author: Kaye, J.

text:
    Peter G. Eikenberry, Respondent, v Adirondack Spring Water Co., Inc., et al., Appellants.
    Argued April 23, 1985;
    decided May 30, 1985
    POINTS OF COUNSEL

      Joel Bernstein for appellants.
    I. The actual or true interest rate charged under the 1980 agreement at the time the forbearance was made was usurious. (Band Realty Co. v North Brewster, Inc., 37 NY2d 460.) II. The 1980 agreement violates both the civil and criminal usury statutes and is thereby void. III. The defense of criminal usury was not waived and may be interposed as a defense by the corporate defendant and the other defendants. (Hammelburger v Foursome Inn Corp., 76 AD2d 646.) IV. Plaintiff cannot recover under the void 1980 agreement and must return the amount paid thereunder to defendants or apply same to the amount owing, if any, under the 1976 agreement. (Real Estate Trust Co. v Keech, 69 NY 248.)

      Peter G. Eikenberry, pro se, Martin E. Connor and Paul R. Levenson for Peter G. Eikenberry, respondent.
    I. There is no “criminal usury” because the 1980 and 1981 agreements provided for interest from a date later than the time the underlying obligation arose. (Marvin v Feeter, 8 Wend 533; Gettinger v Lattingtown Harbor Dev. Co., 17 AD2d 629; Franklin Natl. Bank v Feldman, 42 Misc 2d 839; Matter of Aaron, 30 NY2d 718; Matter of Montgomery, 246 App Div 495; Matter of Mandel, 20 AD2d 719; Bergerman & Hourwich v Harman, 51 Misc 2d 414.) II. Under the traditional formula of computation the true interest rate charged under the 1980 and 1981 agreements is less than 8%. (Feldman v Kings Highway Sav. Bank, 278 App Div 589, 303 NY 675; Band Realty Co. v North Brewster, Inc., 37 NY2d 460.) III. The 1980 and 1981 agreements are not usurious because they provided for interest at below the legal rate at the time both the agreements and respondent’s forbearance of suit were made. IV. The 1980 and 1981 agreements were directed to a preexisting debt between the parties and did not constitute a loan or forbearance within the meaning of the General Obligations Law. (Lander v Gambino, 94 AD2d 715.) V. The 1980 and 1981 agreements are not usurious because they were made after appellants’ obligation to respondent was fully mature. (American Express Co. v Brown, 392 F Supp 235; Union Estates Co. v Adlon Constr. Co., 221 NY 183; Bloom v Trepmal Constr. Corp., 29 AD2d 951, 23 NY2d 730; Heelan v Security Natl. Bank, 73 Misc 2d 1004.) VI. The defense of usury is not available to corporate appellant Adirondack Spring Water Co. (Schneider v Phelps, 41 NY2d 238.) VII. Even if the 1980 and 1981 agreements are deemed usurious respondent is entitled to summary judgment for the sums due under the retainer agreement. (Henal Novelties & Premiums Corp. v Herman, 82 Misc 2d 711; DeSimon v Ogden Assoc., 88 AD2d 472; Stitz v Stevens, 70 AD2d 588; Patterson v Birdsall, 64 NY 294.)
   OPINION OF THE COURT

Kaye, J.

Where an extension agreement for the repayment of a debt is void, because of a usurious rate of interest, the invalidity of that agreement does not extinguish defendants’ liability to plaintiff for the debt under the parties’ original contract.

Plaintiff rendered legal services to defendants pursuant to a November 12,1974 retainer agreement, with agreed hourly fees to be paid partly at the rate of $500 a month and partly upon the disposition of certain litigation. When defendants terminated the representation in February 1976, they owed plaintiff $17,965 in fees and disbursements, which the parties compromised for $16,000 in a letter agreement dated February 11,1976 signed by all defendants. The agreement provided for payment by defendants of $6,000 at the rate of $150 per month, and $10,000 upon the conclusion of the suits. After defendants once again defaulted in late 1980, plaintiff delivered a summons and complaint to a process server and also recommenced negotiations with defendants. Instead of actually beginning his action, however, plaintiff entered into 1980 and 1981 letter agreements with defendants setting forth new payment schedules. These agreements required defendants for the first time to pay interest, retroactive to 1976, at the rate of “10 per cent on the unpaid balance as of January 1 of each year.”

Defendants defaulted yet again, and plaintiff in April 1982 commenced the present action to recover $11,539 allegedly still owing under the agreements. Defendants asserted as a defense that the agreements were usurious and therefore void. Special Term granted plaintiff’s motion for summary judgment, reasoning, as to the individual defendants, that because “the supposedly excessive rate of interest was only charged after defendants’ obligation to pay matured, it is not usurious”, and, as to the corporate defendant, that the defense of usury is not available. The Appellate Division unanimously affirmed, stating that because “the contractual rate of 10% was permissible ‘at the time the * * * forbearance [was] made’ (General Obligations Law, § 5-501, subd 4), the [1980 and 1981] agreements do not call for a usurious rate of interest” (98 AD2d 759, 760).

Although we agree with the courts below that the defense of usury is unavailable to the corporate defendant, and that the 1980 and 1981 letter agreements can be enforced against the corporation (see, General Obligations Law § 5-521 [1]), we cannot agree with the conclusion that, as to the individual defendants, those agreements were not usurious. The fact that the agreements related to an antecedent debt does not save them from the reach of General Obligations Law § 5-501 (1), which provided that “[t]he rate of interest * * * upon the loan or forbearance of any money, goods, or things in action * * * shall be the rate prescribed by the banking board pursuant to [Banking Law § 14 (1) (g)],” or of General Obligations Law § 5-511, which provides generally that any contract specifying interest at a greater sum shall be void. (See, London v Toney, 263 NY 439,442.) The 1980 and 1981 agreements were concededly made in consideration of plaintiff’s forbearance from suit — the summons and complaint were already in the hands of a process server — and are therefore “forbearances” within the usury law (cf. Stitz v Stevens, 70 AD2d 588, 588-589, affd 48 NY2d 957).

Nor does the fact that the legal rate of interest was increased in 1980 and 1981 immunize the agreements. While the 10% annual interest rate was legal beginning August 1, 1979, the agreements applied that rate back to periods when the maximum interest was 8.50% (Jan. 1, 1976 to Dec. 7, 1978), 9.50% (Dec. 8, 1978 to Apr. 30, 1979), and 9.75% (May 1, 1979 to July 31, 1979) (see, 3 NYCRR 4.1). Without reaching the question of how provisions for retroactive interest should be regarded in other circumstances, here the interest rate specified for periods prior to August 1, 1979 was on its face in excess of the legal rate.

Plaintiff argues that section 5-501 (4) of the General Obligations Law, which provides that “interest shall not be charged, taken or received on any loan or forbearance at a rate exceeding such rate of interest as may be authorized by law at the time the loan or forbearance is made, whether or not the loan or forbearance is made pursuant to a prior contract or commitment providing for a greater rate of interest” (General Obligations Law § 5-501 [4]), by negative implication authorized him in 1980 retroactively to exact interest in excess of the legal rates in effect from 1976 to 1979 so long as that rate is “authorized by law at the time the loan or forbearance is made”. Reliance on this provision — which appears to have formed the basis for the Appellate Division decision — is misplaced.

In enacting section 5-501 (4), part of a statutory scheme designed to transfer authority for fixing the legal rate of interest to certain administrative agencies (see, L 1968, ch 349), the Legislature intended to carve out an exception to the general rule that preexisting loans or forbearances do not become usurious as a result of decreases in the maximum interest rate (General Obligations Law § 5-501 [4-a]). The Legislature determined that by preventing parties from agreeing just prior to an imminent decrease in the legal rate of interest to make a loan or forbearance at the then-prevailing higher rate effective after the decrease, it could “assure that the rate of interest at which the loan or forbearance is made reflects economic conditions then prevailing” (Memorandum of State Banking Department, 1968 NY Legis Ann, “Corporations and Banking”, at 136). This statute, in short, does not sanction the retrospective application of the higher interest rates in effect when an agreement is made to prior periods governed by lower rates, but serves a quite different purpose.

