author: Kaye, J.

text:
    In the Matter of Sarah K. Timmy S et al., Appellants; Warren K et al., Respondents, and Robert Abrams, as Attorney-General of the State of New York, Intervenor-Appellant.
    Argued October 14, 1985;
    decided November 14, 1985

      POINTS OF COUNSEL

      Frederick J. Magovern, Diane C. Pfirrman and Peter B. Skelos for appellants.
    I. It was error for the court below to reach the constitutional issues since respondents clearly lacked standing to challenge the alleged deficiencies of the statute. (Duke Power Co. v Carolina Envtl. Study Group, 438 US 59; Ulster County Ct. v Allen, 442 US 140; Lehr v Robertson, 463 US 248; Smith v Organization of Foster Families, 431 US 816; Caban v Mohammed, 441 US 380; Harbulak v County of Suffolk, 654 F2d 194; Farr v Newman, 14 NY2d 183; Matter of Anonymous, 55 AD2d 383; Pryke v Standard Acc. Ins. Co., 144 Misc 53, affd sub nom. Baldwin v Standard Acc. Ins. Co., 237 App Div 334, 262 NY 575.) II. Domestic Relations Law § 115-b is constitutional and respondents’ extrajudicial consents are irrevocable. (Matter of Malpica-Orsini, 36 NY2d 568; Schieffelin v Goldsmith, 253 NY 243; Ahern v South Buffalo Ry. Co., 303 NY 545, 344 US 367; Morrissey v Brewer, 408 US 471; Anti-Fascist Comm. v McGrath, 341 US 123; Mathews v Eldridge, 424 US 319; Matter of Jonathan E. G., 107 Misc 2d 900; Lehr v Robertson, 463 US 248; Smith v Organization of Foster Families, 431 US 816; In re Gault, 387 US 1.) III. The extrajudicial consents to adoption made by respondents were valid, effective and irrevocable. (New York Tr. Auth. v Beazer, 440 US 568; People v Mobil Oil Corp., 48 NY2d 192; Matter of Natural Parents of "Nicky” v Dumpson, 81 Misc 2d 132; Matter of Male Infant L., 61 NY2d 420; People ex rel. Scarpetta v Spence-Chapin Adoption Serv., 28 NY2d 185; People ex rel. Grament v Free Synagogue Child Adoption Comm., 194 Misc 332, 275 App Div 823; Matter of Daniel C., 99 AD2d 35, 63 NY2d 927; People ex rel. Skokas v McCarthy, 7 Misc 2d 963; Matter of Department of Social Servs. [Sandra C.] v Thomas J. S., 100 AD2d 130, 63 NY2d 675; Stuebner v Stuebner, 184 Misc 1034.) IV. The trial court applied the correct standard of proof at both the revocation and the best interests hearings. (Santosky v Kramer, 455 US 745; Stanley v Illinois, 405 US 645; Smith v Organization of Foster Families, 431 US 816; Addington v Texas, 441 US 418; Mathews v Eldridge, 424 US 319; Logan v Zimmerman Brush Co., 455 US 422; New York State Assn. for Retarded Children v Rockefeller, 357 F Supp 752; United States v Yazell, 382 US 341.) V. The evidence overwhelmingly supports the trial court’s and dissent’s conclusion that adoption of Sarah by Mr. and Mrs. S is in the best interest of the child. (Bunim v Bunim, 298 NY 391; Matter of Darling T., 28 NY2d 391; Dintruff v McGreevy, 34 NY2d 887; Finlay v Finlay, 240 NY 429; Matter of Bennett v Jeffreys, 40 NY2d 543; Smith v Organization of Foster Families, 431 US 816; Matter of Male Infant L., 61 NY2d 420.)

      Robert Abrams, Attorney-General (Robert J. Schack, Robert Hermann and Florence E. Abrams of counsel), intervenor-oppellant pro se.

    I. Respondents lack standing to challenge the constitutionality of the provisions of Domestic Relations Law § 115-b for notice in an extrajudicial consent form of their limited right to revoke consent to adoption. If the issue is reached, the court should uphold the statute by reading it to require such notice. (New York Tr. Auth. v Beazer, 440 US 568; People v Mobil Oil Corp., 48 NY2d 192; Matter of Daniel C., 99 AD2d 35; Di Bella v Di Bella, 47 NY2d 828; Hamilton Mut. Realty Fund v Band Realty Co., 41 NY2d 936; Manrara v Murphy, 296 NY 65; Buffalo Elec. Co. v State of New York, 14 NY2d 453; Harbulak v County of Suffolk, 654 F2d 194; Farr v Newman, 14 NY2d 183; Lehr v Robertson, 463 US 248.) II. Respondents lack standing to challenge the constitutionality of the alleged failure of Domestic Relations Law § 115-b to provide adequate notice of the commencement of the revocation period. In any event, the lack of such notice is constitutional. If such notice were requisite, the requirement should be read into the statute. (Matter of Anonymous, 55 AD2d 383; Matter of Martz, 102 Misc 2d 102, affd sub nom. Matter of Jessica XX, 77 AD2d 381, 54 NY2d 417, affd sub nom. Lehr v Robertson, 463 US 248; Matter of Benjamin v State of New York, Dept. of Labor, 74 AD2d 690.) III. Domestic Relations Law § 115-b does not infringe the due process rights of respondents in requiring them to prove by a preponderance of the evidence the invalidity of their consent and to show that the best interests of the child require they be given custody. (Smith v Organization of Foster Families, 431 US 816; Joyner v Dumpson, 712 F2d 770; Lehr v Robertson, 463 US 248; Caban v Mohammed, 441 US 380; Matter of Daniel C., 115 Misc 2d 130; Matter of Bennett v Jeffreys, 40 NY2d 543; Matter of Joseph LL., 97 AD2d 263, 63 NY2d 1014; Hector M. v

      Commissioner of Social Servs., 102 Misc 2d 676; Matter of Roe v New York Foundling Hosp., 33 AD2d 83; People ex rel. Stone v Maglio, 62 Misc 2d 292.)

      Katherine G. Thompson, John E. Halpin and Elizabeth M. Barnett for respondents.
    I. The court below correctly held that Warren and Christine K were denied due process and that their consents were invalid. (Matter of Daniel C., 99 AD2d 35, 63 NY2d 927; Matter of Male M., 76 AD2d 839, 50 NY2d 1056.) II. The court below, although not required to do so, considered best interests and correctly determined that Sarah’s welfare will be best served by return to her parents, Warren and Christine K. (Matter of Male Infant L., 61 NY2d 420; Matter of Ryan, 291 NY 376; Matter of Male M., 76 AD2d 839; Dennis T. v Joseph C., 82 AD2d 125; Matter of Unnamed Baby Boy, 110 AD2d 1019; Anonymous v Anonymous, 108 Misc 2d 1098; Matter of James M. G., 86 Misc 2d 960; Jankowski v Azaro, 246 App Div 557; Prime v City of Yonkers, 131 App Div 110, 199 NY 542; Carr v Morris, 191 App Div 671.) III. The court below was correct in declaring Domestic Relations Law § 115-b unconstitutional for failure of the form to advise the natural parents of their limited revocation right. (Matter of Daniel C., 99 AD2d 35, 63 NY2d 927; Matter of Unnamed Baby Boy, 110 AD2d 1019; Santosky v Kramer, 455 US 745; Matter of Leon RR, 48 NY2d 117; Lassiter v Department of Social Servs., 452 US 18; Stanley v Illinois, 405 US 645; Mullane v Central Hanover Trust Co., 339 US 306; Lehr v Robertson, 463 US 248; Matter of Bennett v Jeffreys, 40 NY2d 543; Dennis T. v Joseph C., 82 AD2d 125.) IV. Due process required clear and convincing evidence rather than preponderance of the evidence as the standard of proof in this permanent termination of parental rights proceeding. (Santosky v Kramer, 455 US 745; Mathews v Eldridge, 424 US 319; Alsagar v District Ct. of Polk County, 406 F Supp 10; Corey L v Martin L, 45 NY2d 383; Matter of Leon RR, 48 NY2d 117; Stanley v Illinois, 405 US 645; Lassiter v Department of Social Servs., 452 US 18; Meyer v Nebraska, 262 US 390; Skinner v Oklahoma, 316 US 535; May v Anderson, 345 US 528.) V. In addition to the misleading and deceptive forms and procedures utilized to induce the natural parents to execute their purported extrajudicial consents, the court below found that there were numerous improprieties surrounding the transfer of Sarah and the execution of these consents that rendered their consents void ab initia. (Matter of Anonymous, 46 Misc 2d 928;
      Matter of Unnamed Baby Boy, 110 AD2d 1019; Matter of Male M., 76 AD2d 839; Matter of Anonymous, 60 Misc 2d 854.) VI. The court below found that the undisputed medical evidence that Warren and Christine K were in a state of severe shock and trauma rendered the transfer invalid and their consénts void ab initia. (Matter of E. W. C., 89 Misc 2d 64.) VIL The trial court’s and the dissent’s conclusion that Sarah’s best interests will be served by adoption is against the weight of the evidence. (Matter of Male Infant L., 61 NY2d 420; Matter of Bennett v Jeffreys, 40 NY2d 543; Smith v Organization of Foster Families, 431 US 816.)

      Joyce R. Parker for The CAP Book, amicus curiae.

