author: Ciparick, J.

text:
    [861 NE2d 813, 829 NYS2d 449]
    B.D.G.S., Inc., Respondent, v Anthony Balio et al., Defendants, and Savings Bank of Utica, Appellant.
    Argued November 14, 2006;
    decided December 21, 2006

      POINTS OF COUNSEL

      Getnick Livingston Atkinson Gigliotti & Priore, LLP, Utica {Janet M. Richmond and Patrick G. Radel of counsel), for appellant.
    I. Under this Court’s ruling in Spielman v Manufacturers Hanover Trust Co. (60 NY2d 221 [1983]) Savings Bank of Utica was entitled to judgment as a matter of law. (Maxton Bldrs. v Lo Galbo, 68 NY2d 373; Federal Ins. Co. v Manufacturers Hanover Trust Co., 157 AD2d 460; Underpinning & Found. Constructors v Chase Manhattan Bank, N.A., 46 NY2d 459; Prudential-Bache Sec. v Citibank, 73 NY2d 263; Jones v Community Bank of Sullivan County, 306 AD2d 679; Tette v Marine Midland Bank, 78 AD2d 383.) II. In the alternative, the claims against Savings Bank of Utica must be dismissed because there was no proof of unjust enrichment — a requirement for money had and received claim. (State of New York v Barclays Bank of N.Y., 76 NY2d 533; Miller v Schloss, 218 NY 400; Board of Educ. of Cold Spring Harbor Cent. School Dist. v Rettaliata, 78 NY2d 128; Parsa v State of New York, 64 NY2d 143; Middle E. Banking Co. v State St. Bank Intl., 821 F2d 897; Calisch Assoc. v

      Manufacturers Hanover Trust Co., 151 AD2d 446; Bank of Castile v Salerno, 99 AD2d 663; Henderson v Lincoln Rochester Trust Co., 303 NY 27; Moch Co. v Security Bank of N.Y., 176 App Div 842; Hutzler v Hertz Corp., 39 NY2d 209.)

      Mackenzie Hughes, L.L.P., Syracuse (Nancy L. Pontius of counsel), for respondent.
    I. The Appellate Division correctly denied Savings Bank of Utica’s (SBU) motion for summary judgment and affirmed the judgment against it based upon SBU’s failure to act in accordance with reasonable commercial banking standards. (Jones v Community Bank of Sullivan County, 306 AD2d 679; Moore v Richmond Hill Sav. Bank, 117 AD2d 27; Heffernan v Norstar Bank of Upstate N.Y., 125 AD2d 887; Tette v Marine Midland Bank, 78 AD2d 383, 54 NY2d 681; Lawyers’ Fund for Client Protection of State of N.Y. v Gateway State Bank, 273 AD2d 565; Belmar Trucking Corp. v American Trust Co., 65 Misc 2d 31; Shivers v Citibank, N.A., 12 AD3d 248; Holland Am. Cruises, N.V. v Carver Fed. Sav. & Loan Assn., 60 AD2d 545; Home Ins. Co. v Manufacturers Hanover Trust Co., 203 AD2d 125.) II. Spielman v Manufacturers Hanover Trust Co. (60 NY2d 221 [1983]) is not controlling on the issue of whether Savings Bank of Utica acted in accordance with reasonable commercial standards. (Horovitz v Roadworks of Great Neck, 76 NY2d 975; Underpinning & Found. Constructors v Chase Manhattan Bank, N.A., 46 NY2d 459.) III. A holding that as long as a bank follows a restrictive indorsement it has acted in accordance with commercially reasonable standards would be contrary to language and intent of the UCC, would make bad law, and would conflict with a substantial body of case law. (Federal Ins. Co. v Manufacturers Hanover Trust Co., 157 AD2d 460; Tette v Marine Midland Bank, 78 AD2d 383; Moore v Richmond Hill Sav. Bank, 117 AD2d 27.) IV. A pre-UCC claim for money had and received against a bank that accepts a forged check for deposit does not require a showing that the bank retained any of the proceeds of the check. (Henderson v Lincoln Rochester Trust Co., 303 NY 27; Moch Co. v Security Bank of N.Y., 176 App Div 842, 225 NY 723; State of New York v Barclays Bank of N.Y., 76 NY2d 533; Calisch Assoc. v Manufacturers Hanover Trust Co., 151 AD2d 446; Parsa v State of New York, 64 NY2d 143; Bank of Castile v Salerno, 99 AD2d 663.) V. A finding that UCC 3-419 (3) applies to B.D.G.S., Inc.’s claim for money had and received will have no impact on the judgment. (People v Bank of N. Am., 75 NY 547; Moore v Richmond Hill Sav. Bank, 117 AD2d 27; Moch Co. v Security Bank of N.Y., 176 App Div 842; Alumax Aluminum Corp. v Norstar Bank, 168 AD2d 163; Tette v Marine Midland Bank, 78 AD2d 383; Hutzler v Hertz Corp., 39 NY2d 209; Hechter v New York Life Ins. Co., 46 NY2d 34; Lawyers’ Fund for Client Protection of State of N.Y. v Gateway State Bank, 273 AD2d 565.)
   OPINION OF THE COURT

Ciparick, J.

The primary issue presented by this appeal is whether defendant Savings Bank of Utica’s (SBU) actions conformed to reasonable commercial standards as a matter of law under Uniform Commercial Code § 3-419 (3) when it complied with restrictive indorsements on checks submitted for deposit. SBU also asserts that any liability under section 3-419 (3) should be limited to the amount of proceeds remaining in its possession. We hold that compliance with a restrictive indorsement does not establish compliance with reasonable commercial standards as a matter of law and that SBU’s liability is not limited to proceeds remaining in its possession.

B.D.G.S., Inc., a New York corporation with headquarters in the state of Washington, owns a warehouse in Utica, New York. In 1991, a representative of B.D.G.S. entered into an oral agreement with two local men — defendants Anthony Balio and his employee, Peter Duniec — to manage the warehouse. Their responsibilities included finding tenants and collecting rent, which was then to be forwarded to B.D.G.S. and deposited into its bank account in Washington. Balio and Duniec formed the Beechgrove Warehouse Corporation and maintained a business account in that name at SBU.

