unanimity provision, thereby preventing the amendment from taking effect. Accordingly, petitioners commenced this proceeding and moved for judgment declaring the resolution valid and enforceable and compelling respondent to sign the certificate of amendment. Respondent cross-moved to dismiss the petition, for reformation of the certificate of incorporation and to compel arbitration of the dispute. Supreme Court granted the petition and denied the cross motion. The Appellate Division reversed and denied the petition.

To support their position on this appeal, petitioners contend that the Legislature added the word "specifically” to section 616 (b) because it recognized that a unanimity provision gives minority shareholders the ability to deadlock any and all corporate action. The amendment was intended to minimize deadlocks by permitting a two-thirds majority of the shareholders to alter or delete the unanimity requirement unless the certificate of incorporation explicitly stated otherwise. Respondent maintains that "specifically” was added to the statute to clarify that if more than a two-thirds vote was required to amend a unanimity provision, the certificate should state exactly what greater percentage is needed. They maintain that this certificate satisfied that requirement by declaring that a unanimous vote was required for any amendment.

The history of Business Corporation Law § 616 (b) begins with Benintendi v Kenton Hotel (294 NY 112), where this Court invalidated a unanimity provision adopted by unanimous shareholder vote. We reasoned that such a provision was antithetical to the basic concept of corporate governance by majority rule and contrary to public policy (id., at 118-119). In 1948, the Legislature abrogated Benintendi by enacting section 9 of the Stock Corporation Law, which authorized unanimity provisions when approved by a unanimous vote (see, L 1948, ch 862). The effect of section 9 was to require unanimous shareholder consent to either add or amend a unanimity provision (see, 3 White, New York Corporations [f 616.02, at 6-378 [13th ed]). In 1951, this section was amended to allow adoption or change of a supermajority provision by a two-thirds or greater vote. A unanimous vote was still required, however, where the certificate called for a unanimous vote; where the unanimity provision itself required such a vote; or where the unanimity provision was adopted prior to the effective date of the 1951 amendment (see, L 1951, ch 717).

In 1961, the Business Corporation Law was adopted to replace the Stock Corporation Law, and section 9 was substantially reenacted as Business Corporation Law § 616 (b) and § 709 (b). However, in 1962, prior to the 1963 effective date of the Business Corporation Law, a series of changes were made, including the addition of the word "specifically” in section 616 (b). As finally enacted, section 616 (b) provides that "[a]n amendment of the certificate of incorporation which changes or strikes out a [supermajority] provision * * * shall be authorized at a meeting of shareholders by vote of the holders of two-thirds of all outstanding shares entitled to vote thereon, or of such greater proportion of shares * * * as may be provided specifically in the certificate of incorporation” (emphasis added). According to the Legislative Study Committee the word "specifically” was one of a number of "technical” amendments added to the chapter to clarify existing language and avoid minor inconsistencies. It was not intended to effect a substantive change in the law (Mem of Joint Legis Comm To Study Revision of Corp Laws, Bill Jacket, L 1962, ch 834, at 86).

Thus, nothing in the legislative history or the statute itself suggests the necessity for a discrete paragraph addressed solely to the supermajority provision and explicitly declaring the vote required for its amendment. The history reveals that Stock Corporation Law §9 stated that a provision in the certificate of incorporation requiring unanimous consent could only be amended by unanimous consent and this provision was substantially reenacted in the Business Corporation Law. Inasmuch as the Legislature did not intend the "technical” revisions added before the effective date of the Business Corporation Law to change the existing law substantively, the present statute should be construed as section 9 of the Stock Corporation Law was. Unanimity was required under the prior law to amend a unanimity provision, such as this one, and the addition of the word "specifically” merely provides that a two-thirds majority may now amend a unanimity provision unless the certificate requires a greater percentage.

The provision in Bag Bazaar’s certificate is unambiguous: it requires unanimous shareholder consent for the transaction of "any business * * * including amendment to the certificate of incorporation.” To read section 616 (b) as requiring more to address amendment of the supermajority provision would be unnecessarily restrictive in light of the legislative history. The certificate need only clearly state what vote, if greater than two thirds, is required to amend a unanimity provision. The certificate of Bag Bazaar, Ltd. does so.

The commentaries relied on by petitioners do not support petitioners’ position (see, Hoffman, New Horizons for the Close Corporation in New York Under its New Business Corporation Law, 28 Brooklyn L Rev 1, 5 [New Horizons]; Israels, Corporate Practice § 4.20, at 91-92 [Hoffman 4th ed]; Kessler, A Close Corporation Checklist for Drafting the Certificate of Incorporation under the New York Business Corporation Law, 31 Fordham L Rev 323, 336 [Close Corporation]). They suggest only the obvious: that under prior law unanimity was required to amend a unanimity provision and that under the Business Corporation Law, unanimity is required only when "specifically” called for by the certificate of incorporation (see generally, Hoffman, New Horizons, op. cit., at 5; Kessler, Close Corporation, op. cit., at 336). They do not address the question before us, i.e., what language will fulfill the specificity requirement.

Finally, petitioners note that unless section 616 (b) is read as requiring an explicit certificate provision governing the amendment of unanimity provisions, majority shareholders will be unable to conduct the business of a corporation in the face of opposition from the minority. But as respondent notes, there is nothing inherently unfair or improper about a voluntary organization’s consensual decision to assure protection for minority shareholders, and shareholders are not without remedies where deadlocks do arise (see generally, Business Corporation Law § 1104).

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

Chief Judge Kaye and Judges Titone, Bellacosa, Smith, Levine and Cipakick concur.

Order affirmed, with costs.

       While the 1951 amendments to that section allowed a unanimity provision to be amended by a two-thirds vote in certain instances, petitioners acknowledge that the provision at issue here would have required unanimous shareholder consent to amend, despite the 1951 amendment.


author: Ciparick, J.

text:
    [637 NE2d 263, 614 NYS2d 372]
    Virna Mirand et al., Respondents, v City of New York, Defendant, and Board of Education of the City of New York, Appellant.
    Argued May 5, 1994;
    decided June 21, 1994

      POINTS OF COUNSEL

      Paul A. Crotty, Corporation Counsel of New York City (Michael S. Adler and Stephen J. McGrath of counsel), for appellant.
    I. The Trial Judge correctly declared the verdict to be unsupportable as a matter of law, inasmuch as plaintiffs failed to satisfy essential elements of their burden of proof with respect to each of their negligent supervision theories. (People v Bleakley, 69 NY2d 490; Bernstein v City of New York, 69 NY2d 1020; Blum v Fresh Grown Preserve Corp., 292 NY 241; Harris v Armstrong, 64 NY2d 700; Welch v Mr. Christmas, 57 NY2d 143; Lawes v Board of Educ., 16 NY2d 302; Gattyan v Scarsdale Union Free School Dist. No. 1, 152 AD2d 650; Kenavan v City of New York, 70 NY2d 558; McCormack v City of New York, 80 NY2d 808; Rodriguez v City of New York, 189 AD2d 166.) II. In any event, the verdict is at the very least tainted, since at least one of the negligent supervision theories included without differentiation in the jury interrogatories is legally unsupportable. (Kavanaugh v Nussbaum, 71 NY2d 535; Davis v Caldwell, 54 NY2d 176; Rossignol v Silvernail, 146 AD2d 907; Duffey v Fear, 121 AD2d 928.)

      Alexander J. Wulwick, New York City, and Roura & Melamed for respondents.
    Plaintiffs made out a legally sufficient case for the jury on the issues of negligent supervision and proximate cause. Accordingly, the order of the Court below, reinstating the verdict, should be affirmed. (Alexander v El

      dred, 63 NY2d 460; Cohen v Hallmark Cards, 45 NY2d 493; Logan v City of New York, 148 AD2d 167; Pratt v Robinson, 39 NY2d 554; Hanley v Hombeck, 127 AD2d 905; Lawes v Board of Educ., 16 NY2d 302; Hoose v Drumm, 281 NY 54; Gattyan v Scarsdale Union Free School Dist. No. 1, 152 AD2d 650; Lopez v City of New York, 4 AD2d 48, 4 NY2d 738; Ferrill v Board of Educ., 6 AD2d 690.)
   OPINION OF THE COURT

Ciparick, J.

This appeal requires us to consider the nature and extent of the tort liability of a school district based on the theory of negligent supervision for injuries caused to plaintiffs by the intentional acts of a fellow student.

Defendant Board of Education appeals from an order of the Appellate Division which reversed a judgment of Supreme Court granting defendant’s motion to set aside the jury verdict in plaintiffs’ favor and dismissing the complaint. The Appellate Division reinstated the verdict.

Defendant argues that the trial court properly set aside the jury verdict as a matter of law since there was no valid line of reasoning nor any permissible inferences which could lead rational minds to find for the plaintiffs. We conclude that the jury verdicts were supported by sufficient evidence and the order of the Appellate Division should be affirmed.

