author: Hancock, Jr., J. Titone and Bellacosa, JJ.

text:
    The People of the State of New York, Respondent, v Emanuel Santana, Appellant.
    Argued June 1,1992;
    decided July 7, 1992

      POINTS OF COUNSEL

      Stanley Neustadter for appellant.
    I. The trial court’s "gag order” — which barred defense counsel from discussing with his own expert the midtrial psychiatric examination conducted on appellant by the prosecution’s expert — directly interfered with appellant’s statutory, State and Federal constitutional rights to counsel and to confront witnesses, and his due process right to prepare and present a complete defense. (Matter of Lee v County Ct., 27 NY2d 432; People v Cooke, 292 NY 185; Levine v Levine, 56 NY2d 42; People v Felder, 39 AD2d 373, 32 NY2d 747; United States v Brown, 699 F2d 585; Lewis v Owen, 395 F2d 537; United States v Conners, 894 F2d 987; Trans World Metals v Southwire Co., 769 F2d 902; Stevenson & Co. v 81,193 Bags of Flour, 629 F2d 338.) II. The speedy trial motion (CPL 30.30) should have been granted; the People’s concession that they had done nothing to keep apprised of appellant’s whereabouts and status after the issuance of the six-month incompetency order disentitles them to the benefit of any of the narrow statutory excuses for the 373-day delay in their declaration of readiness. (People v Santos, 68 NY2d 859; People v McKenna, 76 NY2d 59; People v Sylvester, 29 AD2d 985; People v Scott, 56 AD2d 667; People v Bratton, 103 AD2d 368, 65 NY2d 675; People v Smith, 69 NY2d 313; People v Villani, 59 NY2d 781; People v Anderson, 66 NY2d 529.)

      Richard A. Brown, District Attorney (Annette Cohen and Barbara D. Underwood of counsel), for respondent.
    I. Defendant’s statutory speedy trial rights were not violated. (People v Dean, 45 NY2d 651; People v Rarback, 40 NY2d 922; People v Nieves, 67 NY2d 125; People v Goodman, 41 NY2d 888; People v Martin, 142 AD2d 737; People v Pressley, 115 AD2d 228.) II. The trial court acted within its discretion in denying defendant’s request to audiotape the People’s psychiatric expert’s examination of defendant and in prohibiting defense counsel from discussing it with a defense expert before the completion of all his testimony in the case. (People v Thomas, 50 NY2d 467; People v Narayan, 58 NY2d 904; People v Thomas, 53 NY2d 338; Narayan v Scully, 741 F Supp 377, 927 F2d 594;
      People v Smith, 111 AD2d 883; People v Cooke, 292 NY 185; Levine v Levine, 56 NY2d 42; People v Felder, 39 AD2d 373, 32 NY2d 747; United States v Johnston, 578 F2d 1352, 439 US 931; Parks Equip. Co. v Southeast Equip. Co., 817 F2d 340.)
   OPINION OF THE COURT

Hancock, Jr., J.

Defendant was indicted for forcible rape and robbery, first degree sexual abuse and other crimes for three separate incidents in Queens in which he attacked different women at knifepoint. He pleaded not guilty by reason of insanity. At the jury trial, the only issue was whether defendant lacked the mental capacity to commit the crimes by reason of mental disease or defect (Penal Law § 40.15). Defendant was convicted on all charges, and the Appellate Division affirmed unanimously.

In his appeal to our Court, defendant argues that there should be a reversal because of the trial court’s restriction of his counsel’s right to consult with his own psychiatric expert witness in connection with the cross-examination of the People’s expert and concerning the possible presentation of surrebuttal testimony. We agree and conclude that there should be a new trial. For reasons which follow, however, we do not agree with defendant that the indictments should be dismissed for violation of the speedy trial rule (CPL 30.30). Nor do we find merit in defense counsel’s contention that the trial court was required to permit him to audiotape the examination of his client by the People’s clinical psychologist.

I

At trial, defendant conceded that he had committed the offenses and called witnesses only on the issue of his mental condition. The principal defense witness was Dr. Stephen Teich, a psychiatrist, who gave his expert opinion, based on several interviews with defendant, that defendant was suffering from post-traumatic stress disorder. Defendant, as a child, had been sexually abused by his brother. In 1967, at the age of 19, he had seen intense combat as a Marine in Vietnam and had had several emotionally disturbing experiences. Defendant’s history after his discharge included periods of drug and alcohol abuse, attempts at suicide and a period of psychiatric treatment in a Veteran’s hospital. According to Dr. Teich, defendant was overwhelmed with feelings of resentment, hostility, self-hatred and anxiety. In Teich’s opinion, he was suffering from post-traumatic stress disorder and lacked the substantial capacity to know and appreciate the nature, consequences and wrongfulness of his acts.

When Dr. Teich had completed his direct testimony, the People for the first time sought permission pursuant to CPL 250.10 (3) to have defendant examined by their own expert, Dr. Erwin Parson, a clinical psychologist and certified psychotherapist. The court granted the application and directed that it be conducted that same evening. Because of the time constraints, Dr. Parson could not prepare the written report which, under CPL 250.10 (4), the examining doctor is required to prepare and furnish to the defense. Defense counsel, therefore, requested permission to audiotape the examination for the purpose of discussing it with Dr. Teich. The court denied this request, concluding that to allow the tape recording "would be * * * like having Dr. Teich there”, something not permitted by CPL 250.10 (3).

After some discussion, the court, over defendant’s objection, made the ruling which is in dispute: that defense could not talk to Dr. Teich about Dr. Parson’s examination of defendant until Dr. Teich was "completely through” as a witness, and that if he did so, Dr. Teich would be prohibited from testifying in surrebuttal. Dr. Parson, in his testimony, agreed that defendant was suffering from post-traumatic stress disorder. In his opinion, however, when defendant committed the crimes he did not lack the capacity to know and appreciate the nature and consequences of his acts. The defense did not call Dr. Teich in surrebuttal.

Defendant’s trial, which took place in May 1987, was preceded by a prolonged period during which defendant was legally found to be lacking in the capacity to understand the proceedings against him or to assist in his defense and, thus, incompetent to stand trial. The period relevant to defendant’s CPL 30.30 contention begins on April 10, 1985 when the trial court — Supreme Court, Queens County — found defendant unfit to stand trial. By this order, which was based on psychiatric examinations and a hearing, the court committed defendant to the custody of the Commissioner of Mental Health for a period of six months. Similar incompetency proceedings were also being conducted in New York County in connection with other charges pending against defendant. On April 23, 1985, Supreme Court, New York County, found defendant unfit to stand trial and committed him to the custody of the Commissioner of Mental Health for a period not to exceed one year. The Commissioner, operating under both the Queens County and New York County orders, directed that defendant be sent to the Mid-Hudson Psychiatric Center.

On October 10, 1985, the Queens County six-month commitment order expired. Defendant remained in Mid-Hudson, however, under the New York County order which still had several months of the one-year commitment remaining before expiration. On March 4, 1986 the director of Mid-Hudson notified New York County Supreme Court that the hospital psychiatrists had found defendant fit to proceed to trial. On March 25 pursuant to New York County Supreme Court’s direction, defendant was incarcerated in the Bellevue Hospital prison psychiatric ward for psychiatric treatment and tests. New examinations were ordered to determine defendant’s competency. On July 7, 1986 the examining doctors reported that in their opinion defendant was fit to proceed. On September 24, 1986, Supreme Court, New York County, found defendant fit to proceed to trial and on that day accepted his plea of guilty to the New York County charges.

On September 24, 1986, Mid-Hudson for the first time notified Queens County Supreme Court (the trial court in the instant proceeding) and the Queens County District Attorney’s office that Mid-Hudson had found defendant to be competent and had discharged him. The People announced their readiness for trial on October 16,1986, and defendant was returned to Queens for a new competency examination. On November 17, 1986, Queens County Supreme Court found defendant competent to proceed to trial.