    I. This court should dismiss the appeal, because the K’s lack standing to raise the constitutional question. (Matter of Daniel C., 99 AD2d 35, 63 NY2d 927.) II. The K’s have failed to establish that they have constitutionally protectable rights, because they did not establish a substantial relationship with the child, and, in any event, the best interests hearing afforded to the K’s satisfies any applicable due process requirement. (Lehr v Robertson, 463 US 248; Quilloin v Walcott, 434 US 246; Caban v Mohammed, 441 US 380; Mathews v Eldridge, 424 US 319; Santosky v Kramer, 455 US 745; Stanley v Illinois, 405 US 645; Matter of Amy SS., 100 AD2d 657, 64 NY2d 788.) III. Any determination of unconstitutionality must be limited to the facts of this case, and in any event, must be prospective only, because of the reliance placed on decrees entered in previous adoptions. (Matter of Jessica XX, 54 NY2d 417, affd sub nom. Lehr v Robertson, 463 US 248; Caban v Mohammed, 441 US 380; Chevron Oil Co. v Huson, 404 US 97.)

      Frank A. Gulotta for Adoptive Parents Committee, Inc., amicus curiae.

    The paramount concern in any adoption is the best interests of the child. (Matter of Thorne, 155 NY 140; People ex rel. Scarpetta v Spence-Chapin Adoption Serv., 28 NY2d 185; Matter of Daniel C., 99 AD2d 35, 63 NY2d 927; Matter of Bennett v Jeffreys, 40 NY2d 543.)
   OPINION OF THE COURT

Kaye, J.

This tragic case pits two couples — each found to be fit as parents — against each other for custody of Sarah K, now two years old. Sarah, who has Down’s Syndrome, was shortly after her birth released for adoption by respondents, her biological parents; her only home has been with appellants, her adoptive parents. When Sarah was 15 weeks old, on the eve of a hearing relating to her adoption, respondents attempted to revoke the consent they had given three months earlier and regain custody of the child. While respondents challenge the validity of both the statute governing private-placement adoptions (Domestic Relations Law § 115-b) and the consent forms they signed, we conclude that in the circumstances presented the defects of which they complain did not harm them, that their "irrevocable consent” must be honored, and that the Appellate Division order returning Sarah to them should therefore be reversed and the petition for adoption granted.

I

The pertinent facts found by Family Court are as follows. Sarah was born November 6, 1983 to respondents, Warren and Christine K. Shortly after her birth, the obstetrician entered the recovery room and announced his belief that "the baby is a mongoloid.” Respondents decided that they could not keep the child. On November 7, Mr. K told the hospital social worker they had definitely decided to place the child for adoption. She provided him with a list of three agencies as well as the name Janet Márchese, an individual who had previously found adoptive homes for Down’s Syndrome children. That same day Mrs. K went home, leaving Sarah behind. Mr. K contacted the agencies as well as Mrs. Márchese. Mr. K assured Mrs. Márchese that respondents only wanted to find a home for Sarah, that he had done his homework, was sure of their decision, that neither he nor his wife wanted to meet with prospective adoptive parents, and that this was to be accomplished immediately.

Mrs. Márchese on November 8 advised Mr. K that she had found adoptive parents and asked that respondents pay the legal fee for the adoptive parents’ counsel, David Ver plank, explaining that the adoptive parents would likely later incur significant medical expenses. According to Mrs. Márchese, Mr. K — a lawyer — said his partner would represent him. According to Mr. K, however, neither he nor his partner (Bruce Regenstreich) had any experience in adoption matters, and his partner participated as a friend. Mr. K testified that he assumed Mr. Verplank represented them, or represented both the natural and adoptive parents in an uncontested proceeding. Family Court found that Mr. K’s only interest was in an expedited adoption, that the technical question of representation was of no particular significance to him at that time, that Mr. Verplank did not believe he represented respondents, and that respondents did not rely on him for advice or consider him their attorney.

On November 8 Mr. Regenstreich called Mr. Verplank, who drafted the adoption consent forms. On November 11, when the baby left the hospital, she was immediately handed over by Mr. K to a nurse accompanying Mr. Verplank, and since that day she has lived with appellants. At the hospital also, Mr. Verplank delivered to Mr. Regenstreich an envelope of documents, including two consent forms, a bill, an attorney’s affidavit and a natural parents’ affidavit, and Mr. Regenstreich in turn gave the envelope to Mr. K.

For more than two weeks the documents remained in Mr. K’s desk drawer at home, during which time respondents took a brief trip with their son. Then, during the weekend after Thanksgiving (November 26 or 27), Mr. K looked at the documents for — in his own words — "no more than two minutes the whole packet,” and he signed both consent forms. The first, captioned "Irrevocable Consent,” reads

"State of New York Family Court DRL 115 b — la County of Suffolk

Address: Veterans Memorial Highway Hauppauge, N. Y. 11787

In the Matter of the Adoption Irrevocable Consent of___ Adoptive Child

I, [respondents’ names], residing at [respondents’ address], natural (Mother) (Father) of _, do hereby irrevocably Consent to the Private Placement Adoption of my (daughter) (xxx)_, born Nov. 6, 1983. I understand that in the event that Consent is not executed before a Judge of the Family Court, the County of Suffolk then and in that event this Consent shall become irrevocable thirty days after the commencement of the adoption proceeding unless written notice of revocation thereof shall be received by this Court within said thirty days.**

The name and address of the Court in which the adoption proceeding is to be commenced is:

Family Court

County of Suffolk

Address: Veterans Memorial Highway

City: Hauppauge, New York 11787

_[Signed]_

Natural Mother

_[Signed]_

Natural Father

** We came to our decision to place our baby for adoption because of her Down’s Syndrome condition and our belief that the petitioners are far more capable of dealing with this condition and raising the child than we are.”

The second document, also captioned "Irrevocable Consent,” reads:

"State of New York DEL 115-b — la

Family Court

County of Suffolk

Address: Veterans Memorial Highway Hauppauge, N. Y. 11787

In the Matter of the Adoption Docket No. of_ Irrevocable Consent Adoptive Child

I, [respondents’ names], residing at [respondents’ address], natural (Mother) (Father) of_do hereby irrevocable [sic] Consent to the Private Placement Adoption of our (daughter) (xxx)_, BOEN November 6, 1983. I understand that the Consent I am now giving to said adoption is final and irrevocable and that hereafter I will not be able to regain custody of my (daughter) (xxx)_from (her) (xxx) adoptive parents and that I will not be able to maintain an action or proceeding for the return of custody of said child to me. We came to our decision to place our baby for adoption because of her Down’s Syndrome condition and our belief that the petitioners are far more capable of dealing with this condition and raising the child than we are.

_[Signed]_

Natural Mother

_[Signed]_

Natural Father

On this_day of_, 19_, before me personally came [respondents’ names], proven to me by the oath of David H. Ver plank an attorney admitted to practice in the State of New York to be the person(s) described in and who executed the foregoing instrument, and they acknowledge that they executed the same.

Judge, Family Court”

At Mr. K’s request, Mr. Ver plank had added the following sentence, which was part of both consent forms when respondents signed them: "We came to our decision to place our baby for adoption because of her Down’s Syndrome condition and our belief that the petitioners are far more capable of dealing with this condition and raising the child than are we.”

Family Court found that Mr. K had concluded, from looking at both consent forms together that nothing would be final until he and his wife appeared in court. Mr. K so advised his wife, who then signed the documents without even reading them. On November 28, when he returned to work, Mr. K delivered the signed documents to his partner for transmittal to Mr. Verplank.

Appellants commenced the adoption proceeding in Family Court, Suffolk County, on December 19, 1983, but it was not until January 23, 1984 that Mr. Regenstreich received notice from the court that a petition for adoption had been filed and a hearing would be held March 1. Mrs. K said that in February she "began to face the reality of the whole situation that [she] had a daughter with Down’s Syndrome,” and toward the end of the month visited a school for Down’s Syndrome children. On February 28, Mr. K told Mr. Regenstreich that they did not want to go forward with the adoption. The next day, after checking the statute and contacting the Family Court clerk’s office, Mr. Regenstreich advised Mr. K. that a revocation of consent form had to be executed, and that the March 1 court date had been canceled. On February 29, 1984, respondents executed and mailed a revocation of consent, which Messrs. K and Regenstreich had prepared. The form was received by the court March 2.

A bifurcated trial was scheduled by Family Court, consisting of a revocation hearing to consider the validity of the consents executed by respondents and the effect of their attempted revocation and, depending on the result, a best interests hearing to consider what placement would best serve the child’s interests (Domestic Relations Law § 115-b [1] [d] [ii]).

After a lengthy trial, by decision dated September 24, 1984, Family Court determined that the extrajudicial consent procedures as applied had deprived respondents of their right of revocation. In reaching this conclusion, the court rejected respondents’ contention that their consents were vitiated by a state of despair and confusion following the birth, constituting "fraud, duress or coercion in the execution or inducement of an adoption consent” (Domestic Relations Law § 115-b [4]). The court found that while respondents were unquestionably in acute emotional turmoil, the evidence did not support a conclusion that grief rendered them incapable of "a rational, although difficult, decision towards the end of November to place Sarah”, and further that the "decision to place Sarah for adoption was essentially a calculated and firm one; the parents did not suffer from indecision or ambivalence. * * * Their initial decision to place Sarah was ratified by implication on each day that passed after the consent was executed, without objection until months after the fact.” Similarly, the court concluded that any violation of the Social Services Law regarding placement of children for adoption — although it found no violation here — would be redressed by sanctions against the violators, and would not entitle respondents to dismissal of the adoption petition. But the court agreed with respondents’ constitutional challenge, based on a confusion engendered by the two forms and respondents’ reasonable belief that they could revoke their consent until it was given before a judge. The court concluded that the remedy was to afford respondents a best interests hearing, which would place them in the position they would have been in had they received proper notice of their revocation rights under the statute and revoked their consent accordingly.

To resolve the issue of which placement would serve the best interests of the child, Family Court considered the testimony of 28 witnesses. On the basis of financial status, character, mental and physical health, ability to provide for the child’s needs, available support from extended family members, continuity and stability, and capacity to accept the child, the court determined by decision dated November 7, 1984, that Sarah’s best interests would be served by adoption by appellants.