I

Plaintiffs Virna and Vivia Mirand, sisters, were students at Harry S. Truman High School in the Bronx at the time of the incident giving rise to this action. According to Virna’s testimony, on September 20, 1982, she was released from her last class at 2:00 p.m. and went to wait for her sister, whose last class ended at 2:40 p.m., at their usual meeting place. On the way there, Virna accidentally bumped into Donna Webster, another student with whom Virna had not had any previous encounters. Although Virna apologized, Webster, believing the contact to be intentional, cursed Virna and attempted to kick her. Virna blocked the kick and caught Webster’s leg. According to Virna, Webster threatened to kill her. At that point a bystander intervened and prevented anything further from occurring.

Virna proceeded to the first floor of the school where by chance she met her sister who was going to her last class. Webster was a student in Vivia’s class and Vivia suggested that Virna report the altercation to the security office. Virna proceeded to the security office, which was located on the first floor near the building entrance, and knocked on the door. She received no response. Virna testified that as she was walking down a first-floor hallway she met a woman she knew to be an art teacher but whose name she could not recall. She told the teacher of the altercation with Webster, that Webster had threatened her, and that there was no one in the security office. Virna was not allowed to testify regarding what the art teacher said in response. Virna conceded at this point that, in an examination before trial made six years earlier, she had not mentioned her meeting with the art teacher.

According to Virna, after her encounter with the art teacher, she returned to the security office, where again she knocked on the door and received no response. She then went to the second floor and left the building through the main entrance to wait for her sister on the building veranda where school security officers were sometimes present. None were present on that day. Vivia eventually arrived about a half-hour later and the two proceeded to descend the staircase when they found their path blocked by Webster and two male companions. Although the sisters tried to avoid her, Webster approached Virna and struck her on the elbow and head with a hammer. When Vivia tried to seize the hammer, she was hit in the back by an unknown girl. One of the males with Webster, a nonstudent, later identified as her brother, stabbed Vivia through the wrist with a knife. No security or police officers were present during the incident. The sisters were taken to a hospital. Virna was treated and released. Vivia’s hand was operated on and placed in a cast. She spent seven days in the hospital. Since then she has undergone further surgery and hospitalization together with physical therapy. She experiences pain in her injured hand and has limited movement and use of it.

At trial, the evidence concerning general security measures at Truman High School disclosed that in the fall of 1982 there were 13 trained school safety officers assigned to the school. They wore uniforms, carried radios, and operated out of the school’s first-floor security office. There was also a first-floor security desk located by the main entrance to which an officer was assigned at all times. The security officers were assigned throughout the building and were expected to cover the building’s exits at dismissal time. According to the school’s security plan, two to five officers were assigned to the second-floor main entrance at dismissal, although they were not required by the plan to be on the second-floor veranda outside. Teachers were also expected to assist in providing security by using their independent judgment with minor matters and seeking the assistance of other personnel with more serious incidents. At trial, the school’s security coordinator could not recall how many fights had occurred at the school during the preceding year nor whether security officers were at their posts at dismissal time on the day in question.

The jury found that defendant Board of Education negligently failed to provide adequate supervision and awarded plaintiff Virna Mirand $50,000 for past pain and suffering, and Vivia Mirand $750,000 for her past and future pain and suffering. Defendant Board moved to set aside the verdict in plaintiffs’ favor and to dismiss the complaint. Supreme Court granted the motion and dismissed plaintiffs’ complaint, concluding that plaintiffs had not established that defendant Board was on notice of a specific danger, and that there was a failure of proof concerning inadequate supervision and proximate cause.

The Appellate Division reversed the judgment of Supreme Court, denied the motion to set aside the verdict in plaintiffs’ favor, and reinstated the verdict. The Appellate Division concluded that in light of the record, the jury "could find that the Board, having recognized the need for and put into effect a security plan, breached its duty to provide plaintiffs with adequate supervision at a time when such supervision was most critical,” and that the school, "through one of its teachers, was made aware of a specific threat against Virna by a known identifiable student and did nothing about it other than to send her back to the security office, which, at the time, was still closed” (Mirand v City of New York, 190 AD2d 282, 289).

II

Where, as here, a jury verdict is set aside on the ground that, as a matter of law, it is not supported by sufficient evidence, and the Appellate Division reverses, the matter is reviewable, the relevant inquiry being whether "there is simply no valid line of reasoning and permissible inferences which could possibly lead rational [people] to the conclusion reached by the jury on the basis of the evidence presented at trial” (Cohen v Hallmark Cards, 45 NY2d 493, 499).

Ill

Schools are under a duty to adequately supervise the students in their charge and they will be held liable for foreseeable injuries proximately related to the absence of adequate supervision (see, e.g., Lawes v Board of Educ., 16 NY2d 302, 306; Decker v Dundee Cent. School Dist., 4 NY2d 462, 464). Schools are not insurers of safety, however, for they cannot reasonably be expected to continuously supervise and control all movements and activities of students; therefore, schools are not to be held liable "for every thoughtless or careless act by which one pupil may injure another” (Lawes, 16 NY2d, at 306, supra; Ohman v Board of Educ., 300 NY 306, 309). The nature of the duty owed was set forth in the seminal case of Hoose v Drumm (281 NY 54, 57-58): "[A] teacher owes it to his [or her] charges to exercise such care of them as a parent of ordinary prudence would observe in comparable circumstances.” The duty owed derives from the simple fact that a school, in assuming physical custody and control over its students, effectively takes the place of parents and guardians (see, Pratt v Robinson, 39 NY2d 554, 560).

In determining whether the duty to provide adequate supervision has been breached in the context of injuries caused by the acts of fellow students, it must be established that school authorities had sufficiently specific knowledge or notice of the dangerous conduct which caused injury; that is, that the third-party acts could reasonably have been anticipated (see, e.g., Bertola v Board of Educ., 1 AD2d 973). Actual or constructive notice to the school of prior similar conduct is generally required because, obviously, school personnel cannot reasonably be expected to guard against all of the sudden, spontaneous acts that take place among students daily; an injury caused by the impulsive, unanticipated act of a fellow student ordinarily will not give rise to a finding of negligence absent proof of prior conduct that would have put a reasonable person on notice to protect against the injury-causing act (see, Ohman v Board of Educ., 300 NY 306, 310, supra; Wilber v City of Binghamton, 271 App Div 402, 406, affd 296 NY 950).

Even if a breach of the duty of supervision is established, the inquiry is not ended; the question arises whether such negligence was the proximate cause of the injuries sustained. In some cases, the wrongful conduct of a fellow pupil may be considered extraordinary and intervening, thus breaking the causal nexus between a defendant’s negligent act or omission and a plaintiff’s injury. The test to be applied is whether under all the circumstances the chain of events that followed the negligent act or omission was a normal or foreseeable consequence of the situation created by the school’s negligence (see, e.g., Derdiarian v Felix Contr. Corp., 51 NY2d 308, 315; Parvi v City of Kingston, 41 NY2d 553, 560; Dunn v State of New York, 29 NY2d 313, 318).

IV

We agree with the Appellate Division that there was sufficient evidence as a matter of law to establish liability for negligent supervision in this case. Considering the evidence in the light most favorable to plaintiffs, the verdict should stand. Based on Vima’s testimony, which the jury was entitled to credit, it was not unreasonable for the jury to infer that defendant Board was on notice of an imminent foreseeable danger to Virna. The violent acts which caused plaintiffs’ injuries were sparked by a prior altercation and death threat of which defendant, through one of its teachers, was expressly made aware; yet no action was taken to prevent escalation of the incident by the teacher who met Virna and was in a position to assist her. Indeed, no security personnel were even present in the main security office or at key locations throughout the school when Virna sought to report the run-in and Webster’s threat.

It was not irrational for the jury to conclude on such evidence that defendant Board was on notice of an imminent danger to Virna and did nothing reasonably calculated to protect her from that danger (see, Lawes, 16 NY2d, at 305; see also, Cohen, 45 NY2d, at 499, supra). Nor can it necessarily be said that this case involved the type of unforeseeable, spontaneous acts of violence for which school districts cannot be held liable (see, e.g., Lawes, 16 NY2d, at 306, supra; Ohman, 300 NY, at 309, supra).

Supervision of students is obviously needed at dismissal time, when the largest number of students congregate and fights are most likely to occur. Indeed, this is reflected in the high school’s security plan, which called for two to five security officers to be positioned at the second-floor main entrance at dismissal. The uncontradicted testimony revealed that no security officers were present at the second-floor main entrance at the time plaintiffs were assaulted. We stress, however, that defendant’s failure to comply with the requirements of its security plan was not the only factor establishing negligence (see, Lawes, 16 NY2d, at 306, supra; Maurer v Board of Educ., 294 NY 672; see also, Sherman v Robinson, 80 NY2d 483, 489). The jury needed little more than its own common experience to conclude that security or supervisory personnel should have been present at dismissal.

On the issue of proximate cause, we conclude that a rational jury could find that the complete absence of security or supervisory personnel at a time and place when vigilance was absolutely essential constituted the proximate cause of plaintiffs’ injuries. Proximate cause is a question of fact for the jury where varying inferences are possible (see, O’Neill v City of Port Jervis, 253 NY 423, 433). Proper supervision depends largely on the circumstances surrounding the event (see, Oh-man, 300 NY, at 309, supra).