Similarly, the 1980 and 1981 agreements are not excluded from the usury law as agreements providing for a legal rate of interest prior to maturity of an obligation or default thereon and an interest rate greater than the legal rate thereafter (see, Bloom v Trepmal Constr. Corp., 29 AD2d 951, affd 23 NY2d 730; Heelan v Security Natl. Bank, 73 Misc 2d 1004, 1008). Defendants enjoyed no power under the 1980 and 1981 agreements to avoid the payment of excessive interest; there was no condition within defendants’ control in those agreements whereby defendants could avoid paying more than the legal rate of interest (see, Diehl v Becker, 227 NY 318, 325-326).

But the fact that the 1980 and 1981 agreements may be unenforceable against the individual defendants does not mean that their underlying debt is extinguished (see, Perkins v Hall, 105 NY 539, 542; Cook v Barnes, 36 NY 520, 521). To the contrary, “[w]hen a contract for money, legal and innocent in itself, is once made and consummated, it cannot be made usurious and illegal by any subsequent transactions of the parties. These subsequent transactions may of themselves be illegal, and forbidden by law, but they cannot impart the taint and the consequences of usury to an antecedent agreement, fair, and just, and upright in itself. If the obligation under it is to pay a debt, the obligation, with the legal rights resulting from it, remain in all their force, and cannot be discharged by ingrafting upon it some subsequent agreement obnoxious to the charge of usury” (Lesley v Johnson, 41 Barb 359, 362; accord, London v Toney, 263 NY 439,441, supra; Real Estate Trust Co. v Keech, 69 NY 248, 249; Emmons v Barnes, 55 NY 643, 644; Winsted Bank v Webb, 39 NY 325, 331; Bush v Livingston, Lock Revd Cas 550; Eastern Shopping Centers v Contro, 68 Misc 2d 140,142-143; 6A Corbin on Contracts § 1506, at 698; Webb, Law of Usury §§ 306-307 [1899]; Tyler, Law of Usury, at 111 [1878]). Thus, while plaintiff cannot enforce the 1980 and 1981 agreements against the individual defendants, nothing precludes him from collecting upon the underlying debt embodied in the 1976 agreement.

Accordingly, the order of the Appellate Division should be modified and the case remitted to Supreme Court, Kings County, for further proceedings in accordance with this opinion, including calculation of the amount the individual defendants owe plaintiff under the 1976 agreement, less any payments against that indebtedness, together with interest from the date of breach, and as so modified, the order should be affirmed.

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

Order modified, without costs, and case remitted to Supreme Court, Kings County, for further proceedings in accordance with the opinion herein and, as so modified, affirmed.

      . Despite the explicit provision for interest at the rate of 10%, plaintiff and defendants differ sharply on the “actual” rate — plaintiff arguing that the actual rate is only 7.42%, and defendants contending that the rate is at least 391/2%, constituting criminal usury (Penal Law § 190.40), an issue we do not reach because it was not raised in the courts below (see, Hammelburger v Foursome Inn Corp., 54 NY2d 580, 590-592). Plaintiff’s calculation is premised on the retrospective application of the 10% interest rate to the entire unpaid principal as of January 1, 1977, and each January 1 thereafter, including substantial amounts that had been paid by defendants and were no longer owing at the time of the 1980 and 1981 agreements. Such a construction obliterates the distinction between a loan (represented by the 1976 agreement) and a forbearance, or extension agreement — a new transaction — represented by the 1980 and 1981 agreements. Plaintiff cannot retrospectively apply an interest rate in an extension agreement to money previously paid pursuant to the original loan and thereby circumvent the usury laws.

      . Like any change in the rate, decreases were to be announced by the Banking Board or Superintendent of Banking (see, L 1968, ch 349, § 3, adding Banking Law § 14-a [3], repealed L 1978, ch 788, § 1; L 1978, ch 788, § 2, adding Banking Law § 14-a [3], repealed L 1980, ch 883, § 2).

      . The only other defenses raised in the answer are the Statute of Limitations (patently inapplicable to bar suit brought in April 1982 on a contract not breached until late 1980), that plaintiff breached his agreement and abandoned employment (on its face contradicted by statements of defendants and acknowledgments of their long overdue indebtedness), and that the agreements were not made in writing and subscribed by defendants (which, certainly as to the 1976 agreement, is frivolous on this record).


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    In the Matter of Xerox Corporation, Appellant, v Town of Webster et al., Respondents.
    Decided June 4, 1985
    APPEARANCES OF COUNSEL

      Anthony J. Adams, Jr., for appellant.

      Robert A. Feldman for respondents.
   OPINION OF THE COURT

Per Curiam.

Opinions and recommendations that would, if prepared by agency employees, be exempt from disclosure under the Freedom of Information Law (FOIL) as “intra-agency materials” (Public Officers Law § 87 [2] [g]), do not lose their exempt status simply because they are prepared for the agency, at its request, by an outside consultant.

Appellant commenced this article 78 proceeding to review the determinations of respondents denying access under FOIL to requested documents, including real estate appraisal reports prepared for respondents by a private consulting firm in connection with possible revaluation of appellant’s property after new construction. Special Term granted the petition and directed respondents to make the requested documents available. The Appellate Division modified, agreeing with respondents that the appraisal reports were “intra-agency materials” exempt from disclosure under section 87 (2) (g) of the Public Officers Law.

Appellant urges, first, that section 51 of the General Municipal Law, establishing general principles for access to public records, requires disclosure of the requested documents notwithstanding the exemptions specified in FOIL. Such a result would nullify the FOIL exemptions, which the Legislature — presumably aware of General Municipal Law § 51 at the time it enacted FOIL — could not have intended. To give effect to both statutes, the FOIL exemptions must be read as having engrafted, as a matter of public policy, certain limitations on the disclosure of otherwise accessible records.

Appellant’s arguments under FOIL center on the fact that the appraisal reports were prepared by an outside consultant, rather than an agency itself, and thus by definition are said to fall outside the exemption for “intra-agency materials” (Public Officers Law § 87 [2] [g]). Appellant contends, further, that even if the reports could be considered agency materials, they are the consultant’s final product and subject to disclosure as a final determination (Public Officers Law § 87 [2] [g] [iii]), and that the agency’s decision not to revalue the property frees the reports for disclosure.

Opinions and recommendations prepared by agency personnel may be exempt from disclosure under FOIL as “predecisional material, prepared to assist an agency decision maker * * * in arriving at his decision” (Matter of McAulay v Board of Educ., 61 AD2d 1048, affd 48 NY2d 659). Such material is exempt “to protect the deliberative process of the government by ensuring that persons in an advisory role would be able to express their opinions freely to agency decision makers” (Matter of Sea Crest Constr. Corp. v Stubing, 82 AD2d 546, 549).

In connection with their deliberative process agencies may at times require opinions and recommendations from outside consultants. It would make little sense to protect the deliberative process when such reports are prepared by agency employees yet deny this protection when reports are prepared for the same purpose by outside consultants retained by agencies. Accordingly, we hold that records may be considered “intra-agency material” even though prepared by an outside consultant at the behest of an agency as part of the agency’s deliberative process (see, Matter of Sea Crest Constr. Corp. v Stubing, 82 AD2d 546, 549, supra; Matter of 124 Ferry St. Realty Corp. v Hennessy, 82 AD2d 981, 983).