Between 1996 and 2000, B.D.G.S. believed that one of its tenants, Rite-Aid, had been falling behind and failing to make its rent payments. As B.D.G.S. later discovered, Rite-Aid had been making the payments, but 16 checks had been indorsed to Beechgrove Warehouse and deposited into Beechgrove’s own SBU account. The checks had been made payable to DBGS (an apparent typographical error). With minor variations, there was a handwritten indorsement on the back of each check stating,

“DBGS, Inc.
Pay to the order of Beechgrove Warehouse
For Deposit”

with Beechgrove’s SBU account number underneath. A substantial refund check from Niagara Mohawk in the amount of $427,781.82 had similarly been indorsed and deposited in the SBU account. B.D.G.S. commenced this suit in February 2001 (and by amended complaint of November 2002) against SBU, Balio, Duniec, Beechgrove Warehouse and B. & R. Motor Express, Inc. (another corporation allegedly owned by Balio) asserting several causes of action. As relevant for purposes of this appeal, B.D.G.S. brought a claim against SBU for money had and received.

B.D.G.S. moved for partial summary judgment on the issue of liability and, in support of the motion, produced a memo from SBU concerning the bank’s policy on depositing checks payable to business accounts. The memo states that checks “are to be deposited only to the business account of the named payee. They are not to be deposited to an individual account even though the payee may be an officer of the business.” B.D.G.S. also produced the deposition testimony of Richard Callahan, an SBU senior vice-president, who testified that it was a violation of bank policy and reasonable banking standards to deposit the checks into an account other than that of the named payee. Finally, B.D.G.S. provided the affidavit of a banking expert, John Burdiss, concluding that SBU violated its own policies as well as reasonable commercial standards.

Supreme Court denied B.D.G.S.’s motion for partial summary judgment against SBU on the issue of liability, finding issues of fact as to whether the indorsements were forged or were authorized by B.D.G.S. The court also denied SBU’s cross motion for summary judgment dismissing the complaint. The Appellate Division affirmed, finding that B.D.G.S. raised an issue of fact as to whether SBU’s actions with respect to the checks were commercially reasonable.

At trial, Callahan changed his position and testified that he had been mistaken at his deposition. He stated that at the deposition he had been focusing on the payee on the front of the check. However, at trial he testified that SBU had not violated reasonable banking standards because it had complied with the indorsements on the back of the checks. Burdiss testified that several factors should have alerted SBU that the indorsements were improper. Notably, the handwriting on both indorsements was the same. Also, the account activity was unusual in that Beechgrove did not typically process checks or carry a balance as large as the check from Niagara Mohawk. Indeed, checks had bounced from the Beech-grove account and its balance was apparently low prior to the Niagara Mohawk check. Moreover, it was “not the standard” for the bank to deposit a check into one business account that was drawn to another business.

The jury found that SBU had not acted in accordance with reasonable commercial standards by accepting the checks for deposit. Supreme Court denied SBU’s posttrial motions to set aside the verdict and for judgment notwithstanding the verdict and entered judgment in favor of plaintiff in the amount of $1,152,933.83. The Appellate Division affirmed, finding legally sufficient evidence to support the jury’s verdict that SBU did not act in a commercially reasonable manner. We granted SBU leave to appeal and now affirm.

Section 3-419 (3) of the Uniform Commercial Code provides that

“[s]ubject to the provisions of this Act concerning restrictive indorsements a representative, including a depositary or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not hable in conversion or otherwise to the true owner beyond the amount of any proceeds remaining in [its] hands.”

As to restrictive indorsements, the UCC states that, where there is an indorsement such as “for deposit,” the transferee “must pay or apply any value given by him for or on the security of the instrument consistently with the indorsement and to the extent that [it] does so [it] becomes a holder for value” (UCC 3-206 [3]). SBU’s primary argument is that it is not liable under B.D.G.S.’s claim for money had and received because it complied with the restrictive indorsements on the checks.

Section 3-419 (3) limits the liability of representatives— including, as relevant here, depositary banks. As long as the bank complies with any restrictive indorsements and acts in good faith and in accordance with reasonable commercial standards, its liability will be limited to “the amount of any proceeds remaining in [its] hands” (UCC 3-419 [3]). Since the statute provides that the bank will not be “liable in conversion or otherwise,” the defense applies to a claim for money had and received.

SBU argues that compliance with the restrictive indorsements is tantamount to acting in accordance with reasonable commercial standards under the statute. In support of this argument, SBU relies on Spielman v Manufacturers Hanover Trust Co. (60 NY2d 221 [1983]). In that case, an attorney forged the payee’s indorsement on a settlement check made out to a law firm, and the drawer of the check commenced an action against the depositary bank.

Spielman is inapposite. Most notably, the party bringing suit in Spielman was the drawer of the check, rather than — as here — the payee. The Court observed that a drawer generally will not have a cause of action against a depositary bank; “either the forgery is effective to transfer the instrument . . . [or] the depositary has received nothing of the drawer for which the drawer may recover” (Spielman, 60 NY2d at 224). In those situations, the drawer’s cause of action is against the drawee. However, the drawer will be permitted to recover from the depositary bank in the limited circumstances “when the depositary has acted wrongfully and yet the drawee has acted properly in honoring the check because the forgery is effective” (Spielman, 60 NY2d at 225, citing Underpinning & Found. Constructors v Chase Manhattan Bank, N.A., 46 NY2d 459, 466 [1979]). There are no such limitations placed on a payee’s ability to sue the depositary.

SBU places great emphasis on Spielman’s holding that

“[i]t is the direction to deposit to the account of the customer and the bank’s action in honoring that direction which . . . establishes that the bank’s action accorded with reasonable business practice for there are many instances in which a family member or a business may indorse for deposit funds to the credit of another and a depositary is not on notice of chicanery because of it nor is it liable if it faithfully follows such a direction” (Spielman, 60 NY2d at 228).