Defendant moved to dismiss the charges against him because of the District Attorney’s failure to announce readiness within the six-month period prescribed by CPL 30.30 (1) (a). Supreme Court, Queens County, denied the motion on June 11, 1987 and in a written decision granted defendant’s motion for reargument on July 2. On reargument, the court adhered to its original decision and concluded that inasmuch as defendant was incompetent by virtue of the order of Supreme Court, Queens County, from April 10, 1985 until November 17, 1986, all of the time from April 10, 1985 until October 16, 1986, when readiness was announced, was excludable from the six-month limitation as "proceedings for the determination of competency and the period during which defendant is incompetent to stand trial” under CPL 30.30 (4) (a). The Appellate Division agreed with the denial of defendant’s speedy trial motion but did so on the ground that defendant’s successive detentions in Mid-Hudson and Bellevue Hospital made defendant unavailable for trial and that his presence could not be obtained with due diligence (see, CPL 30.30 [4] [c]). It found no impropriety in the trial court’s limitation on consultations between defense counsel and Dr. Teich.

II

Claimed Trial Errors

Preliminarily, we note that the trial court did not act improperly in declining to direct that Dr. Parson’s examination of defendant be tape-recorded. Defendant argues that by the terms of CPL 250.10 (4) he had the absolute right to the tape recording. No authority is cited for the proposition and the statute does not support it. While the statute states that a written report of the psychiatric examination must be prepared and made available to both counsel, tape-recording of the examination is not mandatory. On the contrary, the statute provides that '[n]o transcript or recording of the examination is required, but if one is made, it shall be made available to both parties prior to the trial” (CPL 250.10 [4] [emphasis added]). We agree with the People that the section is designed to further the interchange of expert information between the prosecutor and defense counsel by directing that both counsel be given access to the written report of the examination and to the transcript or recording, if one has been required. The decision of whether to require a transcript or recording, however, is left to the discretion of the Trial Judge. We need not decide whether the court abused its discretion by denying defendant’s request to audiotape because we conclude that there is an alternative ground for reversal.

Defendant’s principal ground for seeking a new trial is the ruling that defense counsel could not discuss the prosecution’s rebuttal evidence (Dr. Parson’s expert testimony concerning his examination of defendant) with his own expert, Dr. Teich, until after Dr. Teich had finished all his testimony in the case. This ruling effectively precluded defense counsel from offering any surrebuttal evidence if he chose to enlist the assistance of his own expert in developing and conducting the cross-examination of the People’s expert. Defense counsel was given a Hobson’s choice: either consult with Dr. Teich about Dr. Parson’s testimony and forgo any surrebuttal or refrain from any consultation with Dr. Teich and be free to call him as a surrebuttal witness.

We agree with defendant that the ruling interfered significantly with his right to make an effective presentation on the only issue before the jury — his affirmative defense of insanity (Penal Law § 40.15). As the Supreme Court has emphasized, "when the State has made the defendant’s mental condition relevant to his criminal culpability and to the punishment he might suffer, the assistance of a psychiatrist may well be crucial to the defendant’s ability to marshal his defense” (Ake v Oklahoma, 470 US 68, 80). Indeed, the Court has cautioned that "without the assistance of a psychiatrist to * * * present testimony, and to assist in preparing the cross-examination of a State’s psychiatric witnesses, the risk of an inaccurate resolution of sanity issues is extremely high” (id., at 82).

To make defense counsel in this case undertake the risky and critical task of cross-examining the People’s psychiatric expert without Dr. Teich’s advice and assistance put defendant at a serious disadvantage. Requiring him to forgo any discussion of Dr. Parson’s testimony with Dr. Teich if he planned to call Teich to rebut that testimony made an effective surrebuttal practicably impossible. Moreover, as defendont points out, to prevent one psychiatric expert from knowing the basis of the other expert’s opinion on the question of defendant’s sanity in a criminal case is incompatible with the legislative policy evident in CPL 250.10 (3) and (4) of assuring that each party has unrestricted access to the relevant psychiatric opinions and information of the other. It can never be known, of course, what conclusion the jury would have reached if defendant had had the benefit of his expert’s advice in cross-examining Dr. Parson or had been able to frame and present an appropriate surrebuttal. The damage to defendant’s case from the ruling is not subject to calculation.

The People contend, however, that the trial court’s directive was a proper exercise of its discretion. They allude to the discretion permitted the trial court to prevent consultation between the defendant and his counsel during defendant’s cross-examination (see, e.g., People v Narayan, 58 NY2d 904). But this case involves a totally different question — the right of defense counsel to talk with his own expert while he is cross-examining the opposing expert. The People also cite decisions upholding the trial court’s discretion to exclude witnesses from the courtroom while other witnesses are testifying (see, e.g., People v Cooke, 292 NY 185, 190-191; Levine v Levine, 56 NY2d 42, 49-50). Such cases, however, involve witnesses to the events or facts in dispute where the truth-seeking function of the trial process is furthered by "preventing one prospective witness from being taught by hearing another’s testimony” (6 Wigmore, Evidence § 1838, at 461 [Chadbourn rev 1976]).

The same reasons for exclusion do not apply to expert witnesses. It has been pointed out that "the presence in the courtroom of an expert witness who does not testify to the facts of the case but rather gives his opinion based upon the testimony of others hardly seems suspect and will in most cases be beneficial, for he will be more likely to base his expert opinion on a more accurate understanding of the testimony as it evolves before the jury” (Morvant v Construction Aggregates Corp., 570 F2d 626, 629-630 [6th Cir], cert dismissed 439 US 801; see, United States v Kosko, 870 F2d 162, 164 [4th Cir]). Moreover, we note that the Federal Rules of Evidence, although not binding, support defendant’s position. While a fact witness under the Federal Rules must be excluded on the request of a party, an expert witness is generally exempted from the exclusion requirement as "a person whose presence is shown by a party to be essential to the presentation of the party’s cause” (Federal Rules Evid, rule 615 [3]; see, e.g., Mayo v Tri-Bell Indus., 787 F2d 1007, 1013 [5th Cir]; Trans World Metals v Southwire Co., 769 F2d 902, 910-911 [2d Cir]). We conclude that in the circumstances of this case the court’s ruling constituted reversible error.

Ill

CPL 30.30 Motion

The question pertaining to the denial of defendant’s speedy trial motion turns on whether the courts below should have excluded from the six-month limitation the time that defendant was incompetent to proceed to trial. We conclude that this exclusion was proper under CPL 30.30 (4) (a) which, in pertinent part, provides:

"In computing the time within which the people must be ready for trial * * * the following periods must be excluded:
"(a) a reasonable period of delay resulting from other proceedings concerning the defendant, including but not limited to: proceedings for the determination of competency and the period during which defendant is incompetent to stand trial” (emphasis added).

The proceedings pertaining to defendant’s competency were instituted by defendant. On April 10, 1985, Queens County Supreme Court, after a hearing at which defendant called three psychiatrists and the People one, determined in a written decision that defendant was an incapacitated person, unable to assist counsel in his defense and, therefore, unfit to proceed to trial. On April 23, 1985, Supreme Court, New York County, in a similar proceeding found that defendant "lack[ed] the capacity to understand the proceedings against him or to assist in his own defense” and adjudicated him to be an incapacitated person. Although the Queens County six-month commitment order expired on October 10, 1985, that court’s finding of incompetency remained unaltered as did the similar finding by New York County Supreme Court which was in effect until September 24, 1986 when that court found defendant fit to proceed. The Queens County finding of unfitness remained in effect until that court’s finding of fitness to proceed on November 17, 1986, about a month after the prosecutor’s statement of readiness.