The final determination being that of respondents to take no action with respect to property revaluation, the consultant’s opinion or recommendation cannot be considered a final agency determination subject to disclosure under section 87 (2) (g) (iii) of the Public Officers Law. Similarly, the fact that respondents ultimately took no action does not divest the reports of their quality as “intra-agency materials,” since FOIL protects against disclosure of predecisional memoranda or other nonfinal recommendations, whether or not action is taken (see, e.g., Matter of Kheel v Ravitch, 93 AD2d 422, 427-429, affd 62 NY2d 1; Sinicropi v County of Nassau, 76 AD2d 832, lv denied 51 NY2d 704; Matter of Miracle Mile Assoc. v Yudelson, 68 AD2d 176, lv denied 48 NY2d 706; Matter of McAulay v Board of Educ., 61 AD2d 1048, affd 48 NY2d 659, supra).

While the reports in principle may be exempt from disclosure, on this record — which contains only the barest description of them — we cannot determine whether the documents in fact fall wholly within the scope of FOIL’S exemption for “intra-agency materials,” as claimed by respondents. To the extent the reports contain “statistical or factual tabulations or data” (Public Officers Law § 87 [2] [g] [i]), or other material subject to production, they should be redacted and made available to appellant. Since it does not appear that either court below reviewed the reports to make such a determination, the matter must be remitted to permit an in camera inspection.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the matter remitted to Supreme Court, Monroe County, for further proceedings in accordance with this opinion.

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

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


author: Kassal, J.

text:
    Wayne D. Freihofer, Respondent-Appellant, v Hearst Corporation, Doing Business as Capital Newspapers Group, Appellant-Respondent.
    Argued April 23, 1985;
    decided May 30, 1985

      POINTS OF COUNSEL

      Thomas F. Gleason and Peter L. Danziger for appellant-respondent.
    I. The court below erred in declining to dismiss plaintiff’s first, fifth and ninth causes of action for failure to state a cause of action for invasion of privacy. (Time, Inc. v Hill, 385 US 374; Stephano v News Group Pub., 64 NY2d 174; Roberson v Rochester Folding Box Co., 171 NY 538; Arrington v New York Times Co., 55 NY2d 433; Gautier v Pro-Football, Inc., 304 NY 354; Davis v Duryea, 99 Misc 2d 933; Spahn v Julian Messner, Inc., 21 NY2d 124; Davis v High Socy. Mag., 90 AD2d 374; Flores v Mosler Safe Co., 7 NY2d 276; Lahiri v Daily Mirror, 162 Misc 776.) II. Plaintiff has failed as a matter of law to set forth a cause of action under a theory of prima facie tort. (Drago v Buonagurio, 46 NY2d 778; Clark v New York Tel. Co., 52 AD2d 1030, 41 NY2d 1069; Nichols v Item Publishers, 309 NY 596; Faulk v Aware, Inc., 3 Misc 2d 833, 3 AD2d 703.) III. The courts below properly held that plaintiff has no cause of action for intentional infliction of emotional distress. (Murphy v American Home Prods. Corp., 58 NY2d 293.)

      Edward R. Feinberg for respondent-appellant.
    I. The perusal and obtaining of pleadings and motions in matrimonial actions is outrageous and shocking conduct clearly interdicted by statute. (Stevenson v News Syndicate Co., 276 App Div 614, 277 App Div 797, 302 NY 81, 690; Shiles v News Syndicate Co., 27 NY2d 9; Danziger v Hearst Corp., 304 NY 244; Stevenson v Hearst Consol. Pub., 214 F2d 902; People v McKane, 143 NY 455; People v Morhouse, 21 NY2d 66; Greenberg v CBS Inc., 69 AD2d 693.) II. The conduct of appellant is clearly interdicted by Civil Rights Law §§ 50 and 51. (Davis v High Socy. Mag., 90 AD2d 374; Stephano v News Group Pub., 64 NY2d 174; Koussevitzky v Allen, Towne & Heath, 188 Misc 479, 272 App Div 759; Binns v Vitagraph Co., 210 NY 51; Delan v CBS, Inc., 91 AD2d 255; Sutton v Hearst Corp., 277 App Div 155; Arrington v New York Times Co., 55 NY2d 433; Gaeta v New York News, 62 NY2d 340; Chapedeau v Utica Observer-Dispatch, 38 NY2d 196; Cottom v Meredith Corp., 65 AD2d 165.) III. The articles at issue are not newsworthy. (Virgil v Time, Inc., 527 F2d 1122; Cox Broadcasting Corp. v Cohn, 420 US 469; Oklahoma Pub. Co. v District Ct., 430 US 308; Smith v Daily Mail Pub. Co., 443 US 97.) IV. Wayne Freihofer has a constitutional right to his privacy. (Shiles v News Syndicate Co., 27 NY2d 9; Greenberg v CBS Inc., 69 AD2d 693; Gertz v Robert Welch, Inc., 418 US 323; All v Playgirl, Inc., 447 F Supp 723; Booth v Curtis Pub. Co., 15 AD2d 343,11 NY2d 907; Gautier v Pro-Football, Inc., 304 NY 354.) V. The headline of the September 26, 1982 article is actionable in and of itself. VI. Appellant has failed to demonstrate any reason to support its motion to dismiss those causes of action sounding in intentional infliction of emotional distress or prima facie tort. (Fox v Issler, 77 AD2d 860; Long v Beneficial Fin. Co., 39 AD2d 11; Sands v Weingrad, 99 Misc 2d 598; Costlow v Cuismano, 34 AD2d 196.)
   OPINION OF THE COURT

Kassal, J.

Does the publication by a newspaper of an article relating to the details of court files in matrimonial proceedings rendered confidential by Domestic Relations Law § 235, give rise to a cause of action for (a) invasion of privacy under Civil Rights Law §§50 and 51, (b) prima facie tort or (c) intentional infliction of emotional distress?

This action was brought to recover damages resulting from the publication of three newspaper articles, relating to a matrimonial action between plaintiff and his wife. The complaint alleges that the publications were in violation of Domestic Relations Law § 235 (1), which provides in respect to matrimonial actions: “An officer of the court * * * or his clerk, either before or after the termination of the suit, shall not permit a copy of any of the pleadings, affidavits * * * or testimony, or any examination or perusal thereof, to be taken by any other person than a party, or the attorney or counsel of a party, except by order of the court.”

The three news articles were published in defendant’s The Times Union on September 26 and December 31,1982 and in the Knickerbocker News on December 31, 1982. The publications reported some of the marital difficulties experienced by plaintiff, one of the principals of the Charles Freihofer Baking Company, a well-known company engaged in the sale of baked goods and associated products for more than 70 years. It is undisputed that the factual content of the articles was obtained from confidential court records. The September 26th article, captioned “Freihofer’s Fighting Over the Dough,” quoted extensively from affidavits filed in the marital suit in connection with a pending application for exclusive occupancy of the marital residence, an estate in Loudonville, in which the Freihofers had lived during their 10-year marriage. Included in the article were charges and countercharges of mental and physical cruelty and adultery which formed the legal basis for the matrimonial action.

Following the first publication, plaintiff’s attorneys wrote to The Times Union on October 1, 1982, objecting to the publication of the story and the use of plaintiff’s photograph, advising as to “the statutory confidentiality protecting court papers of this kind” and demanding that there be no further publication or commentary about “the marital discord” between the parties. Nevertheless, on December 31, 1982, The Times Union published its second news story, covering the Appellate Division’s reversal of Special Term’s order, which had ordered the wife to leave the marital abode and set a hearing on the issue of temporary custody of their son. On the same day, the Knickerbocker News carried a similar story that a hearing had been directed to determine exclusive possession of the Loudonville home and referring to the charges and countercharges of “abusive and cruel behavior.”

Defendant admits having reviewed court records in connection with the preparation of the news articles. However, it denies any violation of Domestic Relations Law § 235, contending that papers and pleadings in court actions, including matrimonial suits, are readily available for inspection at the county clerk’s office and the Appellate Division; such an examination is “not an uncommon practice” in the preparation of a news story; and the news media “regularly” reports with respect to matrimonial proceedings which affect the public interest. In addition, the motion was argued in open court and the proceedings were available to the public, including the press. Furthermore, it contends it did exercise discretion by omitting from publication many of the personal details relating to the marital action, contained in filed court papers, which would have subjected the parties to unnecessary ridicule or embarrassment and that the stories merely reported the facts, without any sensationalism. Defendant urges that, notwithstanding the cloak of confidentiality under Domestic Relations Law § 235 (1), it did not violate the statute, which is directed only to officers and clerks of the court and, in any event, considering the prominence of the Freihofer family in the Albany area and the extensive television and newspaper advertising to promote the Freihofer name, the articles did deal with matters of legitimate public interest and concern.