The Appellate Division, in three opinions, reversed, two justices finding the statute unconstitutional on its face for failing to require that the extrajudicial consent form advise the biological parents that even timely revocation will at best result in a judicial determination of custody based on a "best interests” test, two justices concluding that the particular consent forms misled respondents, and one justice concurring in part, dissenting in part, on the ground that the appropriate remedy for any confusion here was the hearing to determine the child’s best interests.

II

A parent’s consent to the release of a child for adoption has consequence in the law, and cannot invariably be undone at will. The law recognizes that consent implicates not only the very fundamental interests of birth parents, whose decision initiates the process, but also the child’s substantial interests in a stable, continuous home environment, and those of third parties, the adoptive parents, who but for the consent would not have become involved.

Domestic Relations Law § 115-b governs extrajudicial consent to private-placement adoptions, which is the subject of this appeal. Placed in its historical setting, section 115-b was enacted in 1972 to reform statutory and decisional law, perceived as unfair to adoptive parents and unsettling to adoptions generally, which permitted biological parents to revoke consent any time before the final order of adoption and recognized their primacy of status (L 1972, ch 639; L 1973, ch 1035). (See, e.g., People ex rel. Scarpetta v Spence-Chapin Adoption Serv., 28 NY2d 185, 192, appeal dismissed sub nom. DeMartino v Scarpetta, 404 US 805; People ex rel. Kropp v Shepsky, 305 NY 465.) An effort was made by this reform to introduce certainty and finality by limiting a parent’s right to revoke consent, with the stated intention of balancing the rights of surrendéring parents, adoptive parents and children. "This legislation is intended to provide a legal framework within which future adoptions can be undertaken with reasonable guarantees of permanence and with humane regard for the rights of the child, the natural mother and the adoptive parents”. The statute provided "stronger guarantees of the permanence of child adoption arrangements involving authorized social agencies and private-placement adoptions. * * * The uncertainty under which the adoptive parents are now required to live cannot but adversely affect the relationship between them and the child during the period prior to the actual adoption. * * * The broad damage that was done by the recent cases was to strike terror in the hearts of prospective adoptive parents and actually discourage other parents from entertaining adoption.” (1972 NY Legis Ann, at 202, 203.) "[T]his desire for certainty is desperately needed by adoptive parents as well, who at present are living under the shadow of fear by recent court decisions. The bond, the love, the intense emotion between adoptive parents and the child placed in their home, is created the very moment their dream is fulfilled and a child comes through the door of their home. The unconscionable uncertainty and gap in our laws on this subject at present will be remedied by this bill.” (Memorandum from Office of Senate Temporary President, Bill Jacket,' L 1972, ch 639.)

The objective of adding certainty and finality was achieved by the following statutory scheme. Consents executed or acknowledged before a judge or surrogate in which the adoption proceeding was to be commenced (judicial consents), if they so stated, became immediately irrevocable (Domestic Relations Law § 115-b [1] [c]). Consents not so executed or acknowledged (extrajudicial consents), if they so stated, became irrevocable 30 days after commencement of the adoption proceeding unless written notice of revocation was received by the court within that 30-day period (Domestic Relations Law § 115-b [1] [d] [i]). Even if such consent were timely revoked, however, the child would not be returned to the biological parents where the adoptive parents opposed revocation, but the revocation would be given effect only where the court "shall have determined that the best interests of the child will be promoted by giving force and effect to such revocation” (Domestic Relations Law § 115-b [1] [d] [ii]). In a best interests proceeding, biological parents had no right to custody superior to that of adoptive parents, notwithstanding that they were fit, competent and able to maintain, support and educate the child. Custody was to be awarded solely on the basis of the child’s best interests, without any presumption that such interests would be promoted by any particular custodial disposition (Domestic Relations Law § 115-b [1] [d] [ii]; [3]).

Respondents’ quarrel is not with the underlying substance of the statute. Indeed, a position that biological parents can revoke consent at any time until the adoption becomes final, or that they are entitled to a primacy of status over the adoptive parents in any dispositional hearing, would be a return to the law prior to the legislative reform and precisely contrary to the very purposes for which the statute was enacted. Nor do respondents claim that extrajudicial consents to private-placement adoptions are per se invalid, or that the Legislature is without power to make such consents irrevocable after a fixed period, or that a 30-day period is unreasonable.

Rather, respondents claim that they were not afforded proper notice of the operation and effect of the statute, in three respects. First, respondents urge that the statute is defective because it does not require notice to the biological parents of the commencement of an adoption proceeding, so they can know when their 30-day revocation period begins. Second, they contend that the statute does not, but should, require that biological parents be informed that, upon revocation, they do not necessarily secure the return of their child, but may face a best interests hearing in which they stand on equal footing with the adoptive parents. Third, apart from the particular statute or language of either document, respondents contend that their consent must be invalidated because, when the two forms were read together, they fostered a misleading belief that consent was only tentative until respondents appeared in court.

The purported failure of the statute or extrajudicial consent forms to provide for notice of either the commencement of the adoption proceeding or the limited right of revocation — respondents’ first two contentions — has several times elicited judicial criticism.

In Matter of Anonymous (55 AD2d 383), the biological parents sought to revoke their extrajudicial consent to adoption on the ground that the statute failed to provide for notice to them of the commencement of the adoption petition. While the majority concluded that in the circumstances it was not necessary to reach the issue of constitutionality of the statute, the dissenting justice would have declared the statute unconstitutional for failing to require in the extrajudicial consent any provision for adequate notice to biological parents as to when the adoption proceeding is commenced. He concluded that "[ijnsofar as the statute herein clearly affects the right of natural parents to the care and custody of their child, a right deemed 'essential,’ 'basic’ and 'precious’ [citations omitted] it is incumbent upon the State to provide adequate notice to the natural parents before a child is irrevocably taken away from them.” (Id., at p 387.)

In Matter of Daniel C. (115 Misc 2d 130, affd 99 AD2d 35, affd 63 NY2d 927), while the courts concluded that the mother lacked standing to challenge the statute because in the particular circumstances she had not been misled, concern was voiced at every level about the extrajudicial consent form: The acting surrogate recognized that a lay person "could easily infer from the language of the form that * * * the consent * * * could be revoked and upon revocation the parties would be restored to a status quo position,” and urged that "the official form should be revised so as to eliminate any possibility of a natural parent being deceived on the one hand, or on the other hand being in a position to [claim] that he was deceived.” (115 Misc 2d, at pp 133-134.) The Appellate Division majority noted that the case should not "become the springboard for returning the State to the deplorable situation that prevailed before the enactment of section 115-b”, and concluded that "[i]f the statute has defects, the cure is with the Legislature.” (99 AD2d, at p 47.) The dissenting justice, however, would have dismissed the adoption petition because the consent did not advise a signatory that timely revocation would not result in return of the child (99 AD2d 47, 70). We agreed with the Appellate Division majority that, by reason of the biological mother’s lack of standing, it was not necessary to reach any constitutional issue, but the dissenting judge in this court concluded that the consent form complied with neither statutory nor due process requirements (63 NY2d, at p 929 [Jasen, J., dissenting]).

In the present case, Family Court, addressing section 115-b, described the proceeding as presenting "a tragic scenario of misguided practices which should rightfully sound the alarm for reform of the adoption procedures in this state.” Two Appellate Division justices, in reversing, found the statute unconstitutional on its face in failing to require that the consent form advise the natural parents of all the consequences of a timely revocation of consent, noting that the attack on the statute’s failure to provide they be given notice of when the 30-day revocation period commences "also has merit.” (110 AD2d, at p 25, n 2.) The other two justices of the majority concluded that, on the facts, respondents did not give final and unequivocal consent to the adoption, but agreed that the statute was "badly flawed” in failing to provide for notice as to commencement of the adoption proceeding, and "troubling” in its failure to require notice that timely revocation at most results in a best interests hearing, not return of the child. (110 AD2d, at pp 30, 31.)

In each year of the past three years, there have been more than 7,000 adoptions (Source of Statistics: Office of Court Administration). In the extraordinary circumstances presented, where the statute is necessarily in wide use, where any defect may have profound impact on the lives of children and families, and where deeply troubling constitutional issues have several times been identified but have typically evaded review, we will first consider whether there is any infirmity in the statute or the consent forms, as alleged, before reaching the question of the parties’ particular circumstances (see, People v Liberta, 64 NY2d 152; People v Parker, 41 NY2d 21, 25).

We approach this inquiry bearing in mind that a statute will be interpreted, if possible, so as to uphold its constitutionality (see, Loretto v Teleprompter Manhattan CATV Corp., 58 NY2d 143, 149), and in accordance with its manifest intent and purpose (see, Matter of Sabot v Lavine, 42 NY2d 1068, 1069). We read Domestic Relations Law § 115-b to require that extrajudicial consent forms advise biological parents of the effect of their act, so that they are fully informed of their limited rights in the event they choose to make timely revocation, and we further conclude that the right to revoke consent runs from the date the biological parents are notified of the commencement of an adoption proceeding.