Defendant argues that the Queens County District Attorney failed in his duty to monitor the status of defendant in Mid-Hudson and that much, if not all, of the time following the expiration of the Queens County commitment order on October 10, 1985 should not be exempted. We need not address the issue of the Queens County District Attorney’s monitoring of defendant’s status because defendant was legally held to be unfit under the New York County order which remained in effect until September 24,1986.

The speedy trial statute specifically recognizes as a separate factor resulting in delay warranting an exemption from the time limitation “the period during which defendant is incompetent to stand trial” (CPL 30.30 [4] [a] [emphasis added]) — i.e., when, because of an existing determination of defendant’s unfitness to proceed due to his inability to understand the proceedings against him or to assist in his defense, the prosecution may not legally proceed to trial and conviction (see, Pate v Robinson, 383 US 375, 378, 387). It is the delay resulting from defendant’s determined condition and status as an incapacitated person and, as such, his unfitness to proceed to trial that is exempted from the time limitation. We need not decide the abstract question raised by the dissent (dissenting opn, at 109-110) which would be presented if defendant’s status as incompetent had been determined only by Queens County Supreme Court — i.e., whether the period of the subdivision (4) (a) exemption should be curtailed as unreasonable because the Queens County prosecutor was not kept advised of defendant’s status and did not move for a new competency determination. Here, defendant’s status as incompetent was the subject of a parallel Supreme Court order. There is no question concerning the validity or the effect of the outstanding determination of New York County Supreme Court that defendant was an incapacitated person and remained unfit to proceed until that court’s finding of competency on September 24, 1986, and no contention that the resulting period of delay was unreasonable. We hold only, under the unique circumstances of this case where defendant remained an incapacitated person by virtue of the interrelated effect of two orders of New York State Supreme Court, that the period properly exempted under CPL 30.30 (4) (a) brought the total time to be counted against the prosecution to less than 180 days.

The dissent’s proposition that "[i]t is elementary that a judicial finding of incompetency [i.e, the New York County Supreme Court order] is binding only in the proceeding in which it is made” (dissenting opn, at 107), for which it cites no pertinent authority, is clearly contrary to fundamental principles of criminal justice. What the proposition overlooks is that the New York County determination of incompetency had an effect beyond the particular CPL article 730 proceeding in which it was made. The order was by no means merely procedural; it was a substantive factual and legal determination with respect to a specific defendant’s mental and emotional capacity made by a court having jurisdiction over the matter after proceedings in which that defendant’s capacity was the very issue in dispute between the State and the defendant. Whether the Queens County Supreme Court would have been legally bound to give effect to the New York County order’s finding of unfitness as an issue determined by that court or by simply adopting the commonsense conclusion that if a person was legally found to be incompetent in New York County the same person would necessarily be incompetent in Queens County, we need not decide. What is important is that the New York County Supreme Court determination, as long as it remained in effect, would have been a legal and constitutional bar to defendant’s prosecution and conviction in Queens County (see, Pate v Robinson, supra, at 378, 387).

The order should be reversed and a new trial ordered.

Titone and Bellacosa, JJ.

(concurring in part and dissenting in part). We vote to reverse and dismiss the indictments because the People’s readiness responsibilities under CPL 30.30 have not been satisfied. The majority’s rationale with respect to this issue is puzzling and misdirected. Although the trial court’s April 10, 1985 commitment order expired on October 11, 1985, the People did nothing to bring defendant to trial until more than a year later, when they finally declared their readiness. The majority nonetheless finds that the timing requirements of CPL 30.30 were not violated, because, in its view, the combined effect of the trial court’s "unaltered” finding of incompetency, coupled with a "parallel” finding of incompetency in a different criminal action in New York County, somehow excused the People’s protracted unreadiness in this criminal action. The principles that have long governed analysis under CPL 30.30 do not tolerate such laxity.

I.

Defendant was initially arrested in Queens County on December 8, 1983 and held on a felony complaint. After a series of routine pretrial proceedings, defense counsel moved for a competency hearing, with the result that defendant was found to be unfit to proceed and, on April 10, 1985, was committed to the custody of the Department of Mental Hygiene (DMH) for a period of six months. This commitment order was never extended. Nevertheless, the People did nothing further to prosecute the case until September 24, 1986, when they learned from the New York County District Attorney’s office that some six months earlier DMH had determined that defendant was fit to proceed and had released him to the custody of New York City Department of Correction. According to the stipulated facts at the CPL 30.30 hearing, the People’s inaction was the result of their "custom and policy” of relying on DMH to monitor expiring retention orders and to give them notice whenever a defendant under commitment on a retention order was about to be released. Once the Queens prosecutor learned of defendant’s release to the Department of Correction, the Queens case was restored to the trial calendar and, on October 16, 1986, the People formally declared their readiness for trial. The Supreme Court, Queens County, found defendant fit to proceed on November 17,1986.

Defendant promptly moved for dismissal under CPL 30.30, focusing particularly on two large blocks of pre-readiness time: (1) the period from October 11, 1985 (the date the commitment order expired) to March 24, 1986 (the date defendant, having been found by DMH to be competent, was released to the City Correction Department) and (2) March 24, 1986 to October 16, 1986 (the date the People declared their readiness). The People countered by arguing, among other things, that the April 10, 1985 finding of incompetence effectively tolled the time they had to become ready and that, because there had been no intervening judicial findings in Queens County to the contrary, the entire period from that date to November 17, 1986, the date defendant was formally found competent in Queens County, was "excludable.”

In the course of the written and oral argument on the motion, it was disclosed that defendant’s competence had been the subject of a parallel proceeding in New York County during much of the two disputed periods. In April of 1985, he had been committed to DMH’s custody for a year by a New York County Supreme Court order and, after the expiration of the Queens County commitment, had been retained by DMH pursuant to that order. Moreover, after DMH had determined that defendant was competent (March 4, 1986) and released him (March 24, 1986), New York County Supreme Court conducted further competency proceedings and on September 24, 1986 found him fit to proceed. It is these "other proceedings” which the majority apparently now countenances as the core of its rationale for concluding that the People’s readiness responsibilities are excused under CPL 30.30 (4) (a).

II.

Analysis of CPL 30.30 cases involving felony charges generally begins with a recognition of the defendant’s burden of showing that more than six months has elapsed between the commencement of the action and the prosecution’s declaration of readiness (see, People v Berkowitz, 50 NY2d 333, 349). Once that burden is met, as it indisputably was met here, the People have the burden of establishing that "certain periods within that time should be excluded” (id., at 349; accord, People v Santos, 68 NY2d 859). If the People’s burden is not satisfied, dismissal must follow (People v Berkowitz, supra; cf., People v Lomax, 50 NY2d 351).

Significantly, during the course of these proceedings, up to five separate theories have been advanced in an effort to support the People’s position. In their initial response to the CPL 30.30 motion, the People relied principally on a claim that the entire disputed period was excludable under CPL 30.30 (3) (c) (i) because defendant’s prior parole status had been revoked. When that claim proved factually inaccurate, the People shifted to their alternative position that the entire disputed period should be excluded because, regardless of what had transpired in New York County, the Queens County finding of incompetence was unaffected and continued to be the controlling factor until defendant was declared competent in Queens County on November 17, 1986. Evidently dissatisfied with that approach, the trial court fashioned another theory, holding that defendant could not have been prejudiced by the People’s delay because the concurrent finding of incompetence in New York County precluded defendant from arguing that he was, in fact, competent during much of the disputed periods. On defendant’s appeal from his conviction, the Appellate Division used yet another theory based on the exclusion provided in CPL 30.30 (4) (c). Now, in its effort to uphold defendant’s prosecution, this Court has apparently carved out a new theory that blends the argument the trial court rejected with a variation on the one the trial court adopted based on the existence of an incompetency finding in a different criminal proceeding conducted in a neighboring county. We believe that none of the rationales can rescue the People from their failure to be ready in accordance with the statute’s demands.

III.