Plaintiff, on the other hand, alleges that the publications were improperly based upon examination of matrimonial court records. As a result, he says he suffered extreme emotional and physical distress, which affected his business and private relationships, diminished his standing in the community, subjected him to public scorn and ridicule and impaired his social life. The complaint for compensatory and exemplary damages contains 12 causes of action: invasion of privacy under Civil Rights Law §§ 50 and 51 (first, fifth and ninth causes of action); intentional infliction of emotional distress (second, sixth and tenth causes of action); prima facie tort (third, seventh and eleventh causes of action); and abuse of process (fourth, eighth and twelfth causes of action).

Special Term dismissed the causes of action for abuse of process and prima facie tort and granted summary judgment dismissing the causes of action for intentional infliction of emotional distress. In doing so, it held (1) no cause of action existed for abuse of process in that there had not been a regularly issued process, civil or criminal, compelling the performance or forbearance of a prescribed act (Board of Educ. v Farmingdale Classroom Teachers Assn., 38 NY2d 397); (2) no claim for relief could be asserted with respect to the violation of Domestic Relations Law § 235, which, by its terms, applied only to an “officer of the court * * * or his clerk”; and (3) insufficient proof had been offered to demonstrate that the publication amounted to outrageous conduct so as to constitute the tort of intentional infliction of emotional distress. Special Term also denied defendant’s motion for summary judgment to dismiss the first, fifth and ninth causes of action for violation of Civil Rights Law §§ 50 and 51, and plaintiff’s cross motion for summary judgment, concluding that there was an issue as to whether the publication of the articles and use of plaintiff’s name and photograph were of legitimate concern to the public.

The Appellate Division unanimously affirmed (102 AD2d 974), observing, in part, with respect to liability under Domestic Relations Law § 235: “One may publish details of a divorce action based on files obtained without court order unless publication thereof is otherwise tortious (Shiles v News Syndicate Co., 27 NY2d 9, cert den 400 US 999).” (102 AD2d, at p 975.) It concluded, however, that there was no statutory violation since the legislation applied only to court personnel. As to those causes of action predicated upon Civil Rights Law §§ 50 and 51, it agreed with Special Term that there were factual issues, as to whether the articles were newsworthy and of public interest or were published merely to increase circulation, which, it held, would violate the statute.

We disagree and, accordingly, modify to dismiss the first, fifth and ninth causes of action under the Civil Rights Law.

CIVIL RIGHTS LAW §§ 50 AND 51

Sections 50 and 51 of the Civil Rights Law make actionable the use of one’s “name, portrait or picture” for advertising or trade purposes, without securing the person’s consent. The statute created a limited right of privacy, which had not existed prior to the enactment (see, Roberson v Rochester Folding Box Co., 171 NY 538). In Roberson, it was held that any protection to be accorded for the unauthorized use of one’s name or photograph was a matter for the Legislature and could not be created by judicial pronouncement. The legislative response came the following year, with the enactment of Civil Rights Law §§50 and 51 (L 1903, ch 132, §§ 1, 2).

We have in the past recognized that, in this State, there is no common-law right of privacy and the only available remedy is that created by Civil Rights Law §§ 50 and 51 (Stephano v News Group Pub., 64 NY2d 174; Cohen v Herbal Concepts, 63 NY2d 379; Arrington v New York Times Co., 55 NY2d 433; Flores v Mosler Safe Co., 7 NY2d 276). In these cases, we took cognizance of the limited scope of the statute as granting protection only to the extent of affording a remedy for commercial exploitation of an individual’s name, portrait or picture, without written consent.

Thus, the central issue in any case involving an alleged appropriation of plaintiff’s name, portrait or picture is whether the use by defendant was primarily for trade or advertising purposes within the meaning of the statute. While the statute does not furnish any definition of trade or advertising purposes, it has been held that the protection afforded by this statute to individuals does not apply to the publication of newsworthy matters or events. The “newsworthiness exception” has long been recognized in this State (Binns v Vitagraph Co., 210 NY 51, 52; Gautier v Pro-Football, Inc., 304 NY 354, 359; Booth v Curtis Pub. Co., 15 AD2d 343, 345, affd 11 NY2d 907; Pagan v New York Herald Tribune, 32 AD2d 341, affd 26 NY2d 941; Arrington v New York Times Co., supra) and was most recently reconfirmed in Stephano v News Group Pub. (64 NY2d, at p 184, supra).

Applying the statute here, both Special Term and the Appellate Division were of the view that a factual issue existed as to whether the primary purpose underlying the publications was to report on a news event or matter of public interest or merely to promote circulation. To the contrary, the critical factor as to the statutory protection under Civil Rights Law § 51, is the content of the published article in terms of whether it is newsworthy, which is a question of law, and not the defendant’s motive to increase circulation. As was held in Stephano (64 NY2d, at pp 184-185, supra): “The fact that the defendant may have included this item in its column solely or primarily to increase the circulation of its magazine and therefore its profits * * * does not mean that the defendant has used plaintiff’s picture for trade purposes within the meaning of the statute. Indeed, most publications seek to increase their circulation and also their profits. It is the content of the article and not the defendant’s motive or primary motive to increase circulation which determines whether it is a newsworthy item, as opposed to a trade usage, under the Civil Rights Law (Arrington v New York Times Co., supra, p 440; Booth v Curtis Pub. Co., supra).”

Plaintiff argues that the publication of matrimonial court files, standing alone, amounts to an invasion of privacy, inasmuch as Domestic Relations Law § 235 prohibits such disclosure by court personnel. This contention, however, overlooks the fact that, in the absence of further legislation, there is no independent right to such relief. The Legislature has not established a cause of action for violation of Domestic Relations Law § 235. In any event, no claim to that effect has been interposed here.

Moreover, in light of our holding in Shiles v News Syndicate Co. (27 NY2d 9, cert denied 400 US 999) plaintiff may not do so. In Shiles, defendant had published a series of articles in the Daily News, with respect to a separation action and the allegations therein, including the wife’s accusation that her husband had used his position as an airline executive to entice applicants for jobs as stewardesses to become “women for his private harem,” with the company footing the bill, references to his “sexual habits” and encounters with other women. The action by the husband sought to recover for libel and invasion of privacy, defendant interposing as affirmative defenses that the articles were “fair and true reports of judicial proceedings,” privileged under Civil Rights Law § 74 and further, that the reports were true. In reversing an order which had denied a motion to dismiss those defenses, this court held that one who had published and disseminated the contents of the records of matrimonial proceedings could not rely upon a defense of statutory privilege that the articles were fair and true reports of judicial proceedings. We did recognize, however, that the constitutional right of the press to publish the allegations in a matrimonial suit, obtained from court files without permission, could not be impinged upon except that liability would be imposed for defamatory publication (27 NY2d, at p 15; see also, Danziger v Hearst Corp., 304 NY 244, 248-249). Chief Judge Fuld’s observation in Shiles is instructive: “This does not mean that a party may not publish details of a divorce or separation suit based on files obtained without a court order, or that the courts would interfere with the constitutional right of any one to publish such details, but it does mean that, if he does, he will be held accountable and liable if those details are not truthful. (See Danziger v. Hearst Corp., 304 N. Y. 244, 248-249, supra; see, also, Matter of United Press Assns. v. Valente, 308 N. Y. 71, 77.) Thus, in Danziger, where the defendant had published an illegally obtained affidavit, the court, after declaring that the rule of secrecy does not prohibit publication of the details of a matrimonial action that are obtained from a source other than the files of the court, went on to hold that ‘such a publication is actionable if defamatory’ (304 N. Y., at p. 248; emphasis supplied).” (27 NY2d, at p 15.)