In sum, we hold only that it was not irrational for the jury to find as it did on the basis of the evidence presented in this case (see, Cohen, 45 NY2d, at 499, supra).

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

Chief Judge Kaye and Judges Simons, Titone, Bellacosa, Smith and Levine concur.

Order affirmed, with costs.

       On the other hand, an Appellate Division reversal of a trial court’s determination that a jury verdict should be set aside as contrary to the weight of the evidence under CPLR 4404 (a) "is a factual determination and, as such, beyond [the Court’s] review power” (Sage v Fairchild-Swearingen Corp., 70 NY2d 579, 588).


author: Smith, J.

text:
    [637 NE2d 268, 614 NYS2d 377]
    Brian M. Freeman, Appellant, v Moira Johnston, Respondent, et al., Defendant.
    Argued June 7, 1994;
    decided June 30, 1994

      POINTS OF COUNSEL

      Morrison Cohen Singer & Weinstein, New York City (Jonathan W. Lubell and Arlene R. Smoler of counsel), for appellant.
    I. The defamatory statement was published with actual malice. (New York Times Co. v Sullivan, 376 US 254; Harte-Hanks Communications v Connaughton, 491 US 657; Prozeralik v Capital Cities Communications, 82 NY2d 466; Masson v New Yorker Mag., 960 F2d 896; Perk v Reader’s Digest Assn., 931 F2d 408; Peoples Bank & Trust Co. v Globe Intl. Publ., 978 F2d 1065; Sharon v Time, Inc., 599 F Supp 538; Alioto v Cowles Communications, 519 F2d 777; Fitzgerald v Penthouse Intl., 691 F2d 666; Mahoney v Adirondack Publ. Co., 71 NY2d

      31.) II. The challenged statement is clearly and reasonably susceptible of a defamatory meaning. (Rinaldi v Holt, Rinehart & Winston, 42 NY2d 369, 434 US 969; Nichols v Item Publs., 309 NY 596; Ruder & Finn v Seaboard Sur. Co., 52 NY2d 663; November v Time Inc., 13 NY2d 175; Hahn v Andrello, 44 AD2d 501, 36 NY2d 907; Bardey v Brooke-Hitching, 167 AD2d 141; Rudin v Dow Jones & Co., 510 F Supp 210; James v Gannett Co., 40 NY2d 415; Mencher v Chesley, 297 NY 94; Mahoney v Adirondack Publ. Co., 71 NY2d 31; Silsdorf v Levine, 59 NY2d 8, 464 US 831.)

      Squadron, Ellenoff, Plesent, Sheinfeld & Sorkin, New York City (Slade R. Metcalf and Mark H. Jackson of counsel), for respondent.
    The Court below properly dismissed appellant’s libel claim because there is no evidence of constitutional malice. (New York Times Co. v Sullivan, 376 US 254; Curtis Publ. Co. v Butts, 388 US 130, 389 US 889; Harte-Hanks Communications v Connaughton, 491 US 657; Bose Corp. v Consumers Union of U. S., 466 US 485, 467 US 1267; Mahoney v Adirondack Publ. Co., 71 NY2d 31; Gertz v Robert Welch, Inc., 418 US 323; Dally v Orange County Publs., 117 AD2d 577; Ferraro v Finger Lakes Racing Assn., 182 AD2d 1072; St. Amant v Thompson, 390 US 727.)
   OPINION OF THE COURT

Smith, J.

In this action for defamation, the question is whether summary judgment was correctly granted to defendant dismissing the complaint. We agree with the Appellate Division that the evidence was insufficient to allow a rational fact finder to find actual malice by clear and convincing evidence.

This controversy arises from the publication of defendant Moira Johnston’s book, "Takeover — The New Wall Street Warriors: The Men, The Money, The Impact,” chronicling recent contests in the world of corporate takeovers. Plaintiff Brian Freeman, who brought this action for defamation, was a financial advisor to the International Association of Machinists (IAM), one of two unions which took part in negotiations over the future of Trans World Airlines (TWA). The negotiatians involved a battle between Carl Icahn and Frank Lorenzo for control of TWA. In characterizing a critical meeting of the TWA Board of Directors held on August 20, 1985, involving the Icahn-Lorenzo struggle, defendant, in her book, made the following statement concerning plaintiff:

"Brian Freeman, the lawyer who represented the machinists, compounded the threats of strike, warning that being sold into bondage to Lorenzo would provoke night time trashing of airplanes and other sabotage.”

Although plaintiff was admittedly present at that meeting, he denied having made the statement, claiming that it was false and defamatory and conveyed that he "threatened, condoned and encouraged the likely commission of acts of physical sabotage and other illegal actions” by his clients.

Also present at the August 20 meeting were Harry Hoglander, an airline pilot, veteran TWA employee and then Chairman of the Master Executive Council of the Airline Pilots Association, and James Freund, Esq., of Skadden, Arps, Slate, Meagher & Flom, who acted as counsel to the TWA board. Hoglander, who was interviewed by Johnston, recalled that the statement accurately portrayed plaintiff’s sentiment at the meeting. Plaintiff asserts, however, that Freund’s memory of Freeman’s statement contradicted that of Hoglander, thus giving rise to an inference Johnston should have drawn that her information needed further verification.

At Supreme Court, defendant moved for summary judgment, alleging that plaintiff failed to make a prima facie showing of defamation. Supreme Court denied the motion insofar as it was addressed to the defamation cause of action, holding that the statement at issue could not be reconciled with witness Freund’s version that what Freeman said was "no big deal.” Thus, that court found summary judgment as to the defamation cause of action inappropriate.

The Appellate Division granted summary judgment dismissing the defamation claim, with one dissent, noting that the statement attributed to Freeman "is a privileged description of the attitudes of the union membership he represented, and not a blanket endorsement of illegal activity by a lawyer, as plaintiff urges” (192 AD2d 250, 252). The Appellate Division granted plaintiff’s motion for leave to appeal to this Court. We now affirm.

Here, plaintiff claims that the statement in question was published with actual malice and that it is reasonably susceptible to a defamatory meaning. Defendant counters that the Appellate Division properly dismissed plaintiff’s claim because no evidence of constitutional malice exists.

A public official may not recover damages for defamation unless the official proves that the offending false statement was made with " 'actual malice’ — that is, with knowledge that it was false or with reckless disregard of whether it was false or not” (see, New York Times Co. v Sullivan, 376 US 254, 279-280; Prozeralik v Capital Cities Communications, 82 NY2d 466, 474). In Curtis Publ. Co. v Butts (388 US 130, 155, reh denied 389 US 889), the United States Supreme Court extended this standard to all "public figures” and it has since been consistently applied to such (see, Harte-Hanks Communications v Connaughton, 491 US 657, 666; Mahoney v Adirondack Publ. Co., 71 NY2d 31, 39).

In a defamation action, plaintiff has the burden of showing actual malice (see, Mahoney v Adirondack Publ. Co., 71 NY2d 31, 39, supra) including " 'the burden of showing the falsity of factual assertions’ ” (see, Prozeralik v Capital Cities Communications, 82 NY2d, at 473, supra, citing Immuno AG. v Moor-Jankowski, 77 NY2d 235, 245, cert denied 500 US 954). On appeal in these cases, courts have a "constitutional duty to 'exercise independent judgment and determine whether the record establishes actual malice with convincing clarity’ ” (Harte-Hanks Communications v Connaughton, 491 US, at 659, supra, citing Bose Corp. v Consumers Union of U. S., 466 US 485, 514; Prozeralik v Capital Cities Communications, 82 NY2d 466, 474, supra; Mahoney v Adirondack Publ. Co., 71 NY2d 31, 39, supra). The exercise of such "independent judgment” applies to this Court notwithstanding the constraints upon our factual review powers (see, Prozeralik v Capital Cities Communications, 82 NY2d, at 475, supra; see also, Mahoney v Adirondack Publ. Co., 71 NY2d, at 39, supra). "Convincing clarity” is synonymous with the "clear and convincing” standard (see, Anderson v Liberty Lobby, 477 US 242, 254; Bose Corp. v Consumers Union of U S., 466 US 485, 511, n 30, supra).

This standard of "convincing clarity” applies even on a motion for summary judgment (Anderson v Liberty Lobby, 477 US, at 254, supra). Moreover, "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party * * *. If the evidence is merely colorable * * * or is not significantly probative * * *, summary judgment may be granted” (id., at 249-250 [citations omitted]).