However, Spielman did not deal with section 3-419 (3). In addition, it did not hold that, in all cases, compliance with restrictive indorsements is commercially reasonable. Plainly, there are situations where following the indorsements would not be reasonable. For example, it would not be reasonable for a bank to deposit a check according to restrictive indorsements that it had good cause to know were forged. Thus, compliance with such indorsements cannot be considered commercially reasonable as a matter of law under all circumstances.

In this case, the record supports the affirmed findings that SBU’s actions were not commercially reasonable. There was expert testimony concerning aspects of the transactions at issue that should have raised red flags for SBU. Further, there was testimony indicating that the bank did not comply with its own procedures for handling business checks. As a result, the Appellate Division properly determined that SBU did not act in accordance with reasonable commercial standards.

SBU also argues that it was entitled to judgment as a matter of law because B.D.G.S. did not prove that the bank retained any of the proceeds of the checks. If correct, SBU would be immunized from liability since it is apparently undisputed that SBU no longer retains the proceeds. This argument also lacks merit.

As noted above, section 3-419 (3) limits a depositary bank’s liability on an action for money had and received only when the bank satisfies the statutory criteria — compliance with restrictive indorsements, good faith and acting in accordance with reasonable commercial standards. Since SBU did not satisfy all of the above criteria, because it did not act in conformity with reasonable commercial standards, the defense is unavailable and the bank’s liability is not limited to the amount of the proceeds remaining in its possession.

Rather, SBU’s liability is determined by the common-law action for money had and received as it existed prior to the enactment of the UCC. This Court has previously noted that when the Legislature enacted section 3-419, it “did not intend to abrogate the payee’s pre-Code common-law rights to sue in assumpsit, for money had and received or unjust enrichment” (State of New York v Barclays Bank of N.Y., 76 NY2d 533, 540 [1990]). Under pre-UCC case law, the bank was liable for the entire amount of the check (see Henderson v Lincoln Rochester Trust Co., 303 NY 27, 32-33 [1951]). According to that rationale, when a bank took a check for collection, it had

“an obligation to pay the proceeds collected to the true payee owner in the absence of a valid indorsement. The moment the collecting bank receives the proceeds it holds money belonging to the owner of the check and becomes a debtor of such owner and of no one else in the absence of a valid indorsement” (Henderson, 303 NY at 33).

Thus, it is clear that, under these circumstances, SBU’s liability is not limited to the amount of proceeds remaining in its possession.

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

Chief Judge Kaye and Judges Rosenblatt, Graffeo, Read and Smith concur; Judge Pigott taking no part.

Order affirmed, with costs.

      . “An indorsement is restrictive which either
      “(a) is conditional; or
      “(b) purports to prohibit further transfer of the instrument; or “(c) includes the words ‘for collection’, ‘for deposit’, ‘pay any bank’, or like terms signifying a purpose of deposit or collection; or
      “(d) otherwise states that it is for the benefit or use of the indorser or of another person” (UCC 3-205).

      . A depositary bank is “the first bank to which an item is transferred for collection even though it is also the payor bank” (UCC 4-105 [a]).

      . This Court has previously questioned, but not decided, whether a depositary bank is liable to a payee given the “immunization language” of UCC 3-419 (3) and whether a bank is still liable in contract beyond the retained proceeds (see Hechter v New York Life Ins. Co., 46 NY2d 34, 38 n 3 [1978]; Hutzler v Hertz Corp., 39 NY2d 209, 217 n 3 [1976]). As stated above, a bank’s liability is limited when it meets the section 3-419 (3) criteria. However, when it does not, the pre-UCC Henderson rule still applies.


source: Caselaw Access Project

author: Rosenblatt, J.

license: Public Domain

text:
    [861 NE2d 98, 828 NYS2d 283]
    Nitza Keane, Appellant, v Frank M. Keane, Respondent.
    Decided December 21, 2006

      POINTS OF COUNSEL

      Nitza Keane, appellant pro se.
    I. Appellant’s rights were deprived under the 14th Amendment of the Constitution. (Mat

      ter of Tamara B. v Pete F., 220 AD2d 318; Matter of Ballroom Prods. v Abrams, 96 AD2d 1099; Matter of Deutsch v Deutsch, 59 AD2d 741; Belesi v Connecticut Mut. Life Ins. Co., 272 AD2d 353, 95 NY2d 886.) II. The Grunfeld rule was erroneously applied to the facts of this case. (Grunfeld v Grunfeld, 94 NY2d 696.) III. The double-dipping fallacy viewed by neighboring states should be relevant to New York because of its unfairness. IV Respondent’s incredible and unbelievable testimony regarding the Madison, Connecticut property should be denied as a matter of law. V. There was legal error regarding attorneys’ fees for appellant. VI. The court did not fail to award respondent his separate property. VII. The determination involved as to 9 Bay-view Place, Madison, Connecticut is reviewable as a matter of law. VIII. Appellant was denied tax benefits, while respondent received all tax benefits under equitable distribution as a matter of law. IX. A miscalculation by the trial court resulted in appellant receiving less than her entitled distributive award.