Section 115-b (1) begins: "If a duly executed and acknowledged consent to a private-placement adoption shall so recite, no action or proceeding may be maintained by the consenting parent for the custody of the child to be adopted, and no such consent shall be revoked by such parent if’. Among the subparagraphs of the section is (d) (ii), providing: "Notwithstanding that such written notice shall have been received within said thirty days, the notice of revocation shall be given effect only if the adoptive parents fail to oppose such revocation, as provided in subdivision three of this section, or, if they oppose such revocation and the court as provided in subdivision three of this section shall have determined that the best interests of the child will be promoted by giving force and effect to such revocation.” We read subdivision 1 to mean that, in order to fulfill the requirements of the statute, a consent must set forth the substance of what is provided in the entire paragraph, as appropriate, including the provisions of paragraph (d) (see, Dennis T. v Joseph C., 82 AD2d 125). This is in keeping with the expressed fundamental premise and objective in enacting section 115-b that a parent’s consent should be knowledgeable (see, Memorandum in Support, Chief Sponsor, Bill Jacket, L 1972, ch 639). Just as Domestic Relations Law § 115-b (2), involving judicial consents, requires the court to inform a parent of the consequences of consent, so in the case of extrajudicial consents, where there is no judge or surrogate to discharge this function, the mandates of section 115-b (1) serve to notify parents of the consequences of their consent.

Similarly, section 115-b (1), in fixing a reasonable time limitation on the right to revoke consent, presumes that the biological parent will receive notification of the adoption proceeding. Domestic Relations Law § 111 (3) provides that "Notice of the proposed adoption shall be given in such manner as the judge or surrogate may direct and an opportunity to be heard thereon may be afforded to a parent whose consent to adoption may not be required pursuant to subdivision two, if the judge or surrogate so orders.” Since the Legislature provided for a 30-day revocation period as of right, triggered by the adoption proceedings, it may fairly be implied that notice to the biological parents of the proceedings is required. Where they are not notified at the commencement of the adoption proceedings, then their 30-day period to revoke consent must begin to run when they are furnished notice.

Thus, we conclude both that Domestic Relations Law § 115-b requires that extrajudicial adoption consents notify the biological parents of the limited nature of their right of revocation, and that their 30-day revocation period runs from notice to them of the commencement of an adoption proceeding.

Ill

We next turn to the application of these principles to respondents’ contentions that their consents should be vitiated because they were improperly denied notice of the commencement of the adoption proceeding or the effects of timely revocation, and because they were misled by both forms and mistakenly, believed their consent was tentative until they appeared in court.

Although respondents did not receive notice of the adoption proceeding until a month after it had been commenced, and although the extrajudicial consent respondents signed failed to advise them of the consequences of a timely revocation, respondents suffered no injury as a result of either omission. It is axiomatic that there is no standing to complain where an alleged defect in or violation of a statute does not injure the party seeking redress (cf. Ulster County Ct. v Allen, 442 US 140, 154-155). Birth parents obviously would have no standing to complain that the consequences of timely revocation were omitted from consent forms if they were otherwise fully informed of those consequences (see, Matter of Daniel C., supra), or if they made no effort to revoke consent within 30 days of notification of the adoption proceeding. In either case absence of information from the form would not have affected them.

Respondents were entitled to receive notice of the commencement of the adoption proceeding, and the 30-day period for revocation of their consent could not begin to run against them until they were furnished such notice. Here, respondents were not advised when the adoption proceeding was commenced on December 19, 1983, but they were notified by Family Court on January 23 that there would be a preliminary hearing in connection with the adoption, including the case caption number, and surely knew then that an adoption proceeding had been commenced. Their right to revoke therefore must be measured from that date, and it ended 30 days later, on February 23. Respondents’ revocation on February 29, received by Family Court March 2, 1984, was plainly untimely. Having failed to revoke their consent within the 30-day statutory period, respondents cannot complain of a failure to advise them of what the consequences of a timely revocation would have been.

Respondents urge, however, that their tardiness should be excused, and the revocation treated as timely, because they believed that they could revoke their consent until they appeared in court in connection with the adoption. Although respondents may indeed have believed that their revocation was timely until a court appearance, their confusion was not caused by either consent form. Each form was captioned "Irrevocable Consent.” The judicial consent form they signed stated "the Consent I am now giving to said adoption is final and irrevocable”. The extrajudicial consent form they signed stated that "in the event that Consent is not executed before a Judge of the Family Court, the County of Suffolk, then and in that event this Consent shall become irrevocable thirty days after the commencement of the adoption proceeding unless written notice of revocation thereof shall be received by this Court within said thirty days.” This language in and of itself was not misleading, complied with the statute, and accurately conveyed the time limitation placed on revocation by Domestic Relations Law § 115-b (1) (d) (i).

Respondents’ subjective confusion, they say, arose not from any particular defect in either form or any representation by any third person, but as a result of their having received, glanced at and signed both forms together. Under such circumstances, the language of the form, not any mistaken impression gained by one party regarding the legal consequences of that language, must control (see, Goodison v Goodison, 66 AD2d 923, 924, affd 48 NY2d 786). Similarly, Mrs. K’s failure to read the forms before she signed them can be no excuse. She is presumed to have understood the contents of the documents she signed and agreed to them (see, Metzger v Aetna Ins. Co., 227 NY 411, 416).

Moreover, neither emotional distress nor mistake is a ground for vitiating consent- under Domestic Relations Law § 115-b (4). Release or surrender of a child for adoption is a traumatic event, heightened here by Sarah’s condition. But no consent, and surely no consent to the adoption of a handicapped child, could ever be relied on if it were revocable on such a basis. Respondents were single-minded in their resolve that Sarah be adopted immediately, and they sought out — and found — the quickest way to accomplish their objective, for the perceived good of the child as well as their family. Respondents held the consent forms for two weeks before signing them, then remained steadfast in their decision for three months thereafter, knowing the child was meanwhile making a life with appellants, as her prospective adoptive parents. Their consents included a statement of belief that appellants "are far more capable of dealing with this condition and raising the child than we are.” Even when they learned of the adoption proceeding in January, for more than a month they took no action, until Mr. K and his law partner called the court and for the first time consulted the statute, and then drew up a revocation. The consequence of a mistaken impression gained from Mr. K’s "two-minute” review of the critical documents cannot be visited on others.

Respondents were thus obligated to submit any revocation within 30 days after they received notice of the adoption , proceeding, unless they could establish "fraud, duress or coercion in the execution” of the consent (Domestic Relations Law § 115-b [4]). In evaluating respondents’ claim in this regard, it is crucial to recognize that under the statute, it would be insufficient to show that one was simply mistaken as to the meaning of a form. Rather, the claim must be that the consent was signed under compulsion or threat, or against one’s free will, or based upon fraudulent statements (see, e.g., Matter of Unnamed Baby Boy, 110 AD2d 1019; Gerstein v 532 Broad Hollow Rd. Co., 75 AD2d 292, 297; Matter of E. W. C., 89 Misc 2d 64, 71-73). Such evidence or finding is absent here.

Having failed to make any effort to revoke within 30 days of notification of the adoption proceeding, respondents are bound by their consent, and appellants’ petition for adoption should have been granted. We therefore do not reach the infirmities alleged by respondents in the best interests proceeding held before Family Court, which determined on the basis of several grounds including health, character, and ability to accept and provide for the child that Sarah’s best interests were served by her adoption by appellants.

IV

While the issues before us are resolved without reaching the constitutionality of the statute, we note that the reforms of 1972 were motivated by the Legislature’s concern that controversy and uncertainty overhung adoptions. Because certain dissatisfactions with the statute in its actual application have now several times been identified in the case law and literature, we believe it would be highly desirable for the Legislature to examine Domestic Relations Law § 115-b in the light of 13 years’ experience, for it appears that the well-founded concerns that engendered the law are not yet dispelled.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the petition for adoption granted.

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

Order reversed, etc.

      . As noted in the partial dissent at the Appellate Division, the hospital social worker suggested that respondents speak with someone from the Down’s Syndrome School in Bellmore, or a family with a Down’s Syndrome infant, but they were very determined to proceed with the adoption.

      . The Appellate Division, in its plurality opinion, found the remaining points raised by respondents as grounds for invalidating their consents — (1) duress, (2) lack of counsel and (3) alleged violations of Social Services Law §§ 371 and 374 — to be without merit, as Family Court had found. We conclude that these findings are fully supported by the record.

      . In 1971 the Governor disapproved a similar bill which would have granted to consenting parents an absolute right to bar an adoption during the 30-day revocation period. "This objectionable provision has been eliminated, thereby affording our courts adequate discretion to protect children from traumatic disruption of long-standing placements.” (Governor’s Memorandum, 1972 NY Legis Ann, at 360-361.)

      . The consent forms essentially followed the statute, so that respondents’ arguments may be considered as addressing the statute, or the forms, or both. In three respects respondents’ consents differ from those presented by prior case law (see, e.g., Matter of Daniel C., 63 NY2d 927). First, while the statute provides for judicial or extrajudicial consents, in the disjunctive, respondents signed both. Second, a sentence was added to both consents at respondents’ request stating the reason for the release (see, at p 231, supra). Third, a modifier such as "this” or "such” does not appear before the word "Consent” in the second sentence of the extrajudicial consent they signed.
      While the consents in issue were prepared by Mr. Verplank, they follow forms that have been in regular use. See, 10 McKinney’s Forms, Matrimonial and Family Law §§ 14:86D, 14:86E (1985 Supp Pamphlet).

      . In addition, extrajudicial consents have several times been found invalid (see, e.g., Matter of Unnamed Baby Boy, 110 AD2d 1019; Matter of Male Infant M., 76 AD2d 839, lv denied 50 NY2d 1056; Anonymous v Anonymous, 108 Misc 2d 1098, affd sub nom. Dennis T. v Joseph C., 82 AD2d 125, lv denied 55 NY2d 792; Matter of Janet G. v New York Foundling Hosp., 94 Misc 2d 133; Matter of James M. G., 86 Misc 2d 960).