Similarly, in Danziger v Hearst Corp. (supra), we upheld the constitutionality of the statute, observing that the legislation was addressed only to employees of the court system: “It does not prohibit access to the minutes of the clerk of the court and thus does not interfere with the right of any person to obtain information in respect of the pendency or result of any matrimonial action. Nor does the rule prohibit publication of the details of a matrimonial action that are obtained from a source other than the files of the court. Of course, such a publication is actionable if defamatory.” (304 NY, at p 248.)

In our case, there is no claim for defamation or that the content of the articles is untruthful. Domestic Relations Law § 235 does not provide for an independent cause of action against those who publish or disseminate matter relating to a matrimonial action obtained in violation of the statute (see, Shiles v News Syndicate Co., supra; Danziger v Hearst Corp., supra).

PRIMA FACIE TORT

We agree that no cause of action has been pleaded for prima facie tort and, accordingly, the third, seventh and eleventh causes were properly dismissed. Prima facie tort affords a remedy for “ ‘the infliction of intentional harm, resulting in damage, without excuse or justification, by an act or a series of acts which would otherwise be lawful’ ” (ATI, Inc. v Ruder & Finn, 42 NY2d 454, 458; see also, Advance Music Corp. v American Tobacco Co., 296 NY 79; Opera on Tour v Weber, 285 NY 348; Wehringer v Helmsley-Spear, Inc., 59 NY2d 688, affg 91 AD2d 585). The requisite elements of a cause of action for prima facie tort are (1) the intentional infliction of harm, (2) which results in special damages, (3) without any excuse or justification, (4) by an act or series of acts which would otherwise be lawful (Curiano v Suozzi, 63 NY2d 113, 117; Burns Jackson Miller Summit & Spitzer v Lindner, 59 NY2d 314, 332). A critical element of the cause of action is that plaintiff suffered specific and measurable loss, which requires an allegation of special damages (see, Curiano v Suozzi, supra, at p 117; ATI, Inc. v Ruder & Finn, supra, at p 458; Morrison v National Broadcasting Co., 19 NY2d 453, 458; Nichols v Item Publishers, 309 NY 596, 602; Susskind v Ipco Hosp. Supply Corp., 49 AD2d 915). Here, no special damages are alleged and apparently none exist.

Moreover, it has been observed that “[p]rima facie tort should not become a ‘catch-all’ alternative for every cause of action which cannot stand on its own legs.” (Belsky v Lowenthal, 62 AD2d 319, 323, affd 47 NY2d 820; Burns Jackson Miller Summit & Spitzer v Lindner, supra, at p 333). Where relief may be afforded under traditional tort concepts, prima facie tort may not be invoked as a basis to sustain a pleading which otherwise fails to state a cause of action in conventional tort (see, Ruza v Ruza, 286 App Div 767; Porterfield v Saffan, 7 AD2d 987; Susskind v Ipco Hosp. Supply Corp., supra; Springer v Viking Press, 90 AD2d 315). However, where a traditional tort remedy exists, a party will not be foreclosed from pleading, as alternative relief, a cause of action for prima facie tort (see, Board of Educ. v Farmingdale Classroom Teachers Assn., 38 NY2d, at pp 405-406, supra). Although we did recognize that “there may be instances where the traditional tort cause of action will fail and plaintiff should be permitted to assert this alternative claim”, we do not deem this to be an appropriate case for such relief. The newsworthy content of the articles constitutes sufficient justification for its publication.

INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS

We also agree with the dismissal of the second, sixth and tenth causes of action. The tort of intentional infliction of emotional distress predicates liability on the basis of extreme and outrageous conduct, which so transcends the bounds of decency as to be regarded as atrocious and intolerable in a civilized society (Fischer v Maloney, 43 NY2d 553, 557; see also, Murphy v American Home Prods. Corp., 58 NY2d 293, 303). In Fischer v Maloney (supra), we adopted the rule set forth in Restatement (Second) of Torts § 46 (1) that: “One who by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another is subject to liability for such emotional distress.” Clearly, the facts alleged here do not meet this standard and summary judgment was warranted in the absence of any supporting proof.

In conclusion, no cognizable claim for relief on any theory has been alleged or proved and, therefore, the complaint should have been dismissed in its entirety.

Accordingly, the order of the Appellate Division should be modified to the extent of dismissing the first, fifth and ninth causes of action and, as so modified, affirmed, with costs, and the certified question answered in the affirmative.

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

Order modified in accordance with the opinion herein and, as so modified, affirmed, with costs to defendant. Question certified answered in the affirmative.


text:
    The People of the State of New York ex rel. Ralph Maiello, by Richard Finkelstein and Steve Sandler, Appellant, v New York State Board of Parole et al., Respondents.
    Argued April 30, 1985;
    decided June 4, 1985
    POINTS OF COUNSEL

      Steve Sandler, William E. Hellerstein and Roger Brazill for appellant.
    Appellant’s uncounseled statements, made in response to his parole officer’s questioning after the latter had learned that counsel had entered the proceedings on appellant’s behalf, were obtained in violation of his State constitutional right to counsel and were consequently inadmissible against him at his parole revocation hearing. (Morrissey v Brewer, 408 US 471; People ex rel. Menechino v Warden, 27 NY2d 376; People v Skinner, 52 NY2d 24; People v Hobson, 39 NY2d 479; People v Knapp, 57 NY2d 161; People v Roberson, 41 NY2d 106; People v Claudio, 59 NY2d 556; People v Parker, 82 AD2d 661, 57 NY2d 815; People v Hodge, 53 NY2d 313; Matter of Lawrence S., 29 NY2d 206.)

      Robert Abrams, Attorney-General (Hugh B. Weinberg, Robert Hermann, Judith A. Gordon, Gerald J. Ryan and Christopher Keith Hall of counsel), for respondents.
    I. Appellant’s statements, made during parole supervision in the absence of counsel, were admissible at his parole revocation hearing. (People v Hobson, 39 NY2d 479; People v Claudio, 59 NY2d 556; People ex rel. Calloway v Skinner, 33 NY2d 23; Morrissey v Brewer, 408 US 471; Gagnon v Scarpelli, 411 US 778; Mempa v Rhay, 389 US 128; People ex rel. Grace v Bantum, 113 Misc 2d 313.) II. Even if appellant had a right to counsel when he met with his parole officer, the division of parole had inadequate notice that counsel had been retained for parole matters. (People v Marrero, 51 NY2d 56.)
   OPINION OF THE COURT

Per Curiam.

After being paroled from a sentence imposed upon a conviction for robbery in the second degree, relator was arrested for attempted burglary and possession of a weapon. Prior to his release on bail, relator’s Legal Aid counsel advised him of his obligation to report the arrest to his parole officer and further advised him that Legal Aid would represent him at any parole revocation hearing. When relator reported the arrest to his parole officer, he also informed his parole officer that his counsel advised him not to give any details, but, at the parole officer’s urging, he admitted violating the conditions of his parole. The admission was introduced at relator’s final revocation hearing which resulted in a finding that he had violated the terms of his parole and his being remanded for one year or in accordance with any new sentence imposed.

Under these circumstances, any violation of relator’s right to counsel under the State Constitution would not preclude the use at a final parole revocation hearing of statements obtained by the parole officer in the absence of relator’s counsel. A violation of a constitutional right may have different consequences depending upon whether the evidence obtained in violation of that right is attempted to be used in criminal or noncriminal proceedings. Thus, in People v Ronald W. (24 NY2d 732), it was held that statements given by a probationer to his probation officer in a custodial setting without Miranda warnings could sustain the revocation of probation and imposition of sentence. However, in People v Parker (57 NY2d 815, affg 82 AD2d 661), we held that statements made by a Federal parolee to his parole officer under similar circumstances could not be used in a subsequent criminal prosecution (but see, Minnesota v Murphy, 465 US 420). People ex rel. Piccarillo v New York State Bd. of Parole (48 NY2d 76) is not to the contrary. There, we recognized that a parole revocation hearing is different from a criminal trial conducted to determine guilt or innocence, and is, instead, an administrative proceeding at which it is determined whether a parolee violated the terms of parole.