Plaintiff claims that the statement at issue was published with actual malice, that is, with knowledge that it was false or with reckless disregard of whether it was false. Plaintiff argues that here, as in Harte-Hanks, defendant (1) received conflicting information, (2) was advised of a witness who could confirm the probable falsity of the accuser’s charges, and (3) failed to make any effort to interview that witness. The alleged conflict, according to plaintiff, is between Hoglander’s account of plaintiff’s statement and Freund’s recollection of it. Hoglander, in an interview with defendant, remarked that during the meeting, plaintiff discussed the TWA machinists’ animosity toward Lorenzo, that they were emotionally charged, and stated that "the [machinists] would probably trash the airpl[anes] on their overnight layovers.” The statement by Freund that plaintiff considers in conflict with Hog-lander’s view is the following:

"Interviewer: 'Did Brian Freeman take a position about what the machinists might. . .’
"Freund: 'Yea, yea but Brian was more cautious I think as a lawyer, I think he’s a lawyer, maybe he’s not, an investment banker but I think he is a little more cautious. I can’t remember exactly what Brian said. But it was no big deal.’ ”

We reject plaintiff’s contention. Plaintiff’s analysis is flawed because no clear and convincing evidence exists indicating that Hoglander’s view of plaintiff’s statement at the meeting was contradicted by Freund’s statement, the latter statement appearing equivocal at best (see, Mahoney v Adirondack Publ. Co., 71 NY2d 31, 40, supra). Perhaps most telling is Freund’s admission that he could not "remember exactly what [plaintiff] said.” Moreover, Freund’s opinion that it was "no big deal” may refer to any number of considerations: that Hoglander expressed the same sentiment as plaintiff and therefore had lessened the impact of plaintiffs statement; that Freund was genuinely unimpressed by plaintiff; or that plaintiff’s words, in Freund’s view, did not sway the Board in either direction. Given these different possible interpretations, no rational finder of fact could, in this case, find actual malice by clear and convincing evidence. The following statement from the Supreme Court’s decision in Anderson v Liberty Lobby (477 US 242, 254, supra) is applicable here:

"Just as the 'convincing clarity’ requirement is relevant in ruling on a motion for directed verdict, it is relevant in ruling on a motion for summary judgment. When determining if a genuine factual issue as to actual malice exists in a libel suit brought by a public figure, a trial judge must bear in mind the actual quantum and quality of proof necessary to support liability under New York Times. For example, there is no genuine issue if the evidence presented in the opposing affidavits is of insufficient caliber or quantity to allow a rational finder of fact to find actual malice by clear and convincing evidence.”

There is also no showing that defendant wrote the statement with "reckless disregard for [the] truth” (see, St. Amant v Thompson, 390 US 727, 731; New York Times Co. v Sullivan, 376 US, at 279-280, supra). Any such finding must be supported by "sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his publication” (St. Amant v Thompson, 390 US, at 731). Plaintiff has failed to set forth such evidence here. Neither plaintiffs alleged "conflict” between Hoglander’s recollection of plaintiffs August 20 sentiments and Freund’s view of his statements nor any other evidence before us can be assessed to give rise to such concerns by defendant. Defendant was thus not required to interview either the alleged maker of the statement or all of the persons allegedly present at the meeting (see, Harte-Hanks Communications v Connaughton, 491 US 657, 692, supra [failure to investigate, alone, will not support a finding of actual malice]).

Thus, on the evidence considered in this action, plaintiff has failed to show evidence of defendant’s "actual malice with convincing clarity” (Anderson v Liberty Lobby, All US 242, 252, supra). Plaintiff demonstrated neither falsity (see, New York Times Co. v Sullivan, 376 US 254, 279-280, supra) nor a reckless disregard for the truth (id.).

Finally, we agree with the Appellate Division that the statement, in the context in which it was allegedly made, is not susceptible to the defamatory meaning that plaintiff supported illegal acts of sabotage if the negotiation was not concluded as he wished.

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

Chief Judge Kaye and Judges Simons, Titone, Bellacosa, Levine and Ciparick concur.

Order affirmed, with costs.

      . Although plaintiff Brian M. Freeman & Co. Inc. and defendant the Hearst Corporation doing business as Arbor House Publishing Co., Inc. were included as parties at Supreme Court, this appeal involves only plaintiff Brian Freeman and defendant Moira Johnston.

        . The Airline Pilots Association was the other.

      . Supreme Court granted summary judgment dismissing the third cause of action, which alleged a false light invasion of privacy claim, and the Appellate Division affirmed as to that cause of action. Plaintiff does not here claim error with respect to that dismissal.

      . Plaintiff does not dispute that, for present purposes, he is a public figure.


text:
    [638 NE2d 62, 614 NYS2d 714]
    Eric Rohring, Respondent-Appellant, et al., Plaintiff, v City of Niagara Falls, Defendant and Third-Party Plaintiff-Appellant-Respondent. Falls Steel Erectors, Inc., Third-Party Defendant-Appellant-Respondent.
    Argued May 5, 1994;
    decided June 30, 1994

      POINTS OF COUNSEL

      Herzfeld & Rubin, P. C., New York City (Herbert Rubin, David B. Hamm and Miriam Skolnik of counsel), Raymond C. Green and Lustig & Brown, Buffalo (John A. Ziegler of counsel), for third-party defendant-appellant-respondent and defendant and third-party plaintiff-appellant-respondent.
    I. The denial of defendant’s request that an interrogatory on mitigation of damages be included on the verdict sheet mandates a new trial. It is impossible to determine whether the jury’s assessment of damages was in accord with applicable legal principles and supported by the evidence. (Wilmot v State of New York, 32 NY2d 164; Florsz v Ogruk, 184 AD2d 546; McLaurin v Ryder Truck Rental, 123 AD2d 671; Bell v Shopwell, Inc., 119 AD2d 715; Fafard v Ajamian, 60 AD2d 853; Blate v Third Ave. R. R. Co., 44 App Div 163; Bordanaro v Burstiner, 2 Misc 2d 176; Den Norske Ameriekalinje Actiesselskabet v Sun Print. & Publ. Assn., 226 NY 1; Booth v Penney Co., 169 AD2d 663; Kosiorek v Bethlehem Steel Corp., 145 AD2d 935.) II. The misconduct by plaintiffs’ counsel, which permeated the entire trial, deprived defendant of a fair trial and mandates reversal. (Caraballo v City of New York, 86 AD2d 580; Diaz v Williams, 22 AD2d 873; Kohlmann v City of

      New York, 8 AD2d 598; Williams v Brooklyn El. R. R. Co., 126 NY 96; Weinberger v City of New York, 97 AD2d 819; Mercurio v Dunlop, Ltd,., 77 AD2d 647; Poole v Consolidated Rail Corp., 80 NY2d 184; Hannon v Dunkirk Motor Inn, 167 AD2d 834; Reome v Cortland Mem. Hosp., 152 AD2d 773.) III. The judgment entered by the trial court pursuant to CPLR article 50-B was erroneous in that it allowed plaintiff a double recovery for inflation. (Brown v State of New York, 184 AD2d 126, 81 NY2d 711; Hudson v Manhattan & Bronx Surface Tr. Operating Auth., 150 Misc 2d 283, 188 AD2d 355.) IV. The amount awarded for prejudgment interest was incorrectly determined. (Love v State of New York, 78 NY2d 540; Milbrandt v Green Refractories Co., 79 NY2d 26; Hudson v Manhattan & Bronx Surface Tr. Operating Auth., 188 AD2d 355; Billsborrow v Dow Chem., 177 AD2d 7.)

      Paul William Beltz, P. C,

    Buffalo (Robert B. Nichols, William A. Quinlan and Anne B. Rimmler of counsel), for Eric Rohring, respondent-appellant. I. Defendant’s trial counsel failed to preserve for review in this Court the claimed errors that the trial court permitted plaintiff’s economist to testify to inflation during the trial and ordered that the periodic payments of the CPLR article 50-B judgment be increased by 4% per year. (Merrill v Albany Med. Ctr. Hosp., 71 NY2d 990.) II. The structured payments were properly increased by 4% pursuant to CPLR 5041 (e). (Brown v State of New York, 184 AD2d 126; Gambardelli v Allstate Overhead Garage Doors, 150 Misc 2d 395; Johnson v Manhattan & Bronx Surface Tr. Operating Auth., 71 NY2d 198; Peterson v Zuercher, 152 Misc 2d 684; Monessen Southwestern Ry. Co. v Morgan, 486 US 330.) III. The trial court had properly deducted the attorneys’ fee from the full amount of plaintiff’s damages, as required by CPLR 5041 (e). (Frey v Smith & Sons, 751 F Supp 1052; Lieberman v Perez-Veridiano, 142 Misc 2d 223; Brown v State of New York, 184 AD2d 126.) IV. Interest was properly awarded pursuant to CPLR 5002 from the date of adjudication of liability. (Ricca v Board of Educ., 91 AD2d 993; Love v State of New York, 78 NY2d 540; Milbrandt v Green Refractories Co., 79 NY2d 26; Welsh v Peerless Cas. Co., 8 AD2d 373, 8 NY2d 745; In re Brooklyn Navy Yard Asbestos Litig., 971 F2d 831; In re Joint E. & S. Dist. Asbestos Litig., 798 F Supp 940, 995 F2d 343; Ursini v Sussman, 143 Misc 2d 727; Matter of Consolidated Edison Co. v Department of Envtl. Conservation, 71 NY2d 186.) V. There was no reversible error concerning the mitigation issue. (Rastelli v Goodyear Tire & Rubber Co., 79 NY2d 289; Flagg v Nichols, 307 NY 96; Jenkins v Etlinger, 55 NY2d 35; Cornell v T. V. Dev. Corp., 17 NY2d 69; People’s Gas & Elec. Co. v State of New York, 189 App Div 421, 231 NY 520; McClelland v Climax Hosiery Mills, 252 NY 347; Bell v Shopwell, Inc., 119 AD2d 715; McLaurin v Ryder Truck Rental, 123 AD2d 671; Pindar v Jenkins, 128 App Div 711, 199 NY 588.) VI. The asking of leading questions and other alleged misconduct does not constitute reversible error. (Straub v Reading Co., 220 F2d 177; People v Ortiz, 54 NY2d 288; Evans v Newark-Wayne Community Hosp., 35 AD2d 1071; Nicastro v Park, 113 AD2d 129; Caraballo v City of New York, 86 AD2d 580; Moore v Town of Huntington, 39 AD2d 764; Diaz v Williams, 22 AD2d 873; Kohlmann v City of New York, 8 AD2d 598; Weinberger v City of New York, 97 AD2d 819.) VII. The jury’s verdict was supported by the evidence. (Clark v State of New York, 68 NY2d 632; Matter of Taines [Barry One Hour Photo Process], 66 NY2d 757; Tate v Colabello, 58 NY2d 84; Grayson v Irvmar Realty Corp., 7 AD2d 436; Kirschhoffer v Van Dyke, 173 AD2d 7; Dennis v Dachs, 85 AD2d 223; Kavanaugh v Nussbaum, 129 AD2d 559.)