      . See, Frieden, The Constitutional Rights of Natural Parents Under New York’s Adoption Statutes, 12 NYU Rev of L & Soc Change 617, concluding that to meet constitutional requirements, all consents should be executed before a court; and Note, Natural vs. Adoptive Parents: Divided Children and the Wisdom of Solomon, 57 Iowa L Rev 171, to the same effect. See also, Matter of Anonymous (G.) (89 Misc 2d 514, 516), regarding salutary procedures to assure that judicial consents are fully informed.


source: Caselaw Access Project

license: Public Domain

text:
    In the Matter of Forbes, Inc., Appellant, v Department of Finance of the City of New York, Respondent.
    Argued October 10, 1985;
    decided November 19, 1985
    POINTS OF COUNSEL

      Kenneth A. Caruso, Clarence W. Olmstead, Jr., William E.

      Flowers and Daniel Lavin for appellant.
    I. The City tax laws discriminate against Federal obligations. (Gibbons v Ogden, 9 Wheat [22 US] 1; M’Culloch v State of Maryland, 4 Wheat [17 US] 316; Memphis Bank & Trust Co. v Garner, 459 US 392; Smith v David, 323 US 111; New Jersey Ins. Co. v Division of Tax Appeals, 338 US 665; American Bank & Trust Co. v Dallas County, 463 US 855; Werner Co. v Director of Taxation, 350 US 492; United States v County of Fresno, 429 US 452; Schuylkill Trust Co. v Pennsylvania, 296 US 113.) II. The department applied an ineffective administrative regulation. (Acme Folding Box Co. v Finance Admin., 67 AD2d 689; People v Cull, 10 NY2d 123; People v Fogerty, 18 NY2d 664.)

      Frederick A. O. Schwarz, Jr., Corporation Counsel (Peter Rabinowitz and Glenn Newman of counsel), for respondent.
    I. The New York City General Corporation Tax is a nondiscriminatory franchise tax and, therefore, its treatment of Federal obligations is neither unconstitutional nor a violation of 31 USC § 3124 (a). (Catapano Co. v New York City Fin. Admin., 40 NY2d 1074, 431 US 910; Madden v Kentucky, 309 US 83; Carmichael v Southern Coal Co., 301 US 495; Capelle v Makowski, 62 AD2d 1167; Phillips Co. v Dumas School Dist., 361 US 376; Washington v United States, 460 US 536; United States v City of Detroit, 355 US 466; Memphis Bank & Trust Co. v Garner, 459 US 392; Matter of Barney’s v Department of Fin., 93 AD2d 642; Werner Co. v Director of Taxation, 350 US 492.) II. The informal audit guideline applied by respondent’s auditor is not a rule or regulation which must be formally published according to law; petitioner, in any case, was not affected by such "rule”, since the discretionary adjustment at issue was independently determined by a hearing officer and adopted by the Commissioner of Finance. (Matter of Barney’s v Department of Fin., 93 AD2d 642, 61 NY2d 786; Hotch v United States, 212 F2d 280.)

      David Sachs and Mary R. D’Agostino for Bankers Trust New York Corporation, amicus curiae.

    I. The City business tax is not a franchise tax. (Educational Films Corp. v Ward, 282 US 379; Home Ins. Co. v New York, 134 US 594; New York v Jersawit, 263 US 493; Matter of Commercial Safe Deposit Co., 148 Misc 527; People ex rel. United States Aluminum Print. Plate Co. v Knight, 174 NY 475; Werner Co. v Director of Taxation, 350 US 492.) II. The City business tax is not a nonproperty tax in lieu of a franchise tax. (Allstate Ins. Co. v

      United States, 419 F2d 409; American Bank & Trust Co. v Dallas County, 463 US 855.)
   OPINION OF THE COURT

Kaye, J.

By rendering investments in obligations of the Federal Government less attractive than other investments, in the calculation of taxes due under New York City’s General Corporation Tax, the City tax discriminates against Federal obligations within the meaning of the Federal statute permitting only nondiscriminatory franchise taxes to be levied on United States obligations (31 USC former § 742 [renum § 3124]), and therefore violates the supremacy clause of the United States Constitution (US Const, art VI, cl 2).

THE city’s TAX LAW

New York City imposes a general corporation tax, based upon net income, on both domestic and foreign corporations "[f]or the privilege of doing business, or of employing capital, or of owning or leasing property in the city in a corporate or organized capacity, or of maintaining an office in the city” (Administrative Code of City of New York § R46-3.0 [1]). Consistent with this purpose, the City has established rules for allocating corporate income for tax purposes, depending upon the connection between that income and the City. The allocation rules differ for income derived from a taxpayer’s business operations (business income) and income derived from a taxpayer’s investments (investment income). Allocated income is taxed at a rate of 9%.

The portion of a taxpayer’s business income allocated to the City is determined by multiplying the taxpayer’s total business income by the taxpayer’s "business allocation percentage” (BAP) (see, Administrative Code § R46-4.0 [3] [a]). The BAP essentially seeks to measure the percentage of the taxpayer’s business income derived from property, sales, services and receipts in the City. Thus, if a taxpayer conducts 60% of its business in the City, its BAP is 60%, and it will be taxed on 60% of its business income.

The portion of a taxpayer’s investment income allocated to the City, in contrast, is derived by measuring the contacts of the issuers of the obligations or securities in which the taxpayer invests, rather than the contacts of the taxpayer. In the case of corporate obligations, this measurement, called the "investment allocation percentage” (IAP), is the issuer’s BAP. Thus, if a taxpayer’s investments consist solely of the securities of one corporation, the portion of the taxpayer’s investment income to be allocated to the City is determined by multiplying the taxpayer’s total investment income by the BAP of the corporation issuing those securities (see, Administrative Code § R46-4.0 [3] [b]).

Although investment income from government obligations is treated somewhat differently, that difference logically flows from the principle that investment income is ordinarily taxable to the extent that the issuer has quantifiable contacts with the City. The City (and the taxpayer) can determine the BAP of an issuer of a corporate obligation simply by examining the issuer’s report containing this information (Administrative Code § R46-4.0 [3] [b] [1]), which must be filed by all corporations doing business in the City (Administrative Code § R46-5.0). The absence of any report by a corporate issuer would indicate no business in the City, and the issuer’s BAP (which becomes the taxpayer’s IAP with respect to that issue) would be zero. Governmental authorities, however, do not file such returns or reports with the City from which the extent of their connection with the City might be measured. Since the City cannot readily quantify those contacts, it has developed the following rules to determine a taxpayer’s IAP with respect to investments in government obligations (Administrative Code § R46-4.0 [3] [b] [3]).

—Obligations of the 49 States other than New York are allocated wholly outside the City.

—Obligations of the Federal Government and of New York State, as well as cash and cash equivalents, are allocated in accordance with the taxpayer’s IAP based on all other investments. However, if a taxpayer’s IAP is zero — i.e., if a taxpayer has not invested in corporate obligations or has invested in corporate obligations of issuers all of which have BAP’s of zero — income from these obligations is allocated based on the taxpayer’s BAP.

Again applying the principle that investment income is taxable to the extent of the issuer’s connection with the City, the theory behind these rules appears to be that States other than New York generally have little if any contact with the City. Therefore, it is appropriate to allocate their obligations entirely outside the City. The Federal Government and New York State, on the other hand, plainly have a substantial presence in the City. But because that presence is unquantified, it is necessary and appropriate to attribute to their obligations the allocation percentage of a taxpayer’s investments where the allocation percentages are more than zero and quantifiable.

Administrative Code § R46-4.0 (3) Ob) sets forth the method for determining a taxpayer’s investment allocation percentage. In essence, the taxpayer’s IAP is a fraction. The numerator is the combined allocated fair market value of all corporate obligations held by a taxpayer. The denominator is the taxpayer’s total investment capital, including the combined fair market value of corporate securities and the obligations of the other 49 States, but excluding "obligations of the United States and its instrumentalities and obligations of the state of New York, its political subdivisions and its instrumentalities”, as well as cash or cash equivalents, such as bank accounts.

appellant’s tax returns

An obvious objective of tax planning, given the City’s tax scheme, would be for a taxpayer to minimize the tax on its investment income by investing in (a) a small amount of corporate obligations issued by corporations with low BAP’s and (b) a large amount of Federal obligations. The low IAP attributable to corporate obligations having a low BAP would thus apply to a taxpayer’s entire investment portfolio, lowering its taxable investment income. Appellant’s investment portfolio for tax year 1978 indeed reflects this planning:

Issuer IAP Value

Sheraton 4.8438% $ 33,383

Alabama Power 0% 34,547

United States Not Applicable 6,931,345

Bank Accounts Not Applicable 579,808

2.38039% 7,579,083

Appellant claimed in its 1978 return that its total income from these investments was $342,669, and that its allocated investment income was $8,157 ($342,669 x 2.38039%).

The City audited appellant’s tax returns for each tax year in issue on this appeal (1977, 1978 and 1979), and adjusted appellant’s IAP by excluding its investment in Sheraton corporate obligations pursuant to Administrative Code § R46-4.0 (8), which provides in relevant part: "If it shall appear to the director of finance that any business or investment allocation percentage determined as hereinabove provided does not properly reflect the activity, business, income or capital of a taxpayer within the city, the director of finance shall be authorized in his discretion * * * in the case of an investment allocation percentage to adjust it by excluding one or more assets in computing such percentage provided the income therefrom is also excluded in determining entire net income.” As a result of the exclusion, appellant’s income attributable to its Sheraton investment was not taxed at all. But because the exclusion reduced appellant’s IAP to zero, the remaining investment income derived from Federal obligations and bank accounts was allocated based upon appellant’s BAP of 60% rather than its IAP of 2.38%, in accordance with Administrative Code § R46-4.0 (3) (b) (3). The net result of these recalculations was that appellant was assessed additional taxes in excess of $68,000, plus interest, which thereafter became the subject of this appeal.