      Emanuel A. Towns, Brooklyn, for appellant.
    I. Respondent’s trial testimony on the 9 Bayview Place dispute was incredible as a matter of law. (Loughlin v City of New York, 186 AD2d 176; Sullivan v Pilevsky, 281 AD2d 410; Carr v Burnwell Gas of Newark, Inc., 23 AD3d 998.) II. Respondent’s trial counsel’s false representations were prejudicial, as a matter of law. (Schindler v Issler & Schrage, 262 AD2d 226; Heller v Louis Provenzano, Inc., 257 AD2d 378.) III. Though appellant’s counsel did not ask for a continuance or adjournment to meet this concocted story, the missing witness charge should have been granted as a matter of law. (People v Gonzalez, 68 NY2d 424; People v Savinon, 100 NY2d 192; Heller v Louis Provenzano, Inc., 257 AD2d 378.) IV. The trial court misapplied the legal principle applicable to the 9 Bayview Place controversy, thus arriving at an erroneous conclusion. (Heine v Heine, 176 AD2d 77; DeJesus v DeJesus, 90 NY2d 643; Price v Price, 69 NY2d 8; Majauskas v Majauskas, 61 NY2d 481; McKinster v Babcock, 26 NY 378.) V. The Appellate Division erroneously applied the Grunfeld rule to the facts of this case. (Grunfeld v Grunfeld, 94 NY2d 696; McSparron v McSparron, 87 NY2d 275; Holterman v Holterman, 3 NY3d 1.) VI. New York’s statutory scheme requires this Court to limit its Grunfeld ruling to the special circumstances of the professional license. (Matter of Excellus Health Plan v Serio, 2 NY3d 166; Gilman v Tucker, 128 NY 190; Matter of Ahlers v Clement, 141 App Div 891, 201 NY 592; Smull v Delaney, 175 Misc 795; People ex rel. Sheldon v Board of Appeals of City of N.Y., 234 NY 484; People ex rel. Barnes v Warden of Workhouse, 127 Misc 224;
      Wait v Van Allen, 22 NY 319; Hyatt v Taylor, 42 NY 258.) VII. Neighboring state courts have recently considered the double-dipping fallacy and have decided its broad application promotes egregious unfairness. (Grunfeld v Grunfeld, 94 NY2d 696.) VIII. The double-dipping fallacy has caused state courts substantial difficulty because they have not understood the principle’s fundamental flaw. IX. A miscalculation by the trial court resulted in appellant receiving less than her entitled distributive award. X. The Court below erroneously made a determination on appellant Nitza Keane’s order to show cause. XI. The Court below erred in assigning credits for the commercial properties. XII. The failure of the trial court to award counsel fees in this contentious divorce action is without basis. XIII. Respondent offered no proof of his separate property claim at the trial level.

      Berman Bavero Frucco & Gouz P.C., White Plains (Howard Leitner of counsel), for respondent.
    I. When an income-producing asset is distributed equally, any maintenance awarded from the income of that asset constitutes double counting regardless of the nature of the asset. (McSparron v McSparron, 87 NY2d 275; Grunfeld v Grunfeld, 94 NY2d 696; Miness v Miness, 229 AD2d 520; Amodio v Amodio, 70 NY2d 5; Rice v Rice, 222 AD2d 493; Ferraro v Ferraro, 257 AD2d 596; Dempster v Dempster, 236 AD2d 582, 90 NY2d 806; Matter of Penepent Corp., 198 AD2d 782; L’Esperance v L'Esperance, 243 AD2d 446; Matter of Reckson Operating Partnership v Assessor of Town of Greenburgh, 2 Misc 3d 1005[A], 2004 NY Slip Op 50153[U].) II. New York’s statutory scheme does not require limitation of Grunfeld v Grunfeld (94 NY2d 696 [2000]) and McSparron v McSparron's (87 NY2d 275 [1995]) prohibition against double counting to professional licenses. (Gaglio v Molnar-Gaglio, 300 AD2d 934; Sodaro v Sodaro, 286 AD2d 434; Murphy v Murphy, 6 AD3d 678.) III. Besides being antithetical to this Court’s rulings, the foreign state rulings relied upon by appellant have no relevance to this State’s experience. (McSparron v McSparron, 87 NY2d 275; Grunfeld v Grunfeld, 94 NY2d 696.) IV. The determination involving 9 Bayview Place is not reviewable by this Court; in any event, there is no basis for setting the determination aside. (Glenbriar Co. v Lipsman, 5 NY3d 388; Matter of City of New York [Fifth Ave. Coach Lines], 22 NY2d 613; St. Agnes Cemetery v State of New York, 3 NY2d 37; Matter of Schilling v Garguilo, 49 NY2d 817; People v Savinon, 100 NY2d 192; Matter of Tamara B. v Pete F., 220 AD2d 318; Matter of Ballroom Prods. v Abrams, 96 AD2d 1099; Matter of Deutsch v Deutsch,
      59 AD2d 741; Matter of Commercial Structures v City of Syracuse, 97 AD2d 965; McGovern v Getz, 193 AD2d 655.) V. The distributive award was correctly calculated. VI. There was no legal error regarding attorneys’ fees. (Patron v Patron, 40 NY2d 582.) VII. The trial court failed to award respondent his separate property.
   OPINION OF THE COURT

Rosenblatt, J.

In Grunfeld v Grunfeld (94 NY2d 696 [2000]) and McSparron v McSparron (87 NY2d 275 [1995]), we made clear that in divorce actions a court should not twice count the income associated with a professional license, an intangible asset, when making distributive and maintenance awards. We are now called upon to determine whether this principle extends to the distribution of a tangible, income-producing asset and the subsequent award of maintenance from income deriving from that asset. It does not.

I.

The parties, in their early 60s at the time of trial, were married for 30 years. During the marriage, the wife had no outside employment and the husband was sole shareholder in a real estate entity (FMK Realty, Inc.) with two assets. One of these assets was a parcel leased to a car repair shop, providing monthly rental income. The other was a mortgage note, yielding monthly income.

In 1981, the husband and his two siblings inherited a vacation property in Madison, Connecticut. He held sole title to that property as of trial, through a transfer without consideration and only as his siblings’ designee for tax purposes, making the vacation home his separate property (see Domestic Relations Law § 236 [B] [1] [d] [1]) save for any appreciation due to the wife’s efforts (see Domestic Relations Law § 236 [B] [1] [d] [3]; Price v Price, 69 NY2d 8, 17-18 [1986]).

The parties stipulated that, upon divorce, the marital assets should be equally distributed. During trial, the husband’s appraiser valued the body shop rental property at $290,000 using a capitalization of income approach, thus necessarily taking into account the monthly rental income to be received, through the lease term. A market value approach valued the property at $324,000. The Madison residence was valued at $1,050,000, or $990,000 more than its value in 1980, just before the husband and his siblings inherited it.