      Kenneth Mauro, Great Neck, for American Insurance Association and others, amici curiae.

    I. It has very clearly been the legislative intent to reduce costs to defendants and to insurance carriers and, thereby, to reduce medical malpractice premiums as well as costs of health care. II. The statute incorporates an annual 4% increase in the payments to plaintiff. This 4% annual increase is a cost of living or inflation factor that is a statutory part of the calculations made by the court in structuring plaintiff’s annuity. (Matter of Long v Adirondack Park Agency, 76 NY2d 416; Peterson v Zuercher, 152 Misc 2d 684; Brown v State of New York, 184 AD2d 126; Sales v Republic of Uganda, 828 F Supp 1032; Gambardelli v Allstate Overhead Garage Doors, 150 Misc 2d 395.) III. Interest should not be calculated on the portion of the damage award to be paid to plaintiff in the future. (Milbrandt v Green Refractories Co., 79 NY2d 26; Woodling v Garrett Corp., 813 F2d 543; Ursini v Sussman, 143 Misc 2d 727; Frey v Smith & Sons, 751 F Supp 1052; Love v State of New York, 78 NY2d 540; Gunnarson v State of New York, 70 NY2d 923; Trimboli v Scarpaci Funeral Home, 37 AD2d 386.)

      G. Oliver Koppell, Attorney-General, Albany (Jerry Boone, Peter H. Schiff and Michael S. Buskus of counsel), for State of New York, amicus curiae.

    I. The Legislature, in enacting CPLR articles 50-A and 50-B, intended that the 4% factor added to future damages would constitute the exclusive "adjustment” for inflation, so that the finder of fact may not increase the verdict for future damages by any amount for inflation. (Brown v State of New York, 184 AD2d 126, 81 NY2d 711; Matter of Marchant v Meed-Morrison Mfg. Co., 252 NY 284; Peterson v Zuercher, 152 Misc 2d 684; Gambardelli v Allstate Overhead Garage Doors, 150 Misc 2d 395; Zaninovich v American Airlines, 26 AD2d 155; Milbrandt v Green Refractories Co., 79 NY2d 26; Hollwedel v Duffy-Mott Co., 263 NY 95; Johnson v Manhattan & Bronx Surface Tr. Operating Auth., 71 NY2d 198; Doca v Marina Mercante Nicaranguense, 634 F2d 30, cert denied sub nom. Pittston Stevedoring Corp. v Doca, 451 US 971; Caprara v Chrysler Corp., 52 NY2d 114.) II. The "future damages” component of an award is not money already owed to plaintiff until the date of assessment of damages when the "present value” of such "future damages” is ascertained. Then and only then does a defendant incur an obligation for interest on "future damages”. (Love v State of New York, 78 NY2d 540; Trimboli v Scarpaci Funeral Home, 37 AD2d 386, 30 NY2d 687; Milbrandt v Green Refractories Co., 79 NY2d 26; Gunnarson v State of New York, 70 NY2d 923; Matter of Staber v Fidler, 65 NY2d 529; Woodling v Garrett Corp., 813 F2d 543; McCrann v United States Lines, 803 F2d 771; In re Brooklyn Navy Yard Asbestos Litig., 971 F2d 831; In re Joint E. & S. Asbestos Litig., 798 F Supp 940, 995 F2d 343.)
    64

      Schneider, Kleinick & Weitz, P. C, New York City (Brian J. Shoot of counsel), and Stephan Peskin for New York State Trial Lawyers Association, amicus curiae.

    I. CPLR article 50-B does not in any way purport to preclude the trier of facts’ consideration of prospective increases in wages or medical expenses, and, for that and other reasons, should not be construed to preclude preverdict consideration of such factors. (Ursini v Sussman, 143 Misc 2d 727; Caprara v Chrysler Corp., 52 NY2d 114; Spadaccini v Dolan, 63 AD2d 110; Neddo v State of New York, 194 Misc 379, 275 App Div 492, 300 NY 533; Lucivero v Long Is. R. R. Co., 22 Misc 2d 674; Vasina v Grumman Corp., 492 F Supp 943, 644 F2d 112; Johnson v Manhattan & Bronx Surface Tr. Operating Auth., 71 NY2d 198; Jones & Laughlin Steel Corp. v Pfeifer, 462 US 523; Jacobs v Peress, 24 AD2d 746; Paley v Brust, 21 AD2d 758.) II. Postverdict interest as to the periodically paid damages should be assessed upon the present value of the future payments. (Love v State of New York, 78 NY2d 540; Milbrandt v Green Refractories Co., 79 NY2d 26; Caprara v Chrysler Corp., 52 NY2d 114; Matter of Connecticut Natl. Bank, 928 F2d 39; Jones & Laughlin Steel Corp. v Pfeifer, 462 US 523.) III. The new damages rules which defendant and the amici seek, apart from being unfair in their own right, are not logically consistent with various existent rules which they seek to retain. IV. Even if defendant’s proposed amendments were economically sound, even if they were arguably fair, amendment should nonetheless be left to the Legislature.
   OPINION OF THE COURT

Simons, J.

Plaintiff Eric Rohring suffered a serious foot injury while working on a construction site when his safety belt broke and he fell 20 feet to a concrete pavement. At the time, he was employed by third-party defendant Falls Steel Erectors, Inc. on a project for the defendant and third-party plaintiff, City of Niagara Falls. Rohring was granted summary judgment on the issue of liability and subsequently a trial was conducted which resulted in an award of $2,501,311 for past and future damages. Thereafter, the trial court structured the award pursuant to CPLR article 50-B.

These cross appeals present two issues concerning the calculation of plaintiff’s judgment. First, we are asked to review that part of the award for attorney’s fees based on future damages. Second, the parties dispute the methodology employed by the courts below in calculating interest on future damages pursuant to CPLR 5002. For the reasons which follow, we agree with the computations of the Appellate Division and therefore affirm.

I.

CPLR article 50-B was enacted in 1986 as part of the State’s effort at tort reform (see, L 1986, ch 682, § 9). In its essential features it closely parallels CPLR article 50-A, which had been enacted a year earlier in response to concerns about the increasing size of verdicts in medical and dental malpractice

actions (see generally, Siegel, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR art 50-A, at 711, and CPLR art 50-B, at 730-731). Though the statutory scheme of article 50-B is technical and complicated, its basic operation is easily stated. Past damages are paid in a lump sum (CPLR 5041 [b]). Future damages, which are awarded by the jury without reduction to present value (CPLR 4111 [f]), are bifurcated for purposes of article 50-B. The first $250,000 is paid as a lump sum (CPLR 5041 [b]). The remainder, after the subtraction of attorney’s fees and other adjustments, is to be paid in periodic installments (CPLR 5041 [e]). To provide for these periodic payments, subdivision (e) further specifies that defendants are to purchase an annuity contract.

Addressing first the payment of attorney’s fees based on the future damages award, CPLR 5041 (c) states that such attorney’s fees are payable in a lump sum "based on the present value of the annuity contract” called for in subdivision (e). Subdivision (e), in turn, says: "After making any adjustment [including that for attorney’s fees], the court shall enter a judgment for the amount of the present value of an annuity contract that will provide for the payment of the remaining amounts of future damages”. The subdivision states further that this calculation is to be done by applying the discount rate to "the full amount of the remaining future damages, as calculated pursuant to this subdivision”. Concededly, the two provisions, when read together, leave in doubt whether the attorney’s fees are to be deducted before or after the reduction to present value.

Based on its interpretation of the statutory scheme, Supreme Court determined the present value of the attorney’s fees and then subtracted that amount from the gross (undiscounted) value of subdivision (e) future damages before structuring the remaining amount into periodic payments. The Appellate Division disagreed and held that the present value of the attorney’s fees should have been subtracted from the present value of future damages (192 AD2d 228, 232). The Court reasoned that Supreme Court’s methodology improperly inflated the value of the periodic payments that plaintiff would receive.