In the present case, both courts below properly determined that relator’s statement could be used at his final revocation hearing and, therefore, the order of the Appellate Division should be affirmed (see also, Matter of Utsey v New York State Bd. of Parole, 89 AD2d 965). We are here not presented with the issue of the permissible uses, if any, of relator’s statements in other proceedings (cf. Minnesota v Murphy, 465 US 420, supra; compare, People v Parker, 57 NY2d 815, affg 82 AD2d 661, supra).

Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye and Alexander concur in Per Curiam opinion; Judge Titone taking no part.

Order affirmed, without costs.


author: Chief Judge Wachtler.

text:
    We’re Associates Company, Appellant, v Cohen, Stracher & Bloom, P. C., Defendant, and Howard R. Cohen et al., Respondents.
    Argued April 25, 1985;
    decided June 4, 1985
    POINTS OF COUNSEL

      Victor M. Metsch and Gerry E. Feinberg for appellant.
    The shareholder/officer/directors of a professional service corporation, who are solely and directly responsible for the corporation’s business, management and affairs, are personally liable for their just business debts, incurred while rendering services in their professional capacity. (Infosearch, Inc. v Horowitz, 117 Misc 2d 774; Weiner v Weiner, 88 Misc 2d 920; Schnapp, Hochberg & Sommers v Nislow, 106 Misc 2d 194; Port Chester Elec. Constr. Co. v Atlas, 40 NY2d 652; New York Criminal & Civ. Cts. Bar Assn. v Jacoby, 61 NY2d 130; Matter of Weinstock, 40 NY2d 1; Schware v Board of Bar Examiners, 353 US 232.)

      Frederick Newman for defendant and respondents.
    The contention that shareholders of a professional corporation are automatically liable for all debts incurred by the corporation, if sustained, would render article 15 of the Business Corporation Law a nullity and would serve to deprive professional corporations of any tax benefits under the Internal Revenue Code. (Billy v Consolidated Mach. Tool Corp., 51 NY2d 152; Port Chester Elec. Constr. Corp. v Atlas, 40 NY2d 652; Bottlers Seal Co. v Rainey, 243 NY 333; Schnapp, Hochberg & Sommers v Nislow, 106 Misc 2d 194.)
   OPINION OF THE COURT

Chief Judge Wachtler.

In this action to recover rents due and owing under a commercial lease, Special Term granted the individual defendants’ motion to strike their names as parties to the action. The Appellate Division unanimously affirmed. The issue presented on this appeal, here by leave of our court, is whether the shareholders of a professional service corporation organized under article 15 of the Business Corporation Law may be held liable in their individual capacities for rents due under a lease naming only the professional service corporation as tenant.

Defendant Cohen, Stracher & Bloom, P. C., a professional service corporation engaged in the practice of law, whose sole officers, directors and shareholders are the individual defendants, entered into a lease agreement with plaintiff. The lease recited that it was between “we’re associates company * * * as ‘Landlord’ and cohén, stracher & bloom, p.c. * * * as ‘Tenant’ It was signed in the name of the corporate defendant by one of the individual defendants.

The amended complaint alleged, in its first cause of action, that “Defendant CS & B failed to perform its obligations under the Lease, breached the terms thereof and defaulted thereunder, that defendant CS & B failed and refused to pay rent and additional rent in the sum of $13,333.69, as of June 1, 1983, although payment thereof was duly demanded”. The second cause of action repeated the allegations of the first, including the corporate defendant’s default, and further alleged: “By reason of the foregoing, [the individual] defendants Cohen, Stracher and Bloom are jointly, severally and personally liable to plaintiff in the sum of not less than $13,333.69”.

The individual defendants moved to have their names stricken as parties pursuant to CPLR 1003, stating that the corporate defendant was the acknowledged tenant and that the demised premises “were occupied by the corporation and that at no time did any of the individuals act in any other capacity other than as officers and directors of the corporation”, which plaintiff never denied. Special Term granted the motion, and the Appellate Division affirmed, noting in essence that the Legislature, in enacting article 15 of the Business Corporation Law, did not intend to abrogate the traditional limited liability afforded corporate shareholders except as specifically provided in that article.

Plaintiff contends the statute should be liberally construed to apply to debts incurred ancillary to the rendering of professional services; that the rationale underlying the limitation of shareholder liability, i.e., the inability of shareholders to participate in the management of the corporation, does not apply to professional service corporations, which are run by their shareholders; and that affording limited liability to the shareholders of a legal professional services corporation would contravene the Code of Professional Responsibility. Finding none of these contentions meritorious, we affirm.

The only specific provision relating to shareholder liability in article 15 of the Business Corporation Law (the article permitting the formation of domestic professional service corporations) is section 1505 (a), which states: “Each shareholder, employee or agent of a professional service corporation shall be personally and fully liable and accountable for any negligent or wrongful act or misconduct committed by him or by any person under his direct supervision and control while rendering professional services on behalf of such corporation.”

The Appellate Division in this case properly interpreted this section to preclude the imposition of personal shareholder liability in instances not involving the direct rendition of professional services. A principal attribute of, and in many cases the major reason for, the corporate form of business association is the elimination of personal shareholder liability (Billy v Consolidated Mach. Tool Corp., 51 NY2d 152, 163, rearg denied 52 NY2d 829; Rapid Tr. Subway Constr. Co. v City of New York, 259 NY 472, 487-488; 13A Fletcher, Cyclopedia of Corporations § 6213, at 16-17 [1984 Perm ed]). Business Corporation Law § 1513 provides that all articles of the Business Corporation Law apply to domestic professional service corporations, except those articles regulating foreign corporations and foreign professional service corporations, unless there is a specific contrary provision in article 15. The general rule, set forth in the authorities cited above and in Business Corporation Law § 628, is that shareholders are not personally liable for corporate debts {see also, 13A Fletcher, Cyclopedia of Corporations § 6213, at 16 [1984 Perm ed]). Accordingly, there is no basis for extending the limited liability imposed by Business Corporation Law § 1505 (a) to situations not unambiguously covered by that provision.

The plain words of the statute, imposing personal liability only in connection with the rendition of professional services on behalf of the professional service corporation, cannot be defeated by a liberal construction which would include ordinary business debts within the definition of professional services. Words of ordinary import in a statute are to be given their usual and commonly understood meaning, unless it is clear from the statutory language that a different meaning was intended (Matter of Manhattan Pizza Hut v New York State Human Rights Appeal Bd., 51 NY2d 506, 511; McKinney’s Cons Laws of NY, Book 1, Statutes §§ 94, 232). Especially is this so in the present case where strict, not liberal, construction is required because the statute carves out a limited exception to a rule of broad and general application and imposes liability unknown at common law {see generally, McKinney’s Cons Laws of NY, Book 1, Statutes § 301 [a], [c]). The available legislative history and commentary on article 15 and section 1505 (a) support this interpretation (Memorandum of Senator Gioffre, 1970 NY Legis Ann, at 130; Rotgin, The Professional Corporation for Lawyers, 52 NY State Bar J 634; McDonald, Business Associations — 1970 Survey of NY Law, 22 Syracuse L Rev 249, 252).

The foregoing analysis also disposes of plaintiff’s second contention, that the inability of the shareholders to participate in management is not a characteristic of professional service corporations. Plaintiff cites South High Dev. v Weiner, Lippe & Cromley Co. L.P.A. (4 Ohio St 3d 1, 445 NE2d 1106), in which, under similar circumstances to the case at bar, individual shareholders of an incorporated law firm were held in as parties to an action to recover rents allegedly due under a lease executed solely by the corporate entity as tenant. However, the court’s decision in that case was premised on a court rule which specifically provided: “The participation by an individual as a shareholder of a legal professional association shall be on the condition that such individual shall, and by such participation does, guarantee the financial responsibility of the association for its breach of any duty, whether or not arising from the attorney-client relationship.” (Sup Ct Rules for Govt of Bar of Ohio § 4, Gov R III; emphasis added). That rule is diametrically opposed to Business Corporation Law § 1505 (a).