Although the majority states that its holding is based on “the interrelated effect of two orders of New York State Supreme Court” (majority opn, at 102 [emphasis supplied]), it repeatedly declines to analyze the significance of the Queens County limited six-month commitment order in relation to defendant’s CPL 30.30 claim. Thus, notwithstanding its reference to “two orders,” the centerpiece of the majority’s analysis is the fact that there was an "outstanding determination of New York County Supreme Court that defendant was an incapacitated person and remained unfit to proceed until that court’s finding of competency on September 24, 1986” (majority opn, at 102). Based on this fact, the majority invokes CPL 30.30 (4) (a)’s exclusion for “the period during which defendant is incompetent to stand trial.” However, nowhere does the majority explain how a determination in New York County, "parallel” or otherwise, can serve to establish the existence of a "period during which defendant [wa]s incompetent to stand trial” in this Queens County action. In fact, the New York County finding of incompetence had no legal significance in the Queens County prosecution currently under review.

A defendant’s “incompetence” or “unfitness” to stand trial does not exist in the abstract. Rather, that legal status comes into being only after a formal adjudication conducted pursuant to CPL article 730. Certainly, CPL 30.30 (4) (a)’s reference to the “period during which defendant is incompetent” contemplates only periods of adjudicated incompetency.

It is elementary that a judicial finding of incompetency is binding only in the proceeding in which it is made. Direct authority for that proposition may be found in CPL 730.60 (2), which embodies the principle set forth in Pate v Robinson (383 US 375, 378, 387, cited at majority opn, at 102) and provides that "the criminal action pending * * * in the court that issued [the retention or commitment] order is suspended until the superintendent of the institution in which the defendant is confined determines that [the defendant] is no longer an incapacitated person” (emphasis supplied). Even the People in this case unequivocally acknowledged that separate criminal actions require separate CPL article 730 proceedings when they adopted the position that “it was possible to be found fit in New York and not fit in Queens.” Further, the fact that the trial court in this Queens County proceeding found it necessary to conduct its own CPL article 730 inquiry once the matter was recalendared, notwithstanding the existence of a prior “parallel” completed inquiry in New York County, demonstrates that the New York County adjudication, which according to the majority remained in effect from April of 1985 until at least July of 1986 (majority opn, at 102, and n 4), was not binding in the Queens County action.

Despite the clear language of CPL 730.60 (2) limiting the effective reach of a commitment order, the majority makes the rather startling assertion that under “fundamental principles of criminal justice” the New York County incompetency determination in this case “had an effect beyond the particular CPL article 730 [proceeding] in which it was made” (majority opn, at 103). However, it never explains precisely what that effect was and even fails to specify what “fundamental” legal principle it is alluding to. To the extent that the majority implies that the New York County determination could be legally binding in the Queens County action either as “an issue determined by that court” or by virtue of some rule requiring adoption of a "commonsense conclusion” (majority opn, at 103), the majority’s analysis is thoroughly unsupported. Although the New York County court in which the determinatian was made and the Queens County court in which the criminal action against defendant was pending are both units of the Supreme Court, a State-wide entity, there is no rule of reciprocity in this State and any suggestion that a finding in one criminal court is binding in the other without further judicial proceedings on the question is inconsistent with the basic organization of our court system.

Thus, the period during which the New York County finding of incompetence was extant was not a "period during which defendant [wa]s incompetent” in the Queens County action as that term is used in CPL 30.30 (4) (a). Indeed, the flaw in the majority’s conclusion to the contrary is evident from its own statement that "the New York County Supreme Court determination, as long as it remained in effect, would have been a legal and constitutional bar to defendant’s prosecution and conviction in Queens County” (majority opn, at 103 [emphasis supplied]). If anything, it would have been defendant’s actual incompetence, not a judicial "determination” of incompetence, that operated as a temporary bar to prosecution. The "determination” on which the majority relies was merely a formal adjudication that at a particular point in time defendant was incompetent. It had no other independent legal significance, and it certainly did not establish defendant’s ongoing actual incompetence in the transcendent sense that the majority suggests. Accordingly, the New York County incompetency determination did not excuse the Queens County District Attorney’s failure to become ready in a timely manner after DMH’s administrative determination that defendant was competent to proceed.

To the extent that the majority’s holding rests on the unspoken premise that any steps taken to become trial ready in Queens County would have been futile, its analysis is plainly misinformed. Had the Queens County District Attorney taken the necessary steps to revive the prosecution when defendant was released from DMH custody in March of 1986, the Queens County Supreme Court could have immediately directed further psychiatric examinations, as the New York County Supreme Court did; alternatively, arrangements could have been made, with the consent of the parties, to coordinate the CPL article 730 proceedings in both counties for the sake of speed and judicial economy. In any event, the required CPL article 730 proceedings would have gone forward and the case could then have proceeded to a prompt disposition. The circumstance that prevented the proceedings from unfolding in this orderly and timely manner was not the extant New York County incompetency determination, which was in the process of being reviewed during much of the period in question; rather it was the laxity of the Queens County District Attorney’s office.

Similarly, to the extent that the majority’s holding rests on the existence of the extant Queens County finding of incompetency (see, majority opn, at 102, 102-103 ["period properly exempted under CPL 30.30 (4) (a)” "where defendant remained an incapacitated person by virtue of the interrelated effect of two orders of New York State Supreme Court”; emphasis supplied]), its analysis does not withstand scrutiny. Even if, as the majority asserts, that finding remained in effect until November 17, 1986, when it was judicially determined in Queens County that defendant was fit to proceed, the People could not claim the benefit of the exclusion because of the statutory requirement that any period excluded on this ground be a "reasonable” one.

Here, the only reason that the trial court’s April 10, 1985 finding of incompetence even theoretically remained "in effect” for so long was that the People failed to take any steps of their own to keep track of their criminal action and to place the matter back on the trial court’s calendar so that the competency question could be reviewed. This failure was not the product of any genuine need of the People for additional time to prepare. Nor was it the product of a reasoned choice by the People to forgo pursuing the case on the theory that further action would be futile in light of a concurrent incompetency finding in a neighboring county (cf., People v Bratton, 65 NY2d 675). Rather, the delay was attributable solely to the People’s negligent failure to follow up on their case after the court’s commitment order had expired. Indeed, accepting the proposition suggested by the majority’s analysis would enable a District Attorney’s office indefinitely to extend its own excludable time by simply failing to take the action necessary to change the case’s status quo. Surely, that is not, and cannot be, the law.

The unreasonableness of the period of delay that occurred while the Queens County incompetency finding was outstanding also becomes evident when the conduct of the Queens County District Attorney’s office is compared to that of the New York County District Attorney’s office. When DMH determined on March 4, 1986 that defendant was no longer unfit, the latter promptly placed the case back on the calendar, prompting further judicial action and, ultimately, a final disposition of the New York County charges by September 24, 1986. If it was feasible for the New York County District Attorney to have taken such steps, it was also both feasible and reasonable for his Queens County counterpart to do so. It is no excuse that "Mid-Hudson never notified the Queens County District Attorney or Supreme Court * * * of defendant’s discharge to Bellevue” (majority opn, at 103, n 5). The Queens County District Attorney’s failure to take similar steps at any point after the expiration of the Queens County commitment order, or at least after DMH’s March 4, 1986 determination of competence, belies any claim the People might now make as to the "reasonableness” of the entire 19-month period during which the Queens incompetency finding was theoretically "in effect.”