We agree with the Appellate Division’s conclusion. All parties acknowledge that the present value of attorney’s fees is the appropriate amount to use in the calculation. The sole question is whether that amount should be subtracted from the present value of subdivision (e) future damages or the gross value of those damages. The problem is that article 50-B, like article 50-A, fails to make clear the sequence of calculations to be followed by a trial court in applying subdivision (c) and subdivision (e) (see, Argentine, From Verdict to Judgment: The Evolution, Confusion and Reformation of CPLR Articles 50-A and 50-B, 40 Buff L Rev 917, 939; see also, Frey v Smith & Sons, 751 F Supp 1052, 1056-1057; Ursini v Sussman, 143 Misc 2d 727, 731). Read literally, the two provisions are in fact circular: To determine the amount of attorney’s fees, a court must first know the amount of future damages to be structured (subd [c]), but to determine the amount of future damages to be structured, the court must first know the amount of attorney’s fees (subd [e]). Thus, this appeal requires us to decide whether the amount to be structured is reduced to the present value and then reduced by the present value of attorney’s fees, or whether the present value of attorney’s fees is to be determined and then subtracted from the gross amount, with the remainder to be structured as required by subdivision (e).

Because the statute is patently ambiguous and is impossible to apply as written, we turn for guidance to the underlying intent of the statutory scheme. Articles 50-A and 50-B are technical administrative schemes intended to regulate and structure payment, and they should not be construed in such a way as to increase the underlying liability owed by defendants. Plaintiffs are entitled to be made whole, as determined by the trier of fact, but have no right to overcompensation. The method selected by the Appellate Division is consistent with those principles. Under the Appellate Division’s approach, the full amount defendants have to pay — that is, the combined sum owed to plaintiff and plaintiff’s legal counsel— is the amount awarded by the jury (absent other adjustments required by the statutory scheme and not relevant here). Under Supreme Court’s approach, on the other hand, defendants’ combined payment to plaintiff and to plaintiff’s counsel would actually exceed the amount awarded by the jury. That result is inconsistent with the purposes of articles 50-A and 50-B. Thus, we conclude that the proper methodology is to determine the present value of subdivision (e) future damages before attorney’s fees and then reduce that amount by the present value of attorney’s fees.

II.

Defendants challenge the trial court’s calculation of interest on the future damages. The proceedings here were conducted in two parts. On March 9, 1989, plaintiff was granted summary judgment on liability pursuant to Labor Law § 240. Some two years later, the parties tried the damages portion of the claim. The jury announced its verdict on February 14, 1991. Defendants concede that as a general rule in this type of action interest is calculated from the date liability is established, even though the damage verdict is handed down later (see, CPLR 5001 [a]; 5002; Love v State of New York, 78 NY2d 540, 542). Under the Love approach, courts are authorized to engage in the legal fiction that damages were known and became a fixed obligation at the moment liability was determined. In the instant case, Supreme Court and the Appellate Division calculated interest on both past damages and the present value of future damages from March 9, 1989 (the date of liability).

Defendants concede that they are liable for interest from the date of liability for all damages incurred prior to that date. They assign error only to the trial court’s calculation of interest on future damages. First, they contend that no interest should accrue before plaintiff actually incurred a cost. Only then, they assert, does plaintiff have a valid claim against defendants, and only then should late payment be subject to interest. Thus, as defendants see it, damages incurred after March 9, 1989 should not have been subject to interest until the date plaintiff was in fact deprived of the particular item of loss to be compensated. Second, defendants argue that where part of an award of future damages is subject to the periodic-payment scheme of article 50-A or 50-B, no interest should accrue on that part of the award until a periodic payment is overdue. Defendants’ theory is that plaintiff has no entitlement to the money until the payment becomes due, and only when a payment deadline is missed can interest properly be charged.

Analysis begins with language of the statutory scheme. CPLR 5001, 5002 and 5003 set forth the interest requirements for three distinct periods: Interest prior to verdict (CPLR 5001), interest from verdict to judgment (CPLR 5002) and interest from judgment to payment (CPLR 5003). CPLR 5002 states that interest shall be recovered "upon the total sum awarded * * * from the date the verdict was rendered”. Accordingly, defendants’ argument is undercut by the plain language of the statute: The "total sum awarded” is subject to interest on the date of verdict — no matter whether the award is to compensate future damages, past damages or both.

Defendants nonetheless believe the plain language of the statute should not govern if it results in a "windfall” to plaintiffs, as they believe it does. They rely upon Milbrandt v Green Refractories Co. (79 NY2d 26), where in a wrongful death case we held that future damages should be discounted to the date of liability, which by statute is the date of death, before interest is calculated on them. To do otherwise, we held, would be to create an interest windfall by allowing interest on money not owed to plaintiff inasmuch as defendant had an obligation only for the present value of damages at the date of liability (at 34-35). Though EPTL 5-4.3 (a) literally states that interest is to be paid upon the principal sum from the date of death, our Court declined to interpret that language as allowing an interest windfall (at 35-36).

The question here, however, is not the question of discounting posed in Milbrandt. Future damages here were discounted. Instead, defendants contend that they had no liability whatsoever for future damages on the date of liability. Thus, the essential premise in defendants’ theory of an interest windfall is that they have no liability for future damages until either an actual loss is incurred or until a periodic payment is missed. It follows, then, that even if we were to accept defendants’ contention that no interest windfalls should be allowed, their argument fails if future damages are properly deemed to be liabilities fully owed by defendants as of the date of the liability verdict.

We conclude that they are. The structured judgment schemes of articles 50-A and 50-B do not delay liability. They do not alter liability by making it incremental, nor were they designed to match the timing of periodic payments to the timing of plaintiff’s actual accrual of damages. Instead, the articles merely made payment incremental. Put simply, the CPLR altered how the liability was to be settled; it did not delay liability or even spread it out over a period of time. A defendant’s obligation to a personal injury plaintiff encompasses both past and future damages and becomes fixed as of the date of the liability verdict. That articles 50-A and 50-B did not change that established rule is shown by CPLR 5046 and 5036, which govern adjustments in the payment schedule. Those sections allow the courts, in certain hardship circumstances, to abandon the periodic-payment schedule and order a lump-sum judgment. A plaintiff’s right to seek such an acceleration is necessarily premised on a preexisting liability on the part of the defendant for the full amount of future damages, for nothing about the plaintiff’s unforeseen hardship could rightfully be a basis for imposing a new liability on the defendant.

Thus, we hold that the future damages here were properly treated as a debt owed entirely as of the date of the liability verdict, and interest was properly charged against the present value of future damages from that date under CPLR 5002. That result is consistent with Love and Milbrandt and, most importantly, with the plain language of the statute.

III.

Defendants have also contended on this appeal that Supreme Court improperly allowed a double recovery to plaintiff by admitting evidence of inflation at trial and then imposing the 4% annual adjustment allowed under CPLR 5041 (e). They objected to neither the introduction of inflation evidence nor to the court’s subsequent 4% computation, however, and thus the issue is not preserved for our review. Defendants’ remaining claims do not provide legal grounds for reversal.

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

Chief Judge Kaye and Judges Titone, Bellacosa, Smith, Levine and Ciparick concur.

Order affirmed, without costs.

      . Eric Rohring’s wife, Charlene, was awarded $20,000 on her derivative claim. That claim is not before us on this appeal.

      . Consider, for example, a $1,000,000 award of future damages (irrespective of any required statutory adjustments) where the discount factor is 10% and the attorney is entitled to one third. The following results would be achieved under the two proposed methods: Trial court Gross award of future damages 1,000,000 Present Value of fees — 300,000 700,000 Present Value of 700,000 = 630,000 Appellate Division Gross award of future damages 1,000,000 Present Value of award 900,000 Present Value of fees — 300,000 Remainder 600,000 (one third of Present Value of award, as required by statute) (one third of Present Value of award, as required by statute)
      The plaintiff is, of course, entitled to either $1,000,000 in gross damages or $900,000 in present value damages. Under the trial court’s methodology, however, defendants owe $930,000 in present value ($300,000 to the attorney and $630,000 to the plaintiff). Under the Appellate Division’s methodology, defendants owe the proper amount, $900,000 ($300,000 + $600,000).


text:
    [638 NE2d 506, 614 NYS2d 967]
    In the Matter of Dale P., a Child Alleged to be Neglected. Barbara J. Sabol, as Commissioner of the New York City Department of Social Services, Appellant. Nancy P., Respondent.
    Argued April 27, 1994;
    decided June 16, 1994

      POINTS OF COUNSEL

      Paul A. Crotty, Corporation Counsel of New York City (Ronald E. Sternberg and Leonard Koerner of counsel), for appellant.
    I. A neglected child directly placed by the Family Court into the custody of an unrelated person is not in foster care. The Commissioner of Social Services of the City of New York, therefore, is not authorized to commence a proceeding to terminate the rights of the biological parents of such child. (Matter of Ricky Ralph M., 56 NY2d 77; Matter of Daniel T. C, 141 Misc 2d 50; Matter of Jamal B., 119 Misc 2d 808; Matter of Carl N., 91 Misc 2d 738; Matter of Charise B., 146 Misc 2d 943.) II. The custodian of a directly placed child has no constitutional or statutory right to legal representation for the purpose of bringing an adoption proceeding. The Family Court is not otherwise authorized to direct the Commissioner to provide such representation. (Lassiter v Department of Social Servs., 452 US 18; Matter of Smiley, 36 NY2d 433; Matter of Reidy v Thomas ZZ., 113 AD2d 281; Matter of Miller v Gordon, 58 AD2d 1027; New York City Hous. Auth. v Johnson, 148 Misc 2d 385; Matter of Enrique R., 126 AD2d 169; Matter of Lorie G, 49 NY2d 161; Matter of Shankman v Axelrod, 73 NY2d 203.)