The contrary Ohio rule notwithstanding, the rationale that shareholders of a professional service corporation should be held personally liable for ordinary business debts of the corporation because they are “closer” to the management of such corporation than are shareholders of an ordinary business corporation has not prevailed in our State over the general policy of allowing corporations to be formed for the express purpose of limiting liability. Even single-person businesses are allowed to incorporate, and, so long as no fraud is committed and the corporate form is respected, no individual liability will result (Walkovszky v Carlton, 18 NY2d 414, 419-420; Elenkrieg v Siebrecht, 238 NY 254, 262; 1 O’Neal, Close Corporations § 1.05). If shareholders of a conventional business corporation may enjoy limited liability under such circumstances, so may those of a professional service corporation except as limited by Business Corporation Law § 1505 (a).

The Code of Professional Responsibility provides no basis for the imposition of personal liability in this case. Plaintiff does not suggest, and indeed no authority has been brought to our attention which has held, that an attorney may be held personally liable for the debts of any business corporation of which he is a shareholder simply because he is an attorney and is thus subject to the strictures of the code.

In light of our holding, based on what we discern to be the clear command of New York law, it is unnecessary to determine whether the Federal tax laws would have precluded our reaching a contrary conclusion. True, one of the motivating forces behind the passage of article 15 of the Business Corporation Law was to “make available * * * Federal tax benefits now accorded to executives and employees in all other business endeavors” (Memorandum of Approval of Governor Rockefeller, 1970 McKinney’s Session Laws of NY, at 3135). However, the provisions of article 15 are clear and do not themselves require any change in their application should the Federal taxing authorities or courts find they do not accomplish their stated purpose. Thus, for purposes of this appeal, what the Federal tax laws require of a professional service corporation in order to enjoy the tax advantages for which they are created is irrelevant.

Our decision should work no injustice on those who enter into leases or any other contracts with professional service corporations, who are free to seek the personal assurances of the shareholders that the commitments of the professional service corporation will be honored. Nor do we intend to countenance any abuse of the corporate form of doing business, which, if present in a future case, could compel a different result (cf. Walkovszky v Carlton, supra). What we do hold is that, absent any showing of such abuse, the shareholders of a professional service corporation cannot be held personally liable for an ordinary business debt of the corporation. Accordingly, the order of the Appellate Division should be affirmed.

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

Order affirmed, with costs.

      .  The order from which our permission to appeal was sought is final as to the individual defendants, and therefore the appeal is properly before us, because the action was finally determined as to them, and because they are separate and distinct entities from the corporate defendant (see, Cohen and Karger, Powers of the New York Court of Appeals § 20 [rev ed]; compare, Hart v Sullivan, 84 AD2d 865, mot to dismiss appeal granted in part 55 NY2d 875, affd 55 NY2d 1011 [order dismissing complaint against coemployees in managerial capacities but allowing action to continue against them in individual capacities is nonfinal]).

      . CPLR 1003 provides in pertinent part: “Misjoinder of parties is not a ground for dismissal of an action. Parties may be added or dropped by the court, on motion of any party or on its own initiative, at any stage of the action and upon such terms as may be just. The court may order any claim against a party severed and proceeded with separately.”


text:
    The People of the State of New York, Respondent, v Angel Perez, Appellant.
    Argued March 28, 1985;
    decided June 4, 1985
    POINTS OF COUNSEL

      Freda S. Nisnewitz for appellant.
    I. Appellant was deprived of a fair trial by the prosecutor’s suppression of tapes and transcripts of telephone conversations to which one of his witnesses was a party. (People v Rosario, 9 NY2d 286; People v Savvides, 1 NY2d 554; Brady v Maryland, 373 US 83; People v Steinhardt, 9 NY2d 267; People v Fielding, 158 NY 542; People v Lombard, 4 AD2d 666; People v Cwikla, 46 NY2d 434; United States ex rel. Washington v Vincent, 525 F2d 262; Perkins v LeFevre, 691 F2d 616; People v Ventimiglia, 52 NY2d 350.) II. The court below erred in considering transcripts of tape recordings, neither of which had been admitted in evidence at trial, and for neither of which had the proper foundation ever been laid. (People v Lubow, 29 NY2d 58; People v Gibson, 23 NY2d 618; People v Bernstein, 69 AD2d 907; People v Mincey, 64 AD2d 615; People v Sacchitella, 31 AD2d 180; People v McGee, 49 NY2d 48; People v Nicoletti, 34 NY2d 249; People v Colon, 87 AD2d 826; Fountain v United States, 384 F2d 624; Monroe v United States, 234 F2d 49.)

      Elizabeth Holtzman, District Attorney (Shulamit Rosenblum and Barbara D. Underwood of counsel), for respondent.
    I. Defendant’s claim that the transcript of his stepson’s attempt to bribe a prosecution witness constituted Rosario or Brady material is not preserved for review; is meritless; in any event the material is duplicative of another transcript delivered to the defense. (People v Rosario, 9 NY2d 286; Brady v Maryland, 373 US 83; People v Kanefsky, 50 NY2d 162; People v Payne, 52 NY2d 743; People v Consolazio, 40 NY2d 446; People v Boyd, 58 NY2d 1016; People v Butler, 33 AD2d 675; People v Mealer, 57 NY2d 214; People v Middleton, 54 NY2d 474; People v Testa, 40 NY2d 1018.) II. Defendant’s claim that the court below should not have considered the transcripts is not preserved, and is, in any event, without merit. (People v Boyd, 58 NY2d 1016; People v Rodelfo, 80 AD2d 815; People v Hopper, 87 AD2d 193; People v Consolazio, 40 NY2d 446; People v Martinez, 96 AD2d 516.)
   OPINION OF THE COURT

Chief Judge Wachtler.

The defendant was convicted of felony murder and manslaughter after a jury trial. The Appellate Division affirmed his conviction with one Justice dissenting. Leave to appeal to this court was granted by a Justice of the Appellate Division.

The primary issue is whether it was proper for the prosecutor to withhold from defense counsel statements made by a prosecution witness to members of the defendant’s family. These statements were made in apparent furtherance of a bribe offer or request relating to the homicide charge on which the defendant was then awaiting trial. The defendant claims he was entitled to the statements under People v Rosario (9 NY2d 286). He also urges that they constituted exculpatory matter under Brady v Maryland (373 US 83).

On September 16, 1977 Benedicto Muniz, known as “Junior”, was shot to death in Brooklyn. The defendant and Antonio Calderone were indicted for intentional murder and felony murder on the theory that they killed Junior in the course of robbing him.

The shooting took place at the apartment of Nydia Marcano who is the sister of the defendant’s wife. Nydia Marcano resided at the apartment with her children, Jose and Angel, and with two other women, Iris Maldonado and Cecilia Matos. Jose and Cecilia allegedly witnessed the incident; Nydia and Iris were in another room but came to the scene after hearing the shots. All four of them testified for the prosecution.

Prior to trial the defendant made an omnibus motion in which he requested discovery of several items, including statements made by witnesses and exculpatory evidence. The prosecutor replied that exculpatory matter had been disclosed and that witnesses’ statements would be furnished at trial, in accordance with People v Rosario (supra).

Approximately one month before the trial began Nydia Marcano and certain members of the defendant’s family discussed whether Nydia could leave the area and thus not testify at the trial if she were given a sum of money. Nydia informed the prosecutor that the defendant’s family had initiated the conversation and offered the bribe. The defendant’s family informed his attorney that Nydia had approached them and solicited a bribe.