It is evident from the foregoing that no theory supports the conclusion that the People satisfied their burden of showing the existence of sufficient "excludable” time. Moreover, there is no sound reason for the Court to strain, contrary to the letter, spirit and purpose of CPL 30.30, to uphold this belated prosecution. The prosecutorial inaction in issue falls squarely within the range of conduct that the Legislature meant to regulate when it enacted CPL 30.30 and provided for mandatory dismissals in cases delayed because of prosecutorial indifference (see generally, People v Anderson, 66 NY2d 529; People v Worley, 66 NY2d 523, 527; People v Brothers, 50 NY2d 413). The delay in this case was directly traceable to a decision by the Queens County District Attorney’s office to abdicate its responsibility for monitoring cases involving incompetent defendants and to rely instead on DMH, a State agency that is neither principally concerned with law enforcement nor statutorily charged with CPL 30.30 readiness responsibilities. A prosecutor may not so easily slough off its statutory duty. Having made its decision, the People created a risk that some of the prosecutions for which it was responsible would "fall through the cracks” and, as a result, would languish unnoticed while the deadlines carefully crafted by the Legislature slipped by. It was precisely this type of institutionalized indifference that CPL 30.30 was enacted to combat. Accordingly, we dissent from the majority’s decision to remit for a new trial and would instead dismiss the indictment.

Chief Judge Wachtler and Judges Simons and Kaye concur with Judge Hancock, Jr.; Judge Titone and Bellacosa dissent in part and vote to reverse and dismiss the indictments in a separate opinion.

Order reversed, etc.

      . CPL 250.10 (3) provides that defendant has a right to have his counsel present at the examination as an observer and that the District Attorney may also be present. There is no provision for the presence of the opposing psychiatrist or psychologist.

      . CPL 730.50 (2) and 730.60 (2) required Mid-Hudson to notify the Queens County Supreme Court and the District Attorney when it retained defendant beyond the six-month commitment order and later when it discharged defendant to Bellevue. Because of Mid-Hudson’s failure to comply with its statutory obligations, the Queens County Supreme Court and District Attorney were not apprised of defendant’s status until September 24.1986.

      . Between December 8, 1983, the date of defendant’s arrest, and April 10, 1985, the date of the Queens County finding of unfitness and order of commitment, the parties agree that only 36 days are chargeable to the People, the balance being exempted by reason of motions and other proceedings. The only period in dispute is that between October 10, 1985, the expiration date of the Queens County six-month commitment and October 16,1986, the date of the statement of readiness.

      . We note, moreover, as the People point out, that even if New York County Supreme Court had made its determination of competency as early as July 7, 1986 upon the bare receipt of the reports of defendant’s fitness from the examining psychiatrists, without any further proceedings, there would have been more than enough excludable time to bring the total time counted against the prosecution to well under 180 days.

      . Nor can we subscribe to the dissent’s notion (dissenting opn, at 108) that if the Queens County District Attorney and Supreme Court had been apprised of defendant’s status, they would have been obligated, notwithstanding the effectiveness of the New York County order, to expend the time and resources to pursue their independent and separate CPL article 730 proceedings while the defendant was already in Bellevue Hospital undergoing competency testing by psychiatrists appointed by New York County Supreme Court. Although unnecessary to our decision, it is doubtful at best that the Legislature could have contemplated such an unrealistically rigid interpretation of CPL 30.30 (4) (a). Here, of course, Mid-Hudson never notified the Queens County District Attorney or Supreme Court (see, supra, at 97, n 2) of defendant’s discharge to Bellevue for additional testing.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    The People of the State of New York, Respondent, v Jesse Jackson, Appellant.
    Argued September 10,1992;
    decided October 20, 1992

      POINTS OF COUNSEL

      E. Joshua Rosenkranz, New York City, and Tamara Detloff for appellant.
    Double jeopardy bars reprosecution of Mr. Jackson upon reversal of his single gun possession conviction, because the same jury acquitted him of three other indistinguishable counts and the People cannot bear their burden of proving that Mr. Jackson was not already acquitted of the same offense. (United States v Martin Linen Supply Co., 430 US 564; Grady v Corbin, 495 US 508; North Carolina v Pearce, 395 US 711; People v Ferguson, 67 NY2d 383; Tibbs v Florida, 457 US 31; Benton v Maryland, 395 US 784; United States v Ball, 163 US 662; Green v United States, 355 US 184; Lock-hart v Nelson, 488 US 33; Burks v United States, 437 US 1.)

      Robert M. Morgenthau, District Attorney, New York City (Leonard I. Picker, Mark Dwyer and James M. McGuire of counsel), for respondent.
    I. Defendant’s corrective action appeal should be rejected; for three independent reasons the new trial order is not illegal. (People v Autry, 75 NY2d 836; People v Thomas, 50 NY2d 467; People v Davis, 72 NY2d 32; People v Keindl, 68 NY2d 410; People v Foreman, 168 AD2d 928, 77 NY2d 994; People v McNab, 167 AD2d 858; People v Knight, 161 AD2d 668; People v Caliendo, 158 AD2d 531; Grady v Corbin, 495 US 508, United States v Ragins, 840 F2d 1184.) II. This Court is empowered to grant affirmative relief to a non-appealing party. (People v Carpenito, 80 NY2d 65; People v Goodfriend, 64 NY2d 695; People v Johnson, 39 NY2d 364; People v Fediuk, 66 NY2d 881; People v Kennedy, 68 NY2d 569; People v Griminger, 71 NY2d 635; People v Gamble, 70 NY2d 885; People v Bing, 76 NY2d 331; People v Hobson, 39 NY2d 479; Bellevue S. Assocs. v HRH Constr. Corp., 78 NY2d 282.)
   OPINION OF THE COURT

Per Curiam.

Defendant was charged, along with two codefendants, with second degree murder and four counts of criminal possession of a weapon in the third degree. The possession counts involved four different weapons. The jury convicted him of one of the weapons counts and acquitted him of the other charges. The Appellate Division reversed on the law and as a matter of discretion in the interest of justice. Labelling defendant’s conviction as "duplicitous”, the court noted that because the four counts of weapon possession were all identically worded, it was impossible to determine which of the four guns defendant was convicted of possessing. Accordingly, it ordered a new trial.

Defendant now seeks to appeal the legality of the corrective action ordered by the Appellate Division. He asserts that it is impossible to determine which gun he was found guilty of possessing and, therefore, a new trial will necessarily violate his right not to be put in jeopardy twice for the same offense because, on retrial, he may be found guilty of an offense of which he has already been acquitted. He contends that this Court has the power, under CPL 450.90 (2) (b), to review the legality of the corrective action ordered by the Appellate Division.

CPL 450.90 sets forth the circumstances in which a party may appeal an intermediate appellate court order to the Court of Appeals. Defendant rests his right to appeal on subdivision (2) (b), which states that an appeal may be taken from an Appellate Division order reversing or modifying a judgment or order of a criminal court if "[t]he appeal is based upon a contention that corrective action * * * taken or directed by the intermediate appellate court was illegal.”

Subdivision (2) of CPL 450.90 must be read in conjunction with subdivision (1). Subdivision (1) requires first that the order appealed from be adverse or partially adverse to the party appealing. An appeal is then authorized if the order appealed is either based upon the law (subd [2] [a]) or direct corrective action deemed by the appellant to be illegal (subd [2] [b]; see, Staff Comment, reprinted in Proposed NY CPL 230.80 [1967]).

Inasmuch as the Appellate Division reversed the judgment convicting him, defendant was not adversely affected by the Appellate Division’s order (see, CPL 450.90 [1]).

Accordingly, the appeal should be dismissed.

Chief Judge Wachtler and Judges Simons, Kaye, Titone, Hancock, Jr., and Bellacosa concur in Per Curiam opinion; Judge Smith taking no part.

Appeal dismissed.

      . Defendant has also instituted a CPLR article 78 proceeding seeking to prohibit further prosecution.