      Elynn C. Lambert, Law Guardian, New York City, Lenore Gittis and Carol Goldstein for Dale P.
    I. As part of an order extending placement pursuant to Family Court Act § 1055 (d), the Family Court Judge properly ordered appellant to file a termination of parental rights proceeding on behalf of Dale P., a child directly placed with a "suitable person” under appellant’s supervision following a finding of neglect. (Matter of Alonzo M. v New York City Probation Dept., 72 NY2d 662; Doctors Council v New York City Employees’ Retirement Sys., 71 NY2d 669; Matter of State of New York [Abrams] v Ford Motor Co., 74 NY2d 495; Matter of Schmidt v Roberts, 74 NY2d 513; We’re Assocs. Co. v Cohen, Stracher & Bloom, 65 NY2d 148.) II. The Court below properly held that the Family Court acted within its authority when it ordered appellant to provide legal representation to Mary H. to pursue an adoption proceeding under Domestic Relations Law § 111 during the course of which termination of parental rights will necessarily occur. (Matter of Lorie C., 49 NY2d 161; Matter of Enrique R., 126 AD2d 169.)

      Philip M. Genty, New York City, Jane M. Spinak, Eric Berkowitz, Michael Bochenek, Tracy Cole, Douglas Gray, Estelle McKee, Sharron McPherson, Susan Sawyer and Evette Soto for Morningside Heights Legal Services, Inc., amicus curiae. I.
    The Court below erroneously concluded that the Family Court is an "authorized agency” for purposes of defining foster care. H. The lower courts erred in holding that section 1055 (d) of the Family Court Act permits termination of parental rights for children who are not in foster care. (Matter of Greer v Bane, 158 Misc 2d 486; Matter of Michael B., 80 NY2d 299; Matter of Anonymous [St. Christopher’s Home], 40 NY2d 96; Matter of Ricky Ralph M., 56 NY2d 77; Matter of Dale P., 189 AD2d 325; Matter of Michael W., 120 AD2d 87; Albany County Dept. of Social Servs. [M. Children] v Earl M., 143 Misc 2d 931; Matter of Ida Luz M, 131 Misc 2d 1053; Matter of Commissioner of Social Servs. [Riddle] v Rapp, 127 Misc 2d 835; Matter of Sandra H., 107 Misc 2d 409.) III. If allowed to stand, the decision below will have adverse consequences for the children, parents, caretakers and social services officials involved with the child welfare system in the State of New York. (Matter of Sheila G., 61 NY2d 368; Matter of Sydney, 84 Misc 2d 932; Matter of Jamie M., 63 NY2d 388; Matter of Star A., 55 NY2d 560; Matter of Leon RR, 48 NY2d 117; Smith v Organization of Foster Families, 431 US 816;
      Matter of Michael B., 80 NY2d 299; Matter of Spence-Chapin Adoption Serv. v Polk, 29 NY2d 196; Plyler v Doe, 457 US 202.)
   OPINION OF THE COURT

Bellacosa, J.

The subject of this Family Court proceeding is a child, Dale P., who was abandoned after birth by his mother and taken into the care of a friend, Mary H. The dispositive legal question turns on whether the now seven-year-old child should be given the opportunity for a best interests permanency placement under the auspices of the New York City Commissioner of Social Services, as decided by Family Court. Although the youngster is not a statutory foster child, we agree with the prior courts and conclude that the interstitial and individualized justice effected in this statutory construction case does not transgress technical foster care placement prerequisites.

We agree with Family Court’s decision to impose on the New York City Social Services Commissioner the obligation in this case to initiate termination proceedings for Dale P.’s benefit, pursuant to the complementary features of Family Court Act § 1055 (d) and Social Services Law § 384-b. However, we modify the order, as affirmed by the Appellate Division, to strike the alternative relief directing the Commissioner to provide legal services to Mary H., if the Commissioner failed to comply in the first instance. On this record, the conditional relief presents an issue unnecessary to resolve in light of our disposition of the threshold issue.

L

Dale P. was born in 1987 to Nancy P., a cocaine addict, and an unknown father. Between January 17 and February 7, 1988, Nancy P. abandoned Dale P. Mary H. voluntarily undertook the care and custody of the child. The biological mother repeatedly defaulted in answering court petitions. On unbroken showings of neglect and abuse of the child, Family Court made a finding of neglect on April 5, 1988 and judicially continued the child in Mary H.’s care and custody for a period of 18 months, pursuant to Family Court Act § 1055 with the approval of the Commissioner. Mary H. filed a subsequent petition in which she alleged that Nancy P. had not visited or called about Dale P. and was unable to care for him, and that Mary H. was continuing to nurture the child. On July 28, 1989, Family Court, again with the Commissioner’s acquiescence, extended the child’s placement with Mary H. for one year as of October 5,1989.

Approximately one year later, appellant Commissioner filed a petition, pursuant to article 10 of the Family Court Act, requesting another one-year extension of Dale P.’s placement with Mary H. The Commissioner represented, based on her office’s investigation, that Mary H. was providing good care, that the child was "achieving developmental progress,” and that Mary H. wished to adopt the child. The petition added that Dale P.’s mother, a known drug abuser, had not cooperated with child welfare authorities and that her whereabouts were unknown. Family Court granted the Commissioner’s petition in an order dated October 19, 1990 that extended for an additional year Dale P.’s placement with Mary H., effective October 5, 1990. That order is not before us for review.

The court on its own motion issued a second order, on the same date, directing the Commissioner to institute a termination of parental rights proceeding. The Commissioner moved to vacate this second order, arguing that because Dale P. was not in the "official” care and custody of the Commissioner, the court was not authorized to direct the Commissioner in this respect. Family Court then modified the second order, ruling that if the Commissioner failed to bring a termination proceeding within 30 days, the "foster mother,” Mary H., was authorized to bring an adoption proceeding, in which event the Commissioner was to afford her legal representation. The Commissioner appealed both prongs of this modified second order. The Appellate Division affirmed and this Court granted leave to appeal to review the affirmance of that second order.

The threshold and dispositive issue in the circumstances of this case is whether Family Court may direct the New York City Commissioner of Social Services to commence a proceeding to terminate parental rights of a child previously directly placed by Family Court with a nonrelative custodian under Family Court Act § 1055 and Social Services Law § 384-b (3) (b) and (4) (b).

IL

Indisputably, Dale P.’s placement with Mary H. is in the child’s best interest. The goal of permanency planning for children in foster or direct custodial care is their best interests. That is the essence of this case. Dale P. was earlier abandoned by his biological mother and remains in that legal status. Mary H. has filled the needed interim custodial role since early 1988. The record, developed by the Commissioner’s investigation, confirms that Mary H. is providing capable and proper care as the only parent the child has known.

The legal question evolves out of a tension in authority governing the fragile world of alternative care and custody of children. The Commissioner is legitimately concerned about regularized and statutorily authorized process. She argues that Dale P. has not been properly processed into the official foster care system and is, therefore, not correctly classified to trigger the Family Court’s authority to direct the Commissioner to act on a parental termination step, leading eventually to permanent placement with Mary H. On the other hand, the Law Guardian, on Dale P.’s behalf, urges that the child is entitled to official assistance in progressing promptly toward adoption by Mary H., since he has been in her caring home through "direct placement” under the continuing joint auspices of the Commissioner and Family Court. The guardian suggests that the Commissioner is in the best position to facilitate and effectuate the ultimate goal, despite the fact that Dale P. is not a statutory foster child, and that Family Court should have the power to shape the Commissioner’s assistance and action in this regard and in these circumstances.

We agree with the courts below that the technical foster care processing predicate was not the exclusive channel where, as here, officially authorized direct placement by the Family Court and the Commissioner initially and fortunately rescued the infant by maintaining him in a temporary, caring, direct, custodial home. The judicial action in this case should effect no disruption or alteration of the customary and delicately balanced operation of the foster care system with respect to its search and struggle for permanency planning of children generally and systemically.

While the State’s involvement in the parent-child relationship could not be avoided in this case, an overarching consideration always obtains for children to be returned to biological parents, if at all possible and responsible (Matter of Michael B., 80 NY2d 299). When that cannot be done, the emphasis shifts to securing permanent, stable solutions and settings (Besharov, Practice Commentary, McKinney’s Cons Laws of NY, Book 29A, Family Ct Act § 1055, at 448).