Supreme Court awarded the wife maintenance of $1,292 per month to continue through December 2010 (coinciding with the end of the body shop lease term) and $471 per month thereafter (to equalize the parties’ Social Security benefits). In addition, the court granted her a distributive award of $57,600 plus monthly payments of $2,000 through September 2012 (to distribute the value of the mortgage as received over time). The court awarded the marital home ($275,500 by stipulation) to the wife, along with its furnishings. The body shop property went to the husband, as did the vacation home, except the value of the appreciation of the husband’s original one-third interest reasonably determined to be due to the wife’s efforts.

The Appellate Division modified, over a partial dissent, by deleting the $1,292 monthly maintenance award, reasoning that it derived from impermissible “double counting” of the husband’s income from the rental property after that income had been included in the valuation of the previously distributed property (25 AD3d 729 [2d Dept 2006]). The Court also deleted the award of the furnishings in the marital home to the wife, because the record showed that some of the furnishings had been gifts to the husband and therefore did not qualify as marital property. The Court then certified the legal questions to us. We agree as to the furnishings, but disagree as to the maintenance and now remit to Supreme Court.

II.

In the landmark case of O’Brien v O’Brien (66 NY2d 576 [1985]), we held that professional licenses could constitute marital property subject to distribution at divorce. Subsequently, courts began allowing such licenses to “merge” into the licensee’s career so they would not be considered marital property. We rejected this doctrine in McSparron v McSparron (87 NY2d 275, 285 [1995]) “in favor of a commonsense approach that recognizes the ongoing independent vitality that a professional license may have and focuses solely on the problem of valuing that asset in a way that avoids duplicative awards.” In other words, although the license cannot merge into or reemerge from the holder’s career, the value of the license should not overlap with the value of other marital assets derived from it or maintenance awards based on the income it produces.

We applied this prohibition against double counting for the first time in Grunfeld v Grunfeld (94 NY2d 696 [2000]). In that case, we modified and remitted to Supreme Court after the Appellate Division improperly decided that half the value of the defendant’s law license should have been distributed to the plaintiff in addition to half the value of the defendant’s law practice.

Here, the Appellate Division cited Grunfeld and McSparron for the proposition that any income-producing asset distributed as marital property may not also be considered a source of income for maintenance purposes. Citing those two cases, the Court vacated Supreme Court’s maintenance award because a portion of the husband’s income, considered in determining maintenance, derived from the rental of the body shop property awarded to the husband during distribution. We now reverse that aspect of the Appellate Division’s order and remit for Supreme Court to reinstate its maintenance determination.

We do not see why an inquiry as to double counting should depend on the valuation method used. After all, any valuation of an income-producing property will necessarily take into account the income-producing capacity of that property. To prevent any income derived from any income-producing property from being “double counted” would, therefore, significantly limit the trial court’s considerable discretion in equitably distributing marital property and awarding maintenance. Significantly, we have already differentiated between a professional license and tangible income-producing property, because

“where a professional license is at issue, ‘[t]he asset is totally indistinguishable and has no existence separate from the projected professional earnings from which it is derived’ (Grunfeld v Grunfeld, 94 NY2d 696, 704 [2000]). Hence, a trial court must convert the enhanced earnings attributable to the license into a monetary marital asset to achieve equitable distribution. In contrast, a court can transfer title to real or personal property in order to equitably distribute the asset” (Holterman v Holterman, 3 NY3d 1, 9 n 5 [2004]).

We agree with dissenting Justice Goldstein that this distinction applies here.

Double counting may occur when marital property includes intangible assets such as professional licenses or goodwill, or the value of a service business. As we said in Grunfeld, “[i]n contrast to passive income-producing marital property having a market value, the value of a professional license as an asset of the marital partnership is a form of human capital dependant upon the future labor of the licensee” (94 NY2d at 704). It is only where “[t]he asset is totally indistinguishable and has no existence separate from the [income stream] from which it is derived” (id.) that double counting results.

Here, the rental property was split between the parties for distributive purposes. The rental income from that property was then considered in determining maintenance. The property will continue to exist, quite possibly in the husband’s hands, long after the lease term has expired, as a marketable asset separate and distinguishable from the lease payments. The mortgage payments, in contrast, were properly distributed as an asset and not counted for maintenance purposes because the payments themselves were the marital asset.

III.

We agree with both the Appellate Division majority and dissent that Supreme Court must reconsider the distribution of the furnishings in the marital residence. The husband argued that some of the furnishings were gifts he received from his parents and therefore his separate property (see Domestic Relations Law § 236 [B] [1] [d] [1], [3]), but the trial court did not address this contention. If indeed some of these items are the husband’s separate property, they should not have been distributed to the wife.

The wife also makes numerous allegations and arguments that the husband and his trial attorney made false representations to Supreme Court and that the fact findings of Supreme Court and the Appellate Division were erroneous. As a court of law we are precluded from reviewing affirmed findings of fact unless there is a question of legal sufficiency of the evidence (NY Const, art VI, § 3; see also e.g. Glenbriar Co. v Lipsman, 5 NY3d 388, 392 [2005]). As the record here is sufficient to support the affirmed facts and the courts below did not abuse their discretion in refusing to award the wife attorneys’ fees (Domestic Relations Law § 237; cf. O’Shea v O’Shea, 93 NY2d 187 [1999]), we cannot further address these points.

Accordingly, the order of the Appellate Division should be modified, with costs to plaintiff, by remitting to Supreme Court for further proceedings in accordance with this opinion, and as so modified, affirmed. The certified question should be answered in the negative.

Chief Judge Kaye and Judges Ciparick, Graffeo, Read, Smith and Pigott concur.

Order modified, etc.