At the prosecutor’s behest Nydia telephoned her sister and her sister’s son Francesco, to discuss the matter further. Both of these conversations were recorded and transcribed at the prosecutor’s direction. Soon thereafter defense counsel informed the court as to what the defendant’s family had told him. He requested that a hearing be held but the prosecutor opposed it. The court denied defense counsel’s motion, apparently adopting the prosecutor’s argument that this matter could be explored on cross-examination at trial. The District Attorney did not inform the court or defense counsel with respect to his knowledge of the incident.

At the trial Nydia Marcano testified for the prosecution with respect to the homicide, without making any reference to the bribery discussions which occurred while the defendant was awaiting trial. When she concluded her direct testimony, the prosecutor furnished defense counsel with a copy of a statement she made to the police after the shooting and a copy of her Grand Jury testimony concerning that crime. He did not provide defense counsel with copies of the statements she made in connection with the bribery conversations.

On cross-examination, however, defense counsel inquired as to whether she had asked members of the defendant’s family for money in return for not testifying. She stated that, on the contrary, it was they who had offered to pay her money if she would not testify. When defense counsel asked if she had informed the prosecutor of this she replied that she had and that he instructed her to call them back and act as if she were planning to accept the money. Acting on those instructions, she called her sister, Suzanna, and her sister’s son, Francesco. She stated that the calls were made from the prosecutor’s office and were taped by him.

On redirect the prosecutor began refreshing the witness’ recollection by reference to a transcript of the conversation she had had with her sister concerning the bribery. It was only at that point that the prosecutor furnished defense counsel with a copy of that transcript. However , defense counsel did not question her further concerning this incident.

After she had left the stand, defense counsel reminded the court that he had originally asked for a hearing to explore this matter. The court took the view however that the difficulty could have been avoided if the defendant’s family had been more honest with defense counsel. The prosecutor agreed that the problem arose because defense counsel “blindly proceeds on cross-examination and opens the door on the situation”. When defense counsel asked to find out what information the prosecutor had with respect to her testimony concerning the bribery, the prosecutor objected on the ground that he had already provided defense counsel with more information than he was entitled to. As a result defense counsel was never given a copy at trial of the transcript of the second recorded conversation between Nydia and the defendant’s stepson, Francesco. Although defense counsel later called Francesco to the stand, he was not questioned by either side with respect to the bribery.

As noted, the jury found the defendant guilty of felony murder and manslaughter and the Appellate Division affirmed by a divided court.

The majority at the Appellate Division concluded that the defendant’s rights under Rosario had not been violated. The court noted that, on redirect, the prosecutor furnished defense counsel with a copy of Nydia’s statements to the defendant’s wife. With respect to her statements to Francesco, the majority observed that when the defendant specifically requested that transcript, it was evident that he had no intention of using it to further cross-examine Nydia with respect to the matter which had already damaged his case, and thus there was no interference with his rights under Rosario. The majority also found that the statements were not exculpatory because the witness had not suggested that the defendant was innocent. To the extent the statements could be “broadly classified” as exculpatory because they reflected on the witness’ credibility, the court concluded that the failure to furnish them would be harmless. The dissenter urged that the prior statements regarding the bribery were covered by the Rosario rule and that the defendant had not waived his right to have them furnished to aid in the cross-examination of Nydia Marcano (100 AD2d 366).

In People v Rosario (supra), we held that once a witness testifies for the People, the prosecutor is obligated to turn over to defense counsel the witness’ prior statements relating to “the subject matter of the witness’ testimony” (9 NY2d 286,289). The purpose of the rule “is to afford the defendant a fair opportunity to cross-examine the People’s witnesses at trial” (People v Poole, 48 NY2d 144, 149). The Rosario rule represents a departure from prior law which required the court to review the witness’ prior statement and reveal only those portions which the court considered to be inconsistent with the witness’ trial testimony (People v Walsh, 262 NY 140). Our court discontinued that practice in favor of a broader disclosure rule because it was “persuaded that a right sense of justice entitles the defense to examine a witness’ prior statement, whether or not it varies from his testimony on the stand” (People v Rosario, supra, at p 289). We noted that such statements are valuable not only as a source of contradictions, and that no one is better equipped or motivated than defense counsel to determine how they may be useful to the defense (People v Rosario, supra, at pp 289, 290).

The statements described in Rosario, and generally involved in subsequent cases, were those made “to police, district attorney or grand jury” (People v Rosario, supra, at p 289). The prosecutor urges that the rule should be limited to such statements and should have no application to statements, such as those at issue here, which were made to private parties. The suggested limitation is an artificial one. First, the conversations were prompted by the prosecutor and recorded by law enforcement personnel and were in their possession and control (cf. People v Spruill, 47 NY2d 869; People v McLaurin, 38 NY2d 123, 126; People v Simmons, 36 NY2d 126, 132). Second, and more fundamentally, there is no reason why defense counsel should be deprived of the opportunity to inspect a witness’ prior statement for possible use or leads on cross-examination, simply because the witness made the statement to a person who is not involved in law enforcement or prosecution. Notably, the statute codifying the Rosario rule for application in future cases makes no such distinction (CPL 240.45 [1] [a]).

The prosecutor also argues that the statements are not covered by the Rosario rule because they do not relate to the subject matter of the witness’ direct testimony, but to the independent crime of bribing a witness. The prosecutor concedes that such statements have some bearing on the witness’ credibility but urges that statements relating only to credibility should not be considered subject to disclosure under Rosario. However, the very basis for the rule requiring the prosecutor to disclose a witness’ prior statements is to afford the defendant a fair opportunity to test the witness’ credibility (People v Rosario, supra, at pp 289, 290). Of course not every statement made by a witness which reflects on his credibility should be viewed as relating to the subject matter of his testimony. But the pretrial statements in this case were directly related to the witness’ trial testimony because it was that testimony which the bribe discussions were intended to affect. Thus, under People v Rosario (supra), defense counsel was entitled to the statements the witness made relating to the bribery.

In order to serve their intended purpose, pretrial statements should be given to defense counsel at a time when they can meaningfully assist in the preparation of the cross-examination. Under Rosario that should be done after the witness has testified on direct (People v Rosario, supra; but also note that in future cases, CPL 240.45 [1] [a], requires that disclosure be made before the prosecutor’s opening address in a jury trial and “before submission of evidence” in a nonjury trial). Although a delay, particularly an inadvertent one, will generally not adversely affect the defendant’s rights, delay in a particular case may cause substantial prejudice to the defense. An attorney preparing for cross-examination must not only decide what questions to ask, but what questions to avoid asking. The fairness concept embodied in the Rosario rule cannot be said to have been satisfied when pretrial statements revealing a potential trap for the cross-examiner are furnished to defense counsel only after the trap has sprung.

Thus in the case now before us, where the prosecutor knew from the witness’ prior statements regarding the bribe discussions that cross-examination on this point by defense counsel, without prior disclosure, could substantially damage the defense, disclosure of one of those statements after the door had been opened was totally inadequate. Similarly, the understandable reluctance of defense counsel to further pursue the point on cross-examination, or to request a copy of the other statement for that purpose, cannot be viewed as an abandonment of the right to timely disclosure which had already been violated.

Finally, thé prosecutor urges that if the failure to turn over the statements was error, it was harmless on this record. However, we have held that harmless error analysis is inapplicable to trials held after the Rosario decision (People v Consolazio, 40 NY2d 446; People v Mattiace Indus., 52 NY2d 739). The essence of the Rosario requirement, that the prosecutor supply all of a witness’ statement or statements relating to his testimony, is that a judge’s impartial determination as to what portions may be useful to the defense, is no substitute for the single-minded devotion of counsel for the accused. Appellate judges have no advantage over trial judges in making such a determination.

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

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

Order reversed, etc.

       Because we have found reversible error was committed when the prosecutor violated the defendant’s rights under Rosario, we need not consider whether a similar result would be required under Brady v Maryland (373 US 83).