THE 18% RULE

On appellant’s petition to the Department of Finance for a redetermination of the additional assessment, the auditor who had examined the returns testified as to why he had excluded investments in Sheraton. According to the auditor, for each tax year he calculated the ratio between the value of appellant’s investments in corporate obligations and the total value of its investments, which yielded a percentage well under 2%. For example, for the tax year 1978, the percentage was 0.896% ($67,930 divided by $7,579,083). The auditor testified he had oral instructions that if the ratio were less than 18%, he was automatically to invoke the discretionary power provided by section R46-4.0 (8). Based upon these instructions, he eliminated appellant’s "non-zero investment allocation percentage securities,” which consisted of the Sheraton obligations. This testimony was credited by the referee who heard appellant’s petition for redetermination, and is set forth in the referee’s findings. Nonetheless, the referee concluded that appellant had "not demonstrated that the Commissioner of Finance has abused his discretion, nor that the Investment Allocation Percentages which [appellant] calculated properly reflected its investment activity. Accordingly, the Business Allocation Percentages were correctly applied at the audit level to [appellant’s] interest income from Government Obligations and Bank Certificates of Deposit.”

THE BURDEN ON FEDERAL OBLIGATIONS

The City tax law places a greater burden on taxpayers holding Federal obligations, thus making them less attractive investments, in two ways. First, the law discriminates in favor of the obligations of the other 49 States. Second, the law discriminates in favor of corporate obligations.

The first form of discrimination arises out of the method for calculating a taxpayer’s IAP. While the numerator is based on the value of corporate obligations, the denominator is based on the total value of investment capital, excluding United States obligations and bank accounts. Since the IAP is a fraction, the taxpayer is disadvantaged if the denominator is smaller. The following comparison of appellant’s 1978 tax figures with those of a hypothetical taxpayer with otherwise identical investments — except for a presumed investment in Connecticut bonds rather than Federal obligations — is illustrative:

Hypothetical

Appellant Taxpayer

Sheraton/ Alabama $ 67,930 $ 67,930

IAP (2.38039%) (2.38039%)

United States 6,931,345 0

Connecticut 0 6,931,345

Bank Accounts 579,808 579,808

7,579,083 7,579,083

In both cases, the numerator for calculating the IAP will be the same. The fair market value of the corporate obligations ($67,930) is multiplied by the issuer’s BAP (2.38039%). The resulting figure is $1,617. The denominators, however, are different. In appellant’s return the denominator is $67,930, the fair market value of total investment capital excluding United States obligations and bank accounts. In the hypothetical return, the denominator will be $6,999,275 — the fair market value of the corporate and Connecticut obligations. Thus, appellant would have an IAP of 2.38039%, while the hypothetical taxpayer would have an IAP of .0231%. In 1978, appellant had total investment income of $342,669. It determined its taxable investment income by multiplying that figure by its IAP (2.38039%), resulting in a figure of $8,157. At a 9% tax rate, the tax on its investment income was $734. Assuming that appellant had invested in Connecticut rather than Federal obligations and obtained the same total investment income, its taxable investment income would have been $79 ($342,669 x .0231%), yielding a tax of only $7.

The second form of discrimination arises out of the 18% rule. In effect, the rule penalizes a taxpayer who invests 82% or more of its capital in obligations other than certain corporate obligations — including Federal obligations. Appellant’s total investment income for the tax year 1978 was $342,669. Assuming that the income attributable to Sheraton obligations was $3,000, the 18% rule had the following effect:

Without 18% Rule With 18% Rule

Preallocation

Investment

Income . $342,669 $339,669

Allocation

Percentage 2.38039% 60%

Taxable

Investment

Income 8,157 203,801

Tax (9%) 734 18,342

Moreover, had appellant invested less than 82% of its investment capital in Federal obligations, and instead invested more in corporate obligations having low BAP’s, it would have escaped the 18% rule and paid less tax. For example, assuming appellant had realized the same investment income by purchasing $1,067,930 in corporate obligations (rather than $67,930) and $5,931,345 in Federal obligations (rather than $6,931,345), and assuming that the allocation percentage of the additional corporate obligations was also 2.38%, appellant’s tax bill would have been $17,608 lower.

THE FEDERAL STATUTE

Appellant urges that the City’s tax is unconstitutional because it conflicted with 31 USC § 742 (renum 31 USC § 3124 [a]), which provided in relevant part: "[A]ll stocks, bonds, Treasury notes, and other obligations of the United States, shall be exempt from taxation by or under State or municipal or local authority. This exemption extends to every form of taxation that would require that either the obligations or the interest thereon, or both, be considered directly or indirectly, in the computation of the tax, except nondiscriminatory franchise or other nonproperty taxes in lieu thereof imposed on corporations and except estate taxes or inheritance taxes.” Appellant’s position is that the City’s tax is a franchise tax that impermissibly discriminates against obligations of the United States.

Section 742 was " 'principally a restatement of the constitutional rule’ ” (First Natl. Bank v Bartow County Bd., 470 US —, 105 S Ct 1516, 1522, quoting Memphis Bank & Trust Co. v Garner, 459 US 392, 397) established by the Supreme Court beginning with McCulloch v Maryland (4 Wheat [17 US] 316) that " 'States may not impose taxes directly on the Federal Government, nor may they impose taxes the legal incidence of which falls on the Federal Government’ ” (Memphis Bank & Trust Co. v Garner, 459 US 392, 397, supra, quoting United States v County of Fresno, 429 US 452, 459). Section 742 and its predecessors were designed " 'to prevent taxes which diminish in the slightest degree the market value or the investment attractiveness of obligations issued by the United States in an effort to secure necessary credit’ ” (Memphis Bank & Trust Co. v Garner, 459 US 392, 396, supra, quoting Smith v Davis, 323 US 111, 117). To this end, former section 742 provided "a 'sweeping’ exemption for federal obligations” (First Natl. Bank v Bartow, 470 US —, 105 S Ct 1516, 1520, supra, quoting American Bank & Trust Co. v Dallas County, 463 US 855, 862). "Congress intended to sweep away formal distinctions and to invalidate all taxes measured directly or indirectly by the value of federal obligations, except those specified” in the exclusion (American Bank & Trust Co. v Dallas County, 463 US 855, 867, supra).

The exclusion contained in section 742 for nondiscriminatory franchise taxes was added to the statute in 1959 and embodies a court-created exception for "nondiscriminatory taxes imposed on discrete property interests such as corporate shares or business franchises, even though the value of that discrete interest was measured by the underlying assets, including United States obligations” (American Bank & Trust Co. v Dallas County, 463 US 855, 858, supra). A franchise tax is constitutional so long as it "remains the same whatever the character of the corporate assets may be” (Werner Co. v Director of Taxation, 350 US 492, 493-494). In Werner, the court upheld a franchise tax based upon a corporation’s net worth, which included the value of Federal bonds held by the taxpayer. On the other hand, a "state tax that imposes a greater burden on holders of federal property than on holders of similar state property impermissibly discriminates against federal obligations” (Memphis Bank & Trust Co. v Garner, 459 US 392, 397, supra).

As a practical matter, the City tax unquestionably imposes a greater burden on holders of Federal obligations than on holders of certain other obligations, and thereby diminishes to some degree the investment attractiveness of Federal obligations. Excluding Federal obligations from the denominator of the IAP, while including obligations of other States, effectively places a greater tax on the former than on the latter. The 18% rule compounds the problem, by disadvantaging taxpayers who invest 82% or more of the value of their portfolios in obligations other than those of corporations with low BAP’s, including Federal obligations.

The City concedes that its tax has these effects, but argues that the tax is not discriminatory both because it has a rational basis and because it does not favor New York State obligations over Federal obligations. Neither argument, however, would save the tax.

There is undoubtedly a rational basis for both the definition of IAP and the 18% rule. It is not irrational to allocate investment income by the extent to which an issuer does business in the City, and it is not irrational to conclude that the Federal Government has greater contacts with the City than do other States. Similarly, it is not irrational to seek to correct distortions that may occur where, as here, a taxpayer virtually avoids all tax on investment income by investing a small amount in the obligations of corporations having little contact with the City and the balance in zero-valued securities.

That the disparities may be rational for due process or equal protection purposes, however, is not relevant under section 742. Memphis Bank & Trust Co. v Garner (459 US 392, supra) makes clear that the controlling issue under section 742 is simply whether the tax adversely affects Federal obligations in comparison to other obligations. Phillips Co. v Dumas School Dist. (361 US 376), heavily relied upon by the City, in fact undercuts its position. In Phillips, the school district argued that there was a rational basis for its tax on lessees of Federally owned real property, which was more onerous than the corresponding tax on lessees of State property. But the Supreme Court rejected this contention and held the tax unconstitutional because the State had an obligation to "treat those who deal with the [Federal] Government as well as it treats those with whom it deals itself’ (361 US, at p 385).

It is also beside the point that the tax scheme does not discriminate in favor of obligations of the State of New York. Typically, cases raising the issue of discrimination have involved situations in which States favored their own obligations (see, e.g., Memphis Bank & Trust Co. v Garner, 459 US 392, supra). But nothing in the statute suggests that it should be so limited. To the contrary, the statutory goal of preserving Federal borrowing power is threatened whenever any other class of obligations is taxed more leniently than Federal obligations. In Schuylkill Trust Co. v Pennsylvania (296 US 113), the State statute excluded the value of shares of Pennsylvania corporations held by the taxpayer. Although the statute favored certain corporate (rather than Commonwealth of Pennsylvania) obligations, the court nonetheless found it improper: "If the burden of the tax be lifted in respect of some securities (as it is by confession from those issued by certain Pennsylvania corporations) it must necessarily fall on the remaining securities owned by the company” (296 US, at p 120). Similarly, cases such as United States v County of Fresno (429 US 452, supra) and United States v City of Detroit (355 US 466) support appellant’s position, not respondent’s. In County of Fresno, for example, California imposed a tax on renters of otherwise tax-exempt real property (including property owned by the Federal Government). The tax was constitutional, however, because the State imposed a corresponding property tax on owners of nonexempt property which was passed on to renters. Consequently, those who rented from the Federal Government were "no worse off under California tax laws than those who work[ed] for private employers and rent[ed] houses in the private sector” (429 US, at p 465). Here, in contrast, appellant is "worse off” because it invested in Federal obligations rather than obligations of "the private sector” or of States other than New York.