       Although the deed suggested that the husband paid his siblings $100,000 for their shares of the property, the courts below found otherwise (see M’Crea v Purmort, 16 Wend 460 [1836] [recitation of value in the deed is merely prima facie evidence that consideration was exchanged]). There is no evidence that this amount was in fact paid.


author: Smith, J.

text:
    [862 NE2d 79, 830 NYS2d 1]
    The People of the State of New York, Respondent, v Norman Bradley, Also Known as Bradley Norman, Appellant.
    Argued November 15, 2006;
    decided December 19, 2006

      POINTS OF COUNSEL

      Legal Aid Society, Criminal Appeals Bureau, New York City (Andrew C. Fine, Steven Banks and Laura R. Johnson of counsel), for appellant.
    The introduction of the nontestifying complainant’s statement to a police officer accusing appellant of assaulting her deprived appellant of his right to be confronted with the witnesses against him. (Crawford v Washington, 541 US 36; Ohio v Roberts, 448 US 56; Griffith v Kentucky, 479 US 314; People v Hardy, 4 NY3d 192; Pointer v Texas, 380 US 400; United States v Hinton, 423 F3d 355; United States v Summers, 414 F3d 1287; United States v Cromer, 389 F3d 662; United States v Hinton, 423 F3d 355; People v Robinson, 97 NY2d 341.)

      Robert M. Morgenthau, District Attorney, New York City (Susan Axelrod and Mark Dwyer of counsel), for respondent.
    Deborah Dixon’s excited utterance given in response to Police Officer Steven Mayfield’s preliminary question was not testimonial and was properly admitted at defendant’s trial. (Crawford v Washington, 541 US 36; People v Caviness, 38 NY2d 227; People v Edwards, 47 NY2d 493; White v Illinois, 502 US 346; People v Brown, 70 NY2d 513.)
   OPINION OF THE COURT

Smith, J.

We hold that defendant’s right of confrontation was not violated by the admission into evidence of a statement made in response to a question from a police officer, where the officer’s evident reason for asking the question was to deal with an emergency.

Facts and Procedural History

Defendant was convicted of aggravated criminal contempt, criminal contempt in the first degree and assault in the third degree. The People claimed, and the jury found, that defendant had physically attacked his girlfriend, Debbie Dixon, at a time when two orders of protection directing him to stay away from Dixon were in force.

The People’s only witness at trial was Officer Steven May-field. Mayfield testified that, in response to a 911 call, he arrived, at the door of an apartment and was met there by Dixon, who was visibly shaken, had blood on her face and clothing, was bleeding profusely from one hand, and walked with a noticeable limp. Mayfield testified: “I asked her what happened, and she stated her boyfriend threw her through a glass door.” Mayfield entered the apartment, found defendant there, and observed a glass door with several panes broken out of it and glass on the floor.

Because Dixon was unavailable at trial, the trial court allowed her statement, as recounted by Mayfield, into evidence as an “excited utterance.” Defendant appealed from his conviction, contending that the statement was admitted in violation of his Confrontation Clause rights. The Appellate Division affirmed, and we now affirm.

Discussion

The Sixth Amendment to the United States Constitution protects the right of every defendant in a criminal case “to be confronted with the witnesses against him.” Article I, section 6 of the New York Constitution also gives a right of confrontation, in virtually identical language. Our interpretation of the federal Confrontation Clause is controlled by the Supreme Court’s recent decisions in Crawford v Washington (541 US 36 [2004]) and Davis v Washington (547 US —, 126 S Ct 2266 [2006]). Defendant here relies on both the federal and state Confrontation Clauses, but does not suggest that the two be interpreted differently, and we therefore accept the holdings of Crawford and Davis as the basis for our decision under both constitutions.

It is clear from Crawford and Davis that the admission of a statement made out of court does not violate a defendant’s Confrontation Clause rights unless the out-of-court statement is “testimonial” (see Davis, 547 US at —, 126 S Ct at 2273). The Confrontation Clause, the Court said in Crawford, “applies to ‘witnesses’ against the accused — in other words, those who ‘bear testimony’ ” (541 US at 51 [citation omitted]). In Crawford, the Supreme Court made clear that a “formal statement to government officers” would qualify as testimonial, while a “casual remark to an acquaintance” would not, but did not adopt a definition of “testimonial” (id.). Crawford involved a witness’s “recorded statement,” given at a police station after Miranda warnings, “in response to structured police questioning”; the Court found that statement would qualify as testimonial “under any conceivable definition” (id. at 53 n 4).

Davis and its companion case, Hammon v Indiana, presented closer questions, and required the Court to define “testimonial” with more precision. Davis involved statements made during a 911 call by a victim of domestic violence who, in response to questions from the 911 operator, described an assault upon her as it was happening. Hammon involved a statement by the defendant’s wife taken after officers had come to the couple’s home; finding the situation calm when they arrived, the officers took the wife into a separate room, kept her husband away from her, and got a detailed account of what her husband had done. The Supreme Court held that the statements in Davis were not testimonial, but that those in Hammon were. The Court explained its holdings as follows:

“Statements are nontestimonial when made in the course of police interrogation under circumstances objectively indicating that the primary purpose of the interrogation is to enable police assistance to meet an ongoing emergency. They are testimonial when the circumstances objectively indicate that there is no such ongoing emergency, and that the primary purpose of the interrogation is to establish or prove past events potentially relevant to later criminal prosecution.” (547 US at —, 126 S Ct at 2273-2274.)

The facts of this case are between those in Davis and Hammon-. Dixon was neither describing a present event as it occurred, nor responding to detailed questioning in a calm, secure setting. But under the test the Supreme Court stated in Davis, Dixon’s statement was clearly not testimonial. It was “made in the course of police interrogation under circumstances objectively indicating that the primary purpose of the interrogation [was] to enable police assistance to meet an ongoing emergency.” (547 US at —, 126 S Ct at 2273.)

When Mayfield, responding to a 911 call, arrived at Dixon’s door and was met by an emotionally upset woman smeared with blood, his first concern could only be for her safety. His immediate task was to find out what had caused the injuries so that he could decide what, if any, action was necessary to prevent further harm. Asking Dixon “what happened” was a normal and appropriate way to begin that task, and the officer promptly entered the apartment, as an officer dealing with an emergency would be expected to do.