      . An order of the Appellate Division is "adverse to the party who was the appellant in such court when it affirms the judgment, sentence or order appealed from, and is adverse to the party who was the respondent in such court when it reverses the judgment, sentence or order appealed from. An appellate court order which modifies a judgment or order appealed from is partially adverse to each party” (CPL 450.90 [1]).


author: Bellacosa, J.

text:
    In the Matter of Roberts Real Estate, Inc., et al., Respondents, v New York State Department of State, Division of Licensing Services, Appellant.
    Argued September 17,1992;
    decided October 20, 1992

      POINTS OF COUNSEL

      Robert Abrams, Attorney-General, Albany (John McConnell, Jerry Boone and Peter H. Schiff of counsel), for appellant.
    I. The Court below erred in holding that Real Property Law § 442-c barred imputation to Roberts Inc. of the actual knowledge of anyone other than a managing or representative broker. (People v Eulo, 63 NY2d 341; Matter of Moran Towing & Transp. Co. v New York State Tax Commn., 72 NY2d 166; Mencher v Richards, 256 App Div 280, 1003; Corrigan v BobbsMerrill Co., 228 NY 58; Yager Pontiac v Danker & Sons, 41 AD2d 366, 34 NY2d 707; Marr v Tumulty, 256 NY 15; Connell v Hayden, 83 AD2d 30; Keystone Leasing Corp. v Peoples Protective Life Ins. Co., 514 F Supp 841; Matter of Steinberg, 153 Misc 339; Garbin v Mutual Life Ins. Co., 77 Misc 2d 689.) II. The Court below reasonably determined that the knowledge of Roberts Inc. real estate salespersons Karen Curren and Deborah Wilson, acquired within the scope of their authority derived from the corporation, should be imputed to the corporation under section 442-c. III. The Court below erred in holding that an absence of “actual knowledge” by a corporate broker barred a finding of untrustworthiness or incompetence of such a broker and the imposition of penalties other than suspension or revocation of the corporate broker’s license. (Finger Lakes Racing Assn, v New York State Racing & Wagering Bd., 45 NY2d 471; Matter of Birch v Lomenzo, 31 AD2d 835; Matter of Tobey v Department of State, 33 AD2d 539.)

      Michael T. Wallender, Albany, and Carter, Conboy, Bard-well, Case, Blackmore & Napierski, Albany, for respondents.
    I. The Court below correctly applied Real Property Law § 442-c in vacating Department of State’s imposition of license suspension based on vicarious liability. (Matter of Sullivan Co. [Miller], 289 NY 110; Matter of 12 Cornelia St. [Ross], 56 NY2d 895; Noce v Kaufman, 2 NY2d 347.) II. The Court below’s decision was in accordance with established law. (Matter of Roberts Real Estate v New York State Dept, of State, 171 AD2d 217, 79 NY2d 755; Smith v Lomenzo, 33 AD2d 874; Matter of Kunst v Department of State, 41 AD2d 686; Geisler v Department of State, 73 AD2d 392; Matter of Sperte v Shaffer, 111 AD2d 856; Matter of Realty World/Realty World Franchise Serv. Corp. v Shaffer, 101 AD2d 708; Matter of New York State Med. Transporters Assn, v Perales, 77 NY2d 126; Adler v Lawyers Tit. Ins. Corp., 169 AD2d 925.)
   OPINION OF THE COURT

Bellacosa, J.

The New York State Department of State (Department) seeks a judicial interpretation of Real Property Law § 442-c that would allow it to suspend or revoke a corporate broker’s license based on interpreting "actual knowledge” to include imputed knowledge of employee-salespersons. We agree with the Appellate Division that the Department’s theory and proffered interpretation of the governing words of the statute are not supportable. We thus affirm that Court’s order insofar as it annulled the Department’s determination suspending the license of the corporate broker, Roberts Real Estate, Inc. (Roberts Inc.), on the basis of untrustworthiness and incompetence under Real Property Law § 441-c (1) and § 442-c. However, because the absence of actual knowledge does not insulate real estate brokers from disciplinary measures less severe than license suspension or revocation, there must be a remand to the Department for consideration of an appropriate lesser sanction, if any.

The Department found Roberts Inc. guilty of untrustworthiness and incompetence in failing to inform purchasers of the presence of methane gas in the well water available to their newly constructed homes. The sanction was suspension of its real estate broker’s license for a definite period of three months or the payment of a $3,000 fine. We granted leave to appeal to the Department from the Appellate Division’s annulment of that determination. The Department also found the corporate broker and two of its individual brokers guilty of failure to properly supervise and manage the business or activities of its licensed sales staff. We denied petitioners-respondents’ cross motion for leave to appeal with respect to these other aspects of the Department’s determination (79 NY2d 755). Thus, only the Department’s finding that Roberts Inc. demonstrated untrustworthiness and incompetence is before us.

We conclude that knowledge possessed by sales employees of a corporate broker is not by itself sufficient to satisfy the statutory ingredient of "actual knowledge” that must be chargeable against a broker under Real Property Law § 442-c for revocation or suspension of license purposes. Actual knowledge of an individual representative broker, director or officer is required to impose a suspension or revocation of any broker’s license, including the one held by this corporate broker, Roberts Inc.

In 1986, Roberts Inc. was engaged to market homes to be built in a new subdivision in New Scotland, Albany County, known as Orchard Park. The Albany County Health Department authorized construction to begin based, in part, upon satisfactory test results concerning water quantity and bacteriological and chemical quality. The water from one well drilled on one of the subdivision lots was tested.

Roberts Inc. effected a multiple listing of the proposed homes with the Albany County Board of Realtors and assigned the marketing responsibility of the homes to its Guilderland branch office. Roberts, the president of Roberts Inc., was the designated broker for the corporation. Newell, manager of the Guilderland branch office, was designated to act as a representative real estate broker for Roberts Inc. Newell also supervised associate broker Dede and sales agent Curren. Curren was designated as the listing agent for the Orchard Park subdivision. In March 1986, Dede and Curren attended a meeting with the Orchard Park developer, at which time test documents were produced and representations were made that the aquifer below Orchard Park provided an excellent source of water for the subdivision. In a subsequent meeting, an attorney for the developer showed Curren the site map approved by the Albany County Health Department and informed Curren that the attorney would be the liaison with the Health Department concerning all well water tests in the subdivision.

Roberts Inc. began marketing homes in the subdivision in April 1986. The sales were generally processed in this fashion: A prospective buyer would select a lot and a style of home, and execute a contract of sale with the builder. After the home was fully constructed, a septic system would be installed and a well drilled; the purchaser would inspect the house with the builder and Curren in a final "walk through”. During the walk through, the well-water system would be inspected, and the parties would note any items to be corrected or resolved before the closing of title. All contracts of sale for homes in the subdivision conditioned mortgage financing upon a sufficient supply of usable water. Also, a certificate of occupancy for each home would be issued only after the Albany County Health Department inspected the water supply system and certified that the septic system and the well water supply met certain standards.

Dissatisfaction developed among 13 buyers who had contracted to purchase homes in the subdivision between April 1986 and January 1987, and they eventually filed complaints against Roberts Inc. with the Department. It investigated and then brought licensing disciplinary charges against a variety of licensees, alleging that by late September 1986, two of Roberts Inc.’s sales associates and Curren, the listing sales agent, knew that the well water supplied in the subdivision was contaminated with methane gas. The Department’s Administrative Law Judge found that corporate broker Roberts Inc. derivatively knew of the presence of methane gas because its sales people knew; that the dangerous defect and condition was not disclosed to prospective purchasers; and that Roberts Inc. and two of its representative brokers, Roberts and Newell, demonstrated incompetence in failing to supervise and manage the business of the office or the activities of its licensed sales staff as required by 19 NYCRR 175.20. Upon those findings, the Administrative Law Judge recommended, insofar as relevant to this appeal, that Roberts’ corporate broker’s license be suspended for three months or, alternatively, that a fine be imposed. The Secretary of State approved the findings and recommendation, and this judicial challenge ensued.