Accordingly, the judgment of the Appellate Division should be reversed, with costs, the petition granted, the determination of respondent Department of Finance annulled, and the matter remitted to respondent for readjustment of appellant’s tax liability for the tax years in issue (a) by calculating appellant’s IAP as if its Federal obligations were obligations of a State other than New York and (b) without adjusting appellant’s IAP pursuant to section R46-4.0 (8).

Chief Judge Wachtler and Judges Jasen, Meyer, Alexander and Titone concur; Judge Simons taking no part.

Judgment reversed, with costs, petition granted, determination of respondent Department of Finance annulled, and matter remitted to Supreme Court, New York County, with directions to remand to respondent for further proceedings in accordance with the opinion herein.

       Appellant also argues that the 18% rule is invalid because it is a rule or regulation required to be published pursuant to New York City Charter § 1105. While in general constitutional questions are not reached when a case can be decided on a nonconstitutional ground (see, Matter of Beach v Shanley, 62 NY2d 241, 254), here even a determination that the 18% rule should have been published would not dispose of the more fundamental question whether on remittal the Commissioner could, in view of the discrimination, constitutionally exercise any discretion. Neither ground urged by appellant on this appeal was before us in Matter of Barney’s, Inc. v Department of Fin. (93 AD2d 642, affd 61 NY2d 786).
      In view of our conclusion that the tax is discriminatory, we need not reach the issue, tendered in the brief of the amicus curiae, whether it is indeed even a franchise tax.


author: Alexander, J.

text:
    The People of the State of New York, Appellant, v Michael Morgan, Respondent.
    Argued October 15, 1985;
    decided November 19, 1985
    POINTS OF COUNSEL

      Stephen F. Lungen, District Attorney, for appellant.
    I. The prosecutor’s summation did not abridge respondent’s right to a fair trial. (People v Savage, 50 NY2d 673; People v Dawson, 50 NY2d 311; People v Steinhardt, 9 NY2d 267; People v Carborano, 301 NY 39; People v Johnson, 47 NY2d 785, 444 US 857; People v Marks, 6 NY2d 67; People v Galloway, 54 NY2d 396; People v Crimmins, 36 NY2d 230; People v Rosenfeld, 11 NY2d 290.) II. The evidence against respondent was overwhelming proving him guilty beyond a reasonable doubt. (People v Crimmins, 36 NY2d 230.)

      Keith Geoffrey Ingber for respondent.
    I. Respondent was deprived of his dué process right to a fair trial by the improper examination by the District Attorney of one of the People’s witnesses and subsequent remarks in the District Attorney’s summation. (Chapman v California, 386 US 18; Fahy v Connecticut, 375 US 85; People v Wagman, 99 AD2d 519; People v Nunez, 74 AD2d 805; People u Whitehurst, 87 AD2d 896; People v Muniz, 40 AD2d 985.) II. The People did not establish the guilt of respondent beyond a reasonable doubt. (People v Bailey, 58 NY2d 272; People v Crimmins, 36 NY2d 230; People v Trimarchi, 231 NY 263; People v Erit, 237 App Div 35; People v Eckert, 2 NY2d 126; People v Insogna, 28 AD2d 771; People v Blake, 5 NY2d 118; People v La Beause, 34 AD2d 596; People v Raco, 34 AD2d 1039; People v Cleague, 22 NY2d 363.)
   OPINION OF THE COURT

Alexander, J.

When the circumstantial evidence in this case is viewed in a light most favorable to the prosecution, as we are required to do on this appeal (People v Kennedy, 47 NY2d 196; People v Benzinger, 36 NY2d 29, 32), and the prosecution is given the benefit of every reasonable inference to be drawn therefrom (People v Lewis, 64 NY2d 1111, 1112, People v Way, 59 NY2d 361, 365; People v Montanez, 41 NY2d 53, 57), the facts from which the inference of defendant’s guilt is drawn, when perceived as a whole, overwhelmingly establish his guilt beyond a reasonable doubt, are inconsistent with his innocence and exclude to a moral certainty every other reasonable hypothesis (see, People v Lewis, supra; People v Way, supra; People v Barnes, 50 NY2d 375, 380; People v Montanez, supra; People v Benzinger, supra). Although the prosecutor’s comments during summation went beyond the limits of propriety, in light of the overwhelming evidence of guilt, we hold that this error is harmless and that defendant was not deprived of a fair trial thereby (see, People v Crimmins, 36 NY2d 230; People v Brosnan, 32 NY2d 254; People v Roopchand, 65 NY2d 837). Consequently, the order of the Appellate Division should be reversed and the case remitted to that court for consideration of the facts and issues not reached.

Defendant and codefendant Kevin Postell were indicted on various charges of rape, sodomy, sexual abuse and burglary arising from an incident that occurred on December 8, 1981, when the complainant was attacked in her apartment which she shared with her boyfriend in Mountaindale, New York. At approximately 6:30 p.m. on that date, when she opened the apartment door in response to a knock, two men wearing stocking masks pushed their way in, pressed a knife against her neck and proceeded to rape her and sodomize her. She reported that after the assailants left, a half ounce of marihuana and a purple pouch containing collector’s coins were missing from the apartment.

Approximately 20 minutes prior to the attack, the complainant had received a telephone call from defendant, whom she knew through her boyfriend. Defendant asked to speak to the boyfriend about a possible purchase of marihuana. Complainant recognized defendant’s voice from prior conversations, and advised him that her boyfriend was not at home.

There were no lights on in the apartment during the attack, but complainant was able to describe her attackers by their contrasting height and build. She described them as a big one, who was tall and stocky, and a smaller one, who was shorter and had a slim frame. Theáe descriptions fairly reflected the relative sizes and builds of defendant Morgan and his codefendant. (Defendant fits the description of the "smaller one”.) Complainant was able to determine accurately that her attackers were black. She also testified that while being violated by Postell, she heard defendant rummaging through the apartment, and at one point he demanded to know where the marihuana was kept. She was not able to identify defendant by his voice, however, because the "smaller one” spoke in an unnaturally deep voice, apparently in an attempt to disguise it.

Defendant and Postell were placed at the complainant’s building by two witnesses at approximately the time the attack occurred. Arthur Serrano testified that he observed them enter complainant’s building between 6:30 and 7:00 p.m. and that no one else either entered or exited the building during that period of time. Julia Ann Colon identified the codefendants as the two she saw walking down the alley in the direction of complainant’s building between 6:00 and 7:00 p.m., and whom she observed return from that direction a short time later, enter a gray automobile and drive off.

Walter Williams testified that defendant and Postell came to his home between 5:30 and 6:00 p.m. to use his telephone but left because his phone was out of order. While there, however, he overheard them discussing their desire to "rip something off”. Defendant and Postell came back to Williams’ house approximately one-half hour later and asked Williams to give them a ride out of town, which he did in his gray Cadillac. Williams noticed that Postell was carrying a purple pouch.

A week or so later, Williams again gave defendant a ride, and was told by defendant that defendant had not been involved in the rape, and that Postell was entirely to be blamed. However, they then picked up Postell, who was hitchhiking, and Williams overheard the codefendants discussing how they could exculpate themselves.

The jury also heard testimony from Penny Troy that on December 13, defendant had bragged to her about having had a sexual experience with a white girl in Mountaindale. She testified further that Postell, on the same occasion, admitted that he had raped a girl in Mountaindale.

Defendant was interviewed by Detective Robert Robinson of the Fallsburg Police Department on December 14, 1981, and although he was not placed under arrest at that time, he was given Miranda warnings. Detective Robinson advised defendant that he and Postell were suspects, but that he was not obligated to speak to the police and was free to leave the station house at any time. Nonetheless, defendant consented to an interview which was tape recorded. The tape was received into evidence at the trial. During the interview, defendant admitted that he and Postell were in Mountaindale at the time of the rape, and that he had spoken to the complainant during the second of three telephone calls that he made to her apartment. He also admitted to having knocked on complainant’s door while Postell waited in the hallway, but contended that his knock went unanswered. He denied having "done anything” and in an apparent effort to exculpate himself and divert suspicion, he questioned the complainant’s ability to identify her assailants, observing that she knew him and should have been able to recognize his voice.

Despite the overwhelming evidence of defendant’s guilt, the Appellate Division, relying on People v Conyers (52 NY2d 454) and People v Bailey (58 NY2d 272), reversed the conviction based on the prosecutor’s tactic, during summation, of contrasting defendant’s quiet and soft spoken demeanor in the face of an accusation of having committed rape, sodomy and a burglary, with the way in which the prosecutor would have reacted in like circumstances, stating that: "If someone is going to talk to me about being a suspect in a rape and I wasn’t in Mountaindale and I was this and that, you would have to hold me down. I would have been pounding the tables, swinging from the ceiling. I would have been doing everything to tell you it wasn’t me.” The prosecutor’s characterization was made in response to defense counsel’s prior assertion that defendant had told the jury, "through Detective Robinson that, in fact, he hadn’t [committed any oifense].”