Defendant emphasizes that Mayfield’s question to Dixon was in the past tense: He said “what happened?” not “what’s happening?” From this, and from the fact that no attacker was in sight at the moment, defendant would have us infer, in the words of Davis, that “there [was] no . . . ongoing emergency, and that the primary purpose of the interrogation [was] to establish or prove past events . . . We do not find the inference a likely one. The officer’s purpose in questioning Dixon is shown more persuasively by the facts that came to his attention — a 911 call, a distressed and injured woman — and by the action he took after Dixon answered his question — entering the apartment, without lingering to find out more detail — than by his choice of tense. Any responsible officer in Mayfield’s situation would seek to assure Dixon’s safety first, and investigate the crime second. Because Dixon’s statement was made when the officer could reasonably have assumed, and apparently did assume, that he had an emergency to deal with, her statement was not testimonial under Crawford and Davis.

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

Chief Judge Kaye and Judges Ciparick, Rosenblatt, Graffeo, Read and Pigott concur.

Order affirmed.


author: Chief Judge Kaye.

text:
    [863 NE2d 990, 831 NYS2d 738]
    The People of the State of New York, Appellant, v Ganesh Kisoon, Also Known as Ganesh Kisson, Respondent. The People of the State of New York, Appellant, v Leon Martin, III, Respondent.
    Argued January 10, 2007;
    decided February 13, 2007

      POINTS OF COUNSEL

      Richard A. Brown, District Attorney, Kew Gardens (Donna Aldea and John M. Castellano of counsel), for appellant in the first above-entitled action.
    The Appellate Division erred in holding that defendant’s complaint that the trial court failed to read the jury note to him verbatim was not subject to either the preservation requirement or harmless error analysis. (People v O’Rama, 78 NY2d 270; People v Malloy, 55 NY2d 296; People v Gonzalez, 293 NY 259; People v Cook, 85 NY2d 928; People v Michael, 48 NY2d 1; People v Jackson, 196 NY 357; People v Jones, 81 AD2d 22; People v Starling, 85 NY2d 509; People v DeRosario, 81 NY2d 801; People v Battle, 15 AD3d 413.)

      William G. Kastin, New York City, and Lynn W.L. Fahey for respondent in the first above-entitled action.
    The Appellate Division properly reversed Mr. Kisoon’s conviction because the failure to notify counsel that the jury deadlock note indicated a 10 to 2 vote for conviction or otherwise accurately convey its content and tone was a “mode of proceedings” error. (People v O’Rama, 78 NY2d 270; People v Cook, 85 NY2d 928; United States v Ronder, 639 F2d 931; People v Coons, 75 NY2d 796; People v Jones, 278 AD2d 805; People v Guzman, 259 AD2d 632; People v Heath, 234 AD2d 388; People v Wiemeier, 222 AD2d 972; People v Tavares, 212 AD2d 646; People v Bici, 211 AD2d 804.)

      Frank J. Clark, Distrid Attorney, Buffalo {Donna A. Milling and J. Michael Marion of counsel), for appellant in the second above-entitled action.
    I. Defendant was not prejudiced as a result of the court’s failure to respond to the jury’s note and error, if any, is harmless. (People v Lourido, 70 NY2d 428; People v Agosto, 73 NY2d 963; People v Miller, 6 NY2d 152; People v Jackson, 20 NY2d 440, 391 US 928; People v Cooke, 292 NY 185; People v Malloy, 55 NY2d 296, 459 US 847; People v Burgos, 248 AD2d 547, 92 NY2d 923; People v Almodovar, 62 NY2d 126; People v Phillips, 258 AD2d 393, 93 NY2d 976; People v Agosto, 73 NY2d 963.) II. Defendant’s claim that the court violated People v O’Rama by paraphrasing the contents of a jury note is unpreserved for appellate review. (People v O’Rama, 78 NY2d 270; People v Cook, 85 NY2d 928; People v Starling, 85 NY2d 509; People v DeRosario, 81 NY2d 801; People v Cintron, 273 AD2d 84, 95 NY2d 889; People v Jones, 247 AD2d 272, 92 NY2d 927; People v Kisoon, 23 AD3d 18; People v Parker, 304 AD2d 146, 100 NY2d 585; People v Schojan, 272 AD2d 932, 95 NY2d 871.)

      Thomas Theophilos, Buffalo, for respondent in the second above-entitled action.
    I. The Appellate Division correctly concluded that the trial court’s O’Rama violations were so inherently prejudicial as to require a new trial and counsel was ineffective for failing to object to those violations. (People v Henning, 271 AD2d 813; People v Gonzalez, 293 NY 259; People v Morse, 182 AD2d 781; People v Curet, 256 AD2d 1017; United States v Robinson, 560 F2d 507; People v O’Rama, 78 NY2d 270; People v Cook, 85 NY2d 928; People v Heath, 234 AD2d 388; United States v Ronder, 639 F2d 931; People v Sanchez, 244 AD2d 922.) II. Defendant was absent from the court’s recharge of count 3 mandating reversal of the conviction. The Appellate Division erred when it failed to reverse on this ground. (United States v Toliver, 330 F3d 607; United States v Gagnon, 470 US 522; People v Ciaccio, 47 NY2d 431; People v Rodriguez, 76 NY2d 918; People v Mehmedi, 69 NY2d 759; People v Mullen, 44 NY2d 1; People v Caballero, 221 AD2d 459; People v Vargas, 278 AD2d 807; People v Velasquez, 1 NY3d 44.)
   OPINION OF THE COURT

Chief Judge Kaye.

In each appeal, we are asked to determine whether a trial court committed a mode of proceedings error when it failed to disclose, or significantly paraphrased, a jury note. We conclude that it did.

In People v Kisoon, the People alleged that on June 5, 2001, defendant, from inside a parked car, sold an undercover police officer two plastic “twists” of cocaine for $40 prerecorded buy money. The field team arrested defendant approximately one minute later. The police searched defendant and recovered $20 of the buy money from defendant’s pocket and 40 bags of cocaine from his underwear.