The parties agree that the statutory provisions of article 12-A of the Real Property Law, including section 442-c in particular, govern. Thus, we are confronted solely with a question of statutory interpretation whether the Department can revoke or suspend the license of a corporate broker by imputing to it the knowledge of its sales agents. Relevant to the answer to that question is the consideration that the interpretation be consistent with the statutory limitation of "actual knowledge” for the imposition of that kind of penalty to be imposed on brokers.

Real Property Law § 441-c (1) empowers the Department to revoke or suspend the license of a real estate broker or salesperson, or reprimand or impose a fine, if the broker or salesperson has violated any provision of article 12-A of the Real Property Law or has demonstrated untrustworthiness or incompetency to act as a real estate broker or salesperson. Real Property Law § 442-c, adds, in pertinent part, that no violation of any provision of article 12-A by a real estate salesperson or other employee "shall be deemed to be cause for the revocation or suspension of the license of the broker, unless it shall appear that the broker had actual knowledge of such violation” (emphasis added). Real Property Law § 442-c thus limits the powers and options conferred on the Department under Real Property Law § 441-c when (1) a broker is being penalized for the misconduct of the broker’s employee, and (2) the penalty being sought is revocation or suspension of the employer-broker’s license.

The Department urges that we infuse the statutory meaning and sweep of "actual knowledge” with common-law agency principles. By that importation, a corporate broker, a legally Active entity, would be chargeable with the knowledge possessed by all employees and agents, up and down the ladder of responsibility, so long as they were acting within the scope of their duties (see, Karaduman v Newsday, Inc., 51 NY2d 531, 546-548, rearg denied 52 NY2d 899; see also, Corrigan v BobbsMerrill Co., 228 NY 58, 69; Yager Pontiac v Danker & Sons, 41 AD2d 366, 368, affd 34 NY2d 707).

Roberts Inc. counters that the "actual knowledge” component of Real Property Law § 442-c plainly restricts the licensing disciplinary options of the Department. The statute, as Roberts Inc. would have us interpret it, protects corporate and individual brokers against the imposition of the most serious disciplinary measures, when predicated derivatively on any affiliated employee’s misconduct. It acknowledges that as a Active entity it can possess "actual knowledge” only through attribution from agents, but strongly contends that such imputation can be derived only from agents with high ranking or principal-level authority.

The licensing sanctions contained in Real Property Law article 12-A, including suspension, revocation, fines or reprimand, were not designed and enacted to supplant existing common-law remedies (see, 2 Park Ave. Assocs. v Cross & Brown Co., 36 NY2d 286; see also, Matter of Stowell v Cuomo, 52 NY2d 208, 212-213). Purchasers, for example, aggrieved by a latent defect may bring damage claims for fraud or misrepresentation against the seller or seller’s agent or against contractors for breach of implied warranty (Caceci v Di Canio Constr. Corp., 72 NY2d 52; see also, codification in General Business Law art 36-B), in addition to any consumer or licensing complaints they may wish to initiate with governmental bodies. Thus, the principles of responsibility in the distinct spheres of liability and license regulation ought not be merged. Mixing the statutory regulatory scheme and concepts of one field with the decisional law precepts of another field does not make for a prudent or workable blend (see, e.g., Matter of Lieber [Ross] 46 NY2d 867 [administrative agencies are not bound by common-law or statutory rules of evidence or by technical or formal rules of procedure]).

Further examination of the particular statutes adds more support to our conclusion. Real Property Law § 442-c distinguishes on its face between a salesperson who commits an infraction and a broker who employs that salesperson. The statute withholds from the Department the power to revoke or suspend a broker-employer’s license unless the broker-employer can be shown to have "actual knowledge”. If, as the Department urges, knowledge of any salesperson may be imputed to a corporate broker employer, then the statutory distinction becomes significantly blurred and uneven. We have noted that strict construction of this statutory scheme is essential to insure that the legislative policy of punishing only those with actual knowledge is properly effectuated (see, 2 Park Ave. Assocs. v Cross & Brown Co., 36 NY2d 286, 290-291, supra). The Department’s approach would contradict that interpretation by arrogating to itself instead an expansive new power not granted by the Legislature, but rather explicitly circumscribed in the very statute that defines the agency’s authority.

In answer to the Department’s argument for incorporation by reference of common-law agency principles, we note that it fails to take into consideration the very different purposes for which discrete rules have evolved to govern the relationship of parties in traditional liability settings, as contrasted with the relationships and purposes of administrative law licensing penalty regimes. Indeed, its view would significantly alter the clear, limiting mandate of Real Property Law § 442-c, and would ironically also create two different and uneven disciplinary rules for corporate and individual brokers.

We emphasize that while we agree with the Appellate Division’s result and basic approach in this case, our precise formulation of the rule is slightly broader than the apparently more limited articulation by that Court (171 AD2d 217, 221). We hold that the purposes and limitations of the relevant statute can best be effectuated and harmonized by allowing a corporate broker to be charged with "actual knowledge” only when its principals, i.e., representative brokers, directors or officers have actual knowledge of the pertinent violation or misrepresentation.

The Department, for the purposes of this case and to secure an authoritative judicial interpretation, has proceeded on the basis — there is no contrary proof in the record — that none of Roberts Inc.’s individual brokers, officers or supervisory management personnel knew that the wells were contaminated with methane gas. Because we conclude that Real Property Law § 442-c restricts the authority of the Department from revoking or suspending brokers’ licenses absent actual knowledge, the suspension in this case of a corporate broker’s license for acts and knowledge of only its salesperson employees is not authorized and that determination was correctly annulled by the Appellate Division. However, the absence of "actual knowledge” does not insulate real estate brokers from disciplinary measures less severe than license suspension or revocation for misconduct (see, Real Property Law § 441-c [1]; § 442-c). Thus, a remand for consideration of an appropriate lesser sanction, if any, based on demonstrated untrustworthiness or incompetency, is necessary.

Accordingly, the order of the Appellate Division should be modified, without costs, by remitting the matter to Supreme Court with directions to remand to the Department of State for further consideration in accordance with this opinion, and, as so modified, affirmed.

Chief Judge Wachtler and Judges Simons, Kaye, Titone and Hancock, Jr., concur; Judge Smith taking no part.

Order modified, etc.


author: Kaye, J.

text:
    Lloyd Capital Corporation, Respondent, v Pat Henchar, Inc., et al., Appellants, et al., Defendants.
    Argued September 9,1992;
    decided October 22,1992

      POINTS OF COUNSEL

      D’Ambrosio & D’Ambrosio, P. C., Irvington (John P. D’Ambrosio of counsel), for appellants.
    I. The loan is illegal and unenforceable under Small Business Administration regulations and Federal law which preempts New York State’s laws relating to usury. (Silkwood v Kerr-McGee Corp., 464 US 238; Florida Avocado Growers v Paul, 373 US 132; Matter of State of New York v Strong Oil Co., 87 AD2d 374; Blue Chip Coffee v Applebaum, 128 Misc 2d 963; Federal Natl. Mtge. Assn, v Ricks, 83 Misc 2d 814; Farmer v Philadelphia Elec. Co., 329 F2d 3; United States v Merrick Sponsor Corp., 294 F Supp 1048; Rothberg v Loeb, Rhoades & Co., 445 F Supp 1336; United States v McIntyre Veneer, 343 F Supp 1095; KaiserFrazer Corp. v Otis & Co., 195 F2d 838.) II. The loan is unenforceable under New York law. (Crocker v Whitney, 71 NY 161; Schley v Andrews, 225 NY 110; Szerdahelyi v Harris, 67 NY2d 42; Rosasco Creameries v Cohen, 276 NY 274; Richards Conditioning Corp. v Oleet, 21 NY2d 895; Matter of Schwartz [American Swim Pools], 74 AD2d 638; Millington v Rapoport, 98 AD2d 765; General Venture Capital Corp. v

      Wilder Transp. 26 AD2d 173; Berk v Valley Premium Plan, 31 AD2d 643; Bieber v Goldberg, 133 App Div 207.)