Family Court ruled in this case that a proceeding to legally free a child for adoption should not be dependent on "the accidental nature of the placement, i.e., with the Commissioner [in foster care], or with a related resource, or with an unrelated resource [direct placement]” (Matter of Dale R, 150 Misc 2d 366, 369). That general nostrum cannot, of course, displace statutory specifications and authority. Yet, when applied in context, the rubric reflects an intelligent discretion allowing the Family Court to induce the Commissioner to supply services to effectuate termination of birth parents’ parental rights, where warranted, and thus to set the stage for the creation of a fresh start, a new parent-child relationship through adoption.

IIL

Nevertheless, the Commissioner urges that Dale P.’s permanency planning can be effected through a statutory scheme which does not involve the Commissioner. She notes that because Dale P. is in direct placement with Mary H., he is thus technically not a proper member of the Commissioner’s foster care roster for purposes of the Family Court’s intervention. The Commissioner contends, moreover, that she is not authorized by Social Services Law § 384-b to commence a termination proceeding, since that authority extends only to children in foster ranks which is the sole statutory predicate for her to take that drastic action. Section 384-b (3) (b) of the Social Services Law provides:

"A proceeding under this section may be originated by an authorized agency or by a foster parent authorized to do so pursuant to section three hundred ninety-two of this chapter or to section one thousand fifty-five of the family court act” (Social Services Law § 384-b [3] [b] [emphasis added]).

The Commissioner contends that because Dale P. was never placed in her custody, she is not authorized under the statute to bring a termination proceeding and that Family Court cannot, in these circumstances, order the Commissioner to do so.

We disagree. This record supports the view that Dale P. is entitled to the remedy directed by the Family Court to be implemented by the Commissioner. No valid reason is presented on this record to require Family Court to add an unnecessary, dilatory step by formally placing the abandoned child, Dale P., into the foster care system first as the justification toward achieving the concededly desirable ultimate objective of permanent placement in this child’s best interests. Technically removing a child from a direct placement and placing the youngster with the Commissioner to expedite certification as a de jure foster caregiver may be the preferred progression in most situations to preserve the general objectives of the pertinent statutes (see, Matter of Charise B., 146 Misc 2d 943; Matter of Coop, 140 Misc 2d 951). This approach is also important so as to pay heed to all appropriate procedural safeguards and protections of the interests and rights of natural, biological parents in any termination proceeding. In this case, however, that transferral would be unnecessarily circuitous, the merest formality, and contrary to the best interests of Dale P., who was properly found to be an abandoned, dependent child within the meaning of Social Services Law § 371 (2), (7) and § 384-b (4) (b). That is a key, distinctive feature and predicate upon which the analysis and official actions in this case proceeded.

Appellant Commissioner is, however, justifiably cautious because a child who is directly placed by Family Court does not automatically qualify for special Federal foster care funds, since such placements are not into State licensed facilities (see, 42 USC § 671 [a] [10]; § 672 [b], [c]; 45 CFR part 1355; see also, Matter of Daniel T. C, 141 Misc 2d 50). Also, the Commissioner’s authority over such directly placed children is more circumscribed, since the Commissioner cannot dictate licensing requirements for quality of care provided to such children (see, Matter of Hasani B., 195 AD2d 404; see also, 18 NYCRR part 444). Further, the Commissioner is concerned that the lack of the usual nexus between the child and foster care network may impede the supervisory responsibility of the Commissioner to children in her care and custody. These responsibilities buttress the legislative goal of Social Services Law § 384-b that prior to termination proceedings, "the state’s first obligation is to help the family with services to prevent its break-up or to reunite it if the child has already left home” (Social Services Law § 384-b [1] [a] [iii]). Despite those generalized concerns, they are not pertinent or dispositive in the context of this case. We are satisfied that the precise precedential principle and analysis of this statutory construction case will allow for adequate and appropriate consideration of the Commissioner’s concerns and those of biological parents who in appropriate cases may be affected.

Moreover, Social Services Law § 384-b (1) (b) reflects greater flexibility than the Commissioner’s arguments appear to acknowledge:

"The legislature further finds that many children who have been placed in foster care experience unnecessarily protracted stays in such care without being adopted or returned to their parents or other custodians. Such unnecessary stays may deprive these children of positive, nurturing family relationships and have deleterious effects on their development into responsible, productive citizens. The legislature further finds that provision of a timely procedure for the termination, in appropriate cases, of the rights of the natural parents could reduce such unnecessary stays.” (Social Services Law § 384-b [1] [b].)

Against such expressed concerns and practical observations, the argument cannot be sustained that stricter official supervision and expenditure of relatively more public tax dollars for the care of a child placed in foster care creates a virtually exclusive route and progression towards permanency placement. No convincing reasons are advanced to bar a directly placed child, as in this case, from helpful official assistance along the way. Like the Appellate Division, we consider that "our determination is narrowly directed to the Commissioner’s argument that Dale P. was not a foster child” (Matter of Dale P., 189 AD2d 325, 330). We also agree with the Appellate Division that "[t]he Commissioner’s contention that Dale P. falls within gaps in the statutory scheme is contrary to the legislative intent expressed in Social Services Law § 384-b (1)” (id., at 330). The Family Court’s rescue of this child from that "gap” or statutory interstice is not only correct, it is that court’s preeminent and transcendent raison d’etre.

As part of its continuing duties to attend to the care of this abandoned child, and to extend placement, the Family Court properly ordered the Commissioner to file for termination of parental rights on behalf of Dale P., a child directly placed with a "suitable person” — Mary H. The Family Court is empowered to guard the welfare of the child and, as the Law Guardian has demonstrated, Family Court, in this instance, is the primary care-director, charged with ongoing responsibility for the child (Social Services Law § 383 [2] [legal custody remains with agency placing child]; see also, Matter of Spence Chapin Adoption Serv. v Polk, 29 NY2d 196, 205). Undertaking to insure the welfare of this child, Family Court is authorized by law to place the abandoned Dale P. with Mary H., a competent custodian for the good of the child (see, Social Services Law § 374 [1]; Family Ct Act § 1052 [a] [iii]; § 1055 [a]), and to order the Commissioner to take further actions toward permanent placement.

IV.

Since the Commissioner did not initiate on her own the termination of parental rights, the Family Court also properly relied on Family Court Act § 1055 (d) as a complementary, reinforcing source of its power to direct the Commissioner to proceed with the predicate step under Social Services Law § 384-b (4) (b) toward a permanent placement.

Family Court Act § 1055 (d) sets forth the dispositional options following extensions of placements. Directing the termination of parental rights as a predicate to adoption is an available option for all neglected and abused children who have been placed in nonparental homes. Accordingly, the Family Court was authorized to direct the termination of parental rights when, as here, (1) the child falls within the ambit of Family Court Act § 1055 (d) and (2) the court determines that there are grounds to terminate parental rights on the basis of abandonment.

The intertwined statutory question in this framework is whether, for purposes of Family Court Act § 1055 (d), there is any reason to distinguish a foster child who is not placed by or with a social services agency from one directly placed by the court in a home not certified under applicable State and Federal law. We agree with the reasoning of the Appellate Division and Family Court that no valid reason to support such a distinction is present in these circumstances. If the court has the power to place the child with Mary H. under Family Court Act § 1055 (a) and to continue such placement pursuant to subdivision (b), with the participation and acquiescence of the Commissioner, the court has the power to direct official initiation of proceedings that would ultimately free the child for adoption by such a qualified and proper custodian with all due procedural safeguards. Without such power, the courts would be unnecessarily restricted to keeping children in the very foster care limbo sought to be eliminated or remediated by passage of Family Court Act § 1055 (d) (see also, Social Services Law § 384-b [1] [b]). We conclude that Family Court’s direction to the Commissioner to commence a termination of parental rights proceeding on behalf of the abandoned child, Dale P., is authorized by the complementary aspects of the pertinent statutes and is also supported by the particular circumstances developed in this record. The rulings of Family Court and the Appellate Division in this threshold respect were thus statutorily justified and ought to be sustained.

V.

The conditional portion of the Family Court order under review, as affirmed by the Appellate Division, dealing with provision of legal services to Mary H. if the Commissioner fails to initiate termination proceedings as directed by the Family Court, is unnecessary to resolve in this case. When the Commissioner sought vacatur of the portion of the Family Court’s direction, which we sustain, Family Court found it necessary to provide a fall-back alternative remedy that if after 30 days the Commissioner did not act, she should provide legal representation to Mary H. That hypothesis need not arise at all in this case since the primary termination proceeding relief ordered by Family Court, as discussed and decided, is a justifiable and complete remedy to set the stage for Mary H.’s adoption efforts. The Commissioner made no record of any cognizable potential conflict of interest or authority necessitating or justifying the grant of this conditional, fiscally significant relief. We have no occasion or reason to address the power of the Family Court to add that feature to its ruling in this case.

Accordingly, the order of the Appellate Division should be modified to strike that portion as indicated in this opinion and otherwise affirmed, with costs to the respondent against appellant Commissioner.

Chief Judge Kaye and Judges Simons, Titone, Smith, Levine and Ciparick concur.

Order modified in accordance with the opinion herein and, as so modified, affirmed, with costs to respondent.