While we agree with the Appellate Division that the prosecutor’s statement of his personal view as to what he would have done in like circumstances was improper, we note that the comments were in response to defense counsel’s summation, and were not actually an attempt to impeach defendant through reference to his postarrest silence as was the case in People v Conyers (52 NY2d 454, supra). Rather, the remarks related to the content and manner of the voluntary statements made by defendant during his interview with the police. Moreover, although the prosecutor used himself as an example of contrasting conduct, that use did not rise to the level of transforming the prosecutor into an unsworn witness (see, People v Bailey, 58 NY2d 272, supra). We conclude, therefore, that in the context of the entire summation and the overwhelming evidence of guilt, the prosecutor’s comments were harmless error (People v Crimmins, 36 NY2d 230, supra) and did not deprive defendant of a fair trial (People v Hopkins, 58 NY2d 1079; People v Galloway, 54 NY2d 396).

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

Order reversed and case remitted to the Appellate Division, Third Department, for further proceedings in accordance with the opinion herein.

       Both defendants were initially tried together, but the jury was unable to reach a verdict as to Michael Morgan, while it convicted the codefendant on all counts. This appeal is from the judgment of conviction rendered upon defendant’s retrial.


text:
    Frances J. Roggio, Appellant, v Nationwide Mutual Insurance Company, Respondent.
    Argued October 9, 1985;
    decided November 21, 1985
    POINTS OF COUNSEL

      Harold L. Solomon and Robert M. Cohen for appellant.
    Plaintiff is not barred from bringing suit to seek enforcement of her right to payment of no-fault benefits. (Clurman v Clurman, 52 NY2d 1036; Mendelsohn v A & D Catering Corp., 100 AD2d 209; Marangiello v Kamak, 64 AD2d 624; Matter of

      Nassau Ins. Co. v McMorris, 41 NY2d 701; Scheiner v Empire Mut. Ins. Co., 122 Misc 2d 249; Deto Lab. v Allstate Ins. Co., 117 Misc 2d 1027; Matter of United Paper Mach. Corp. [Di Carlo], 19 AD2d 143, 14 NY2d 814; Hoehn v Schenck, 221 App Div 371.)

      Henry Neal Connolly, Donald P. Ford, Jr., and Michael J. Hutter, Jr., for respondent.
    A person who initially opts for arbitration of his/her claim for certain first-party benefits from an insurance carrier arising from an automobile accident under the No-Fault Law may not subsequently resort to the courts for resolution of further claims for first-party benefits arising from the same accident. (Matter of Nassau Ins. Co. v McMorris, 41 NY2d 701; Matter of Berent [County of Erie], 86 AD2d 764; Matter of Aetna Cas. & Sur. Co. v Cochrane, 64 NY2d 796; Sherrill v Grayco Bldrs., 64 NY2d 261; De Sapio v Kohlmeyer, 35 NY2d 402; Denihan v Denihan, 34 NY2d 307; Banner Cas. Co. v Fox, 86 Misc 2d 772; Montgomery v Daniels, 38 NY2d 41.)
   OPINION OF THE COURT

Kaye, J.

In a dispute involving an insurer’s liability to pay first-party benefits under the No-Fault Law, a claimant denied recovery in arbitration as to certain medical bills cannot then turn to the courts seeking recovery of later medical bills arising from the same accident.

On February 3, 1981, plaintiff, Frances Roggio, was in an accident while driving an automobile insured by defendant, Nationwide Mutual Insurance Co. Nationwide paid claims submitted by Roggio for first-party benefits arising out of the accident until October 22, 1981, when Roggio was examined at Nationwide’s request by Dr. Paul Clark. Dr. Clark reported that Roggio had suffered certain injuries but that there was no objective evidence of orthopedic injuries and no need to continue physiotherapy. Based on his report, Nationwide denied further claims by Roggio for expenses incurred for orthopedic physical therapy treatments, and also denied Roggio’s claims for dental work.

In early 1982, Roggio chose to arbitrate Nationwide’s denial of her claims. Following a hearing before the Health Service Arbitration (H.S.A.) panel (see, 11 NYCRR 65.16 [c] [5]), an award was issued declaring that most of the services rendered were unnecessary, but requiring Nationwide to pay one X-ray and one dental bill. Roggio appealed to a Master Arbitrator (see, 11 NYCRR 65.17), who on July 22, 1982 determined the evidence supported the panel’s decision. The following month, Roggio commenced a CPLR article 75 proceeding to vacate the arbitration award, but the petition was denied in early 1983 and an appeal to the Appellate Division was withdrawn by stipulation. Meanwhile, Roggio submitted another first-party benefits claim for expenses incurred in July 1982, and this claim was also denied by Nationwide. On August 19, 1982, Roggio again opted to arbitrate Nationwide’s denial of that claim. That arbitration has been suspended pending resolution of the present action.

The claim at issue is for reimbursement of $92.04, for a bill of Dr. William Kite submitted to Nationwide on December 9, 1982. When Nationwide refused to pay this bill, Roggio in July 1983 sued in Supreme Court, Albany County. Special Term denied Nationwide’s motion to compel no-fault arbitration or to dismiss the action as barred by res judicata and collateral estoppel, and denied Roggio’s cross motion for summary judgment. On appeal by Nationwide, the Appellate Division dismissed the complaint, concluding that while Roggio’s claim arose after the arbitration award and was therefore not barred by res judicata or collateral estoppel, her election to arbitrate precluded litigation for first-party benefits arising out of the same accident. On this appeal Nationwide recognizes that Roggio is entitled to a hearing on Dr. Kite’s bill, but urges that she is bound by her election to arbitrate. We now affirm the Appellate Division order holding Roggio to her election.

Insurance Law § 5106 (a), in providing that "[pjayments of first party benefits and additional first party benefits shall be made as the loss is incurred”, enables claimants to pursue rapid reimbursement of expenses, as each loss is incurred. Payment is due within 30 days of proof of each loss; a denial of reimbursement entitles the claimant to seek immediate redress, and to recover both the amount of any overdue claim and reasonable attorney’s fees in securing payment. Under section 5106 (b), "[e]very insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party benefits, or additional first party benefits * * * to arbitration pursuant to simplified procedures to be promulgated or approved by the superintendent.” In furtherance of this authority, the Superintendent has promulgated regulations (11 NYCRR part 65) establishing arbitration procedures to resolve disputes concerning coverage, health services and other matters. The two arbitrations commenced by Roggio concerned health services, and the arbitrators were authorized by regulation to determine whether the expenses were necessarily incurred for professional health services on account of personal injuries arising out of the accident (see, Insurance Law § 5102 [a], [b]; 11 NYCRR 65.16 [c] [3] [ii]).

Roggio contends that because Insurance Law § 5106 (a) provides that benefits become due as each loss is incurred, and because each denial of reimbursement by an insurer is by statute made independently subject to redress, the "option” set forth in section 5106 (b) to arbitrate any dispute must include as well an option to litigate any dispute. We cannot agree. The background and language of the statute persuade us that the option to arbitrate provided by Insurance Law § 5106 (b) should be read as it is written, and that a claimant disappointed in the pursuit of medical expense reimbursement in arbitration cannot, on the next rejected bill arising from the same accident, then look to the courts.

In other settings, claimants would not be permitted to flit between forums for the resolution of issues or items of damage arising from a single injury. Such a result would represent an intolerable drain on our resources for dispute resolution, senselessly prolonging controversies and inviting inconsistent adjudications. "The courtroom may not be used as a convenient vestibule to the arbitration hall so as to allow a party to create his own unique structure combining litigation and arbitration.” (De Sapio v Kohlmeyer, 35 NY2d 402, 406.) By the same token, parties are not permitted to participate in arbitration on the merits and yet maintain a right to litigate the issues (see, Sherrill v Grayco Bldrs., 64 NY2d 261, 273).

In the setting of no-fault benefits, while each denial of medical expense reimbursement may — for purposes of facilitating quick recoveries — give rise to an independent claim, there is all the more reason why an election to arbitrate should foreclose litigation of subsequent disputes over medical bills growing out of the same accident.

A legislative objective in enacting the No-Fault Law was to reduce significantly the burden of automobile personal injury litigation on the courts (Memorandum of State Executive Department, 1977 McKinney’s Session Laws of NY, at 2445, 2448; Governor’s Message of Approval of L 1977, ch 892, id., at 2534, 2535). Reading into Insurance Law § 5106 (b) an option to litigate after disappointments in arbitration is obviously inconsistent with this legislative purpose.

Moreover, the clear thrust of section 5106 is to provide no-fault claimants with an opportunity for immediate redress, and by arbitration to offer a mechanism where disputes over reimbursable expenses can be resolved more swiftly and economically than is generally possible in plenary suits. Toward this end, both the statute and the regulations governing health service arbitrations clearly contemplate multiple disputes arising out of the same accident (Insurance Law § 5106 [b]; 11 NYCRR 65.16 [c] [5] [i]), which — when all are in arbitration — can be consolidated for efficient disposition (11 NYCRR 65.16 [c] [5] [i]). Further illustrative of this purpose is the amendment of Insurance Law § 5106 expanding the jurisdiction of arbitration panels to include in a single proceeding resolution of disputes as to additional first-party benefits as well as basic first-party benefits (L 1973, ch 13, as amended by L 1981, ch 340; see also, Chapter Law Memorandum, ch 340, 1981 NY Legis Ann, at 193). The objective of providing an efficient informal mechanism for recovery of benefits is dis-served if a claimant can arbitrate disputes as to certain expenses and also litigate disputes as to other expenses arising out of one accident.

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

Chief Judge Wachtler and Judges Jasen, Meyer, Alexander and Titone concur; Judge Simons taking no part.

Order affirmed, with costs.

       Roggio’s various claims are not "separate and distinct” (Denihan v Denihan, 34 NY2d 307, 310). In Denihan, the various claims were related only because they were based on the same shareholders’ agreement. Here, in contrast, all the claims not only relate to a single document — the insurance agreement — but also arise out of a single factual occurrence — the motor vehicle accident.