      Sherwood Gordon, Bellmore, for respondent.
    I. Lloyd may rely upon the express preemption of the Federal statute to bar State court action predicated upon the violation of a Federally mandated maximum interest rate. (Silkwood v Kerr-McGee Corp., 464 US 238.) II. This is not a case of usury: no usurious rate of interest has been charged. (Hammelburger v Foursome Inn Corp., 76 AD2d 646; JZ Smoke Shop v American Commercial Capital Corp., 709 F Supp 422.) III. Appellants have failed to demonstrate that the defense of illegality has been established sufficiently to warrant the Court, as a matter of law, to direct judgment in their favor. (JZ Smoke Shop v American Commercial Capital Corp., 709 F Supp 422.) IV. The loan transaction is enforceable under New York State law. (Rosasco Creameries v Cohen, 276 NY 274; Furlong v Johnston, 209 App Div 198, 239 NY 141; Christophersen & Kaier v United States Nav. Co., 121 Misc 778; Posner v United Stated Fid. & Guar. Co., 33 Misc 2d 653, affd sub nom. Posner v New York Mut. Underwriters, 16 AD2d 1013.)
   OPINION OF THE COURT

Kaye, J.

Is a loan agreement that violated Federal Small Business Administration (SBA) regulations unenforceable under New York law? In the circumstances presented, we agree with the Appellate Division that the borrowers’ defense of illegality must be rejected and the debt enforced.

In September 1982, plaintiff, an investment company at that time licensed by the SBA, loaned $64,000 to defendant Pat Henchar, Inc. (PHI). The loan was personally guaranteed by defendant Patricia Henchar and secured by a mortgage on her home. As the loan bore an annual interest rate of 20.75% and required a commitment fee of $1,280, it violated pertinent SBA regulations, which set the interest ceiling at 20.125% and prohibited the commitment fee. One year later, PHI defaulted and plaintiff commenced the present action to foreclose on Henchar’s residence. As a defense to repayment, defendants asserted that the SBA violations rendered the loan unenforceable. Plaintiff meanwhile had received several notices from the SBA that the terms were indeed excessive, and in August 1984 reduced the interest rate to 20% and deducted the commitment fee.

On cross motions for summary judgment, Supreme Court dismissed the complaint — in effect denying foreclosure — based on the SBA violations. The Appellate Division reversed on plaintiff’s appeal, rejecting defendants’ illegality defense, and remitted to Supreme Court for a determination of the amount properly due in accordance with SBA regulations. We granted defendants’ motion for leave to appeal from the final order of Supreme Court, bringing up for review the Appellate Division’s prior nonfinal order (CPLR 5602 [a] [1] [ii]), which we now affirm.

As a threshold matter, we perceive no basis for defendants’ assertion that "[i]t is not at all certain that Plaintiff was innocent of criminal usury.” New York law explicitly makes certain usurious contracts unenforceable (see, General Obligations Law §§ 5-521, 5-511; Penal Law § 190.40; Seidel v 18 E. 17th St. Owners, 79 NY2d 735, 740-741), and defendants suggest that the loan may be usurious because various closing costs must be considered interest as a matter of law. However, a borrower may pay reasonable expenses attendant on a loan without rendering the loan usurious (see, Brown v Robinson, 224 NY 301, 314; London Realty Co. v Riordan, 207 NY 264, 266), and defendants made no showing that fees charged in this case were a pretext for higher interest, so as to create a triable issue of fact. Thus, our only task is to determine the effect of the Federal regulatory violation in this State law foreclosure action.

Illegal contracts are, as a general rule, unenforceable. However, "[w]here contracts which violate statutory provisions are merely malum prohibitum, the general rule does not always apply. If the statute does not provide expressly that its violation will deprive the parties of their right to sue on the contract, and the denial of relief is wholly out of proportion to the requirements of public policy * * * the right to recover will not be denied.” (Rosasco Creameries v Cohen, 276 NY 274, 278.)

In Rosasco, plaintiff milk dealer sought recovery for the reasonable value of milk sold to other dealers, who asserted that plaintiff could not recover because it had violated a statute requiring that milk dealers be licensed. Significantly, the statute imposed criminal penalties but did not specify that contracts made by unlicensed milk dealers were unenforceable. We concluded that since the primary purpose of the statute was to protect producers and the consuming public, not milk dealers such as defendants, and since the wrong committed by the violation of the statute did not endanger health or morals, the contract should be enforced. Since Rosasco, we have refused on public policy grounds to enforce agreements entered into in violation of statutes that were enacted to protect public health and safety (see, e.g., Richards Conditioning Corp. v Oleet, 21 NY2d 895, 896).

As a general rule also, forfeitures by operation of law are disfavored, particularly where a defaulting party seeks to raise illegality as "a sword for personal gain rather than a shield for the public good.” (Charlebois v Weller Assocs., 72 NY2d 587, 595.) Allowing parties to avoid their contractual obligation is especially inappropriate where there are regulatory sanctions and statutory penalties in place to redress violations of the law.

Applying these principles to the facts at hand, we conclude that the Appellate Division properly rejected defendants’ illegality defense. As in Rosasco, the violation at issue was not malum in se, or evil in itself. The violation was malum prohibitum due to Federal law, which does not provide for borrowers to interpose illegality as a defense to repayment of their loans. Therefore, unless public policy dictates otherwise, the contract should be enforced.

The stated policy of the Federal Small Business Investment Act (SBIA) is to "aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise” (15 USC § 631 [a]). Congress passed the SBIA to encourage the growth of small businesses by compensating for the difficulty they may have in obtaining financing from conventional lenders (United States v Fidelity Capital Corp., 920 F2d 827, 830). The SBIA is concerned not with public health or safety, but with carrying out Federal small business policy.

The SBA enforces the SBIA and its attendant regulations by requiring licensed lenders to make detailed filings and reports (13 CFR 107.1002), and through periodic examinations (15 USC § 687b [c]). The SBA may redress violations by the revocation and suspension of licenses and cease and desist orders (15 USC § 687a). In addition, private parties may recover penalties where the violation also exceeds the permissible bounds of applicable State law (15 USC § 687 [i] [4] [B]).

We conclude that the regulatory sanctions, reinforced by the potential civil liability where State law is also violated, "quite complementarity and proportionately protect the underlying public policy” (Charlebois v Weller Assocs., 72 NY2d, at 595, supra). We therefore decline defendants’ invitation to read into our State law greater rights and remedies than the Federal scheme provides, especially where the SBA was exercising its own remedial powers, and where voiding the contract would result in an undeserved windfall to defendants.

Nothing in the Federal law compels a different result. As recently noted by the Court of Appeals for the Eleventh Circuit, "[a] loan or other transaction that violates either the [Small Business Investment] Act or the regulations * * * is still valid and enforceable between the parties.” (United States v Fidelity Capital Corp., 920 F2d, at 831, supra.)

Finally, in permitting plaintiff to seek repayment of the debt, we do not command illegal conduct (see, Kaiser Steel Corp. v Mullins, 455 US 72). The SBA scheme does not provide that a loan in violation of its regulations is void ab initia, and the terms being enforced fall within the allowable parameters of Federal law. "Past the point where the judgment of the Court would itself be enforcing the precise conduct made unlawful by the Act, the courts are to be guided by the overriding general policy * * * 'of preventing people from getting other people’s property for nothing when they purport to be buying it.’ ” (Kelly v Kosuga, 358 US 516, 520-521 [quoting Continental Wall Paper Co. v Voight & Sons Co., 212 US 227, 271].)

Accordingly, the judgment of the Supreme Court and the order of the Appellate Division brought up for review should be affirmed, with costs.

Chief Judge Wachtler and Judges Simons, Titone, Hancock, Jr., and Bellacosa concur; Judge Smith taking no part.

Judgment of Supreme Court and order of the Appellate Division brought up for review affirmed, with costs.