During jury deliberations, the trial court received the following jury note: “We took a vote. We are not unanimous. We are 10 guilty to 2 not guilty on all three counts. Furthermore, we believe that further deliberation will not change our decision.” Outside the jury’s presence, the court told the parties that “[t]he jury has sent the Court a note saying that further deliberations are hopeless, that they are hopelessly deadlocked. Bring in the jury.” When the jurors were present in the courtroom, the court announced: “The jury sent the Judge a note, ‘We believe that further deliberation will not change our decision, 3:25 p.m.’ ” Without first consulting counsel or apprising counsel of its intended response, the court admonished the jurors to take their responsibility seriously and to continue deliberations. Defense counsel neither asked to see the note nor objected to the supplemental charge.

The next day, the jury convicted defendant of criminal sale of a controlled substance in the third degree, criminal possession of a controlled substance in the third degree and criminal possession of a controlled substance in the fifth degree. The Appellate Division in a three-two decision reversed defendant’s conviction and ordered a new trial, citing the trial court’s critical failure to disclose the jury vote. The dissent would have required preservation.

In People v Martin, the People alleged that, shortly before 2:00 a.m. on August 31, 1991, defendant stabbed Yolanda Kelly 53 times, killing her. Defendant claimed that he was justified, because the decedent had initiated the knife attack.

The trial court instructed the jury on the counts of intentional murder, depraved indifference murder and criminal possession of a weapon in the third degree, as well as the lesser-included crimes of manslaughter in the first and second degrees. During deliberations, the trial court, due to a clerical error, failed to read or respond to the jury’s first note, which, in part, requested, “definitions of 3 counts.”

Ten minutes later, the jury sent a second note, “Want a brief readback. First Count 3 points.” The court called the jury into the courtroom, and without consulting counsel, addressed the jury: “I have your note, and I understand that you want me to read back the elements necessary on the first count, is that my understanding, okay?” The court then reread the intentional murder instruction, after which a juror stated, “Second count, as long as we’re here.” Again without objection from defense counsel, the trial court reread its depraved indifference murder charge.

Approximately one-half hour later, the jury sent out a third note, “reread elements of 3rd ct.” The trial court again failed to notify counsel of the note’s content before responding to the jury. The court stated, “I have your message, your note where you say please read the elements of the third count. Before I do that, I want to just double check with you, if you do mean the third count of the indictment or if you are referring to something else. Are you asking for the third count of the criminal possession of a weapon in the third degree?” After an affirmative response, the trial court then reread its weapons possession charge, and the jury returned a guilty verdict.

The Appellate Division initially affirmed defendant’s convictions for intentional murder and criminal possession of a weapon in the third degree but later granted defendant’s motion for a writ of error coram nobis. Concluding that the trial court had committed a mode of proceedings error, the Appellate Division, in a three-two decision, reversed defendant’s conviction and ordered a new trial.

In each case, we affirm the order of the Appellate Division.

The governing statute, CPL 310.30, provides:

“At any time during its deliberation, the jury may request the court for further instruction or information with respect to the law, with respect to the content or substance of any trial evidence, or with respect to any other matter pertinent to the jury’s consideration of the case. Upon such a request, the court must direct that the jury be returned to the courtroom and, after notice to both the people and counsel for the defendant, and in the presence of the defendant, must give such requested information or instruction as the court deems proper. With the consent of the parties and upon the request of the jury for further instruction with respect to a statute, the court may also give to the jury copies of the text of any statute which, in its discretion, the court deems proper” (emphasis added).

As we made clear in People v O’Rama (78 NY2d 270, 277 [1991]), the trial court’s core responsibility under the statute is both to give meaningful notice to counsel of the specific content of the jurors’ request — in order to ensure counsel’s opportunity to frame intelligent suggestions for the fairest and least prejudicial response — and to provide a meaningful response to the jury. To those ends, we outlined the following procedure for dealing with jury notes:

“[W]henever a substantive written jury communication is received by the Judge, it should be marked as a court exhibit and, before the jury is recalled to the courtroom, read into the record in the presence of counsel. Such a step would ensure a clear and complete record, thereby facilitating adequate and fair appellate review. After the contents of the inquiry are placed on the record, counsel should be afforded a full opportunity to suggest appropriate responses . . . [T]he trial court should ordinarily apprise counsel of the substance of the responsive instruction it intends to give so that counsel can seek whatever modifications are deemed appropriate before the jury is exposed to the potentially harmful information. Finally, when the jury is returned to the courtroom, the communication should be read in open court so that the individual jurors can correct any inaccuracies in the transcription of the inquiry and, in cases where the communication was sent by an individual juror, the rest of the jury panel can appreciate the purpose of the court’s response and the context in which it is being made” (id. at 277-278).

As the Appellate Division observed in Kisoon,

“[t]here are few moments in a criminal trial more critical to its outcome than when the court responds to a deliberating jury’s request for clarification of the law or further guidance on the process of deliberations. Indeed, the court’s response may well determine whether a verdict will be reached, and what that verdict will be (see People v Ciaccio, 47 NY2d 431, 436 [1979])” (People v Kisoon, 23 AD3d 18, 20 [2d Dept 2005]).

Although we have recognized that some departures from the procedures outlined in O’Rama may be subject to rules of preservation (People v DeRosario, 81 NY2d 801 [1993]; People v Starling, 85 NY2d 509 [1995]), a failure to fulfill the court’s core responsibility is not. Here, neither case is distinguishable from O’Rama.

In Kisoon, as in O’Rama, failure to read the note verbatim deprived counsel of the opportunity to accurately analyze the jury’s deliberations and frame intelligent suggestions for the court’s response. Counsel might have requested, for example, an Allen charge stressing the importance of individual jurors not surrendering conscientiously held views merely for the purpose of returning a verdict. As in O’Rama, the “court’s failure to notify counsel of the note’s contents, which resulted in a denial of the right to participate in the charging decision, was inherently prejudicial” (78 NY2d at 280).

In Martin, too, we conclude that defendant was denied his core right to the assistance of counsel in responding to the jury’s request. While it is undisputed that the trial court erred in failing to notify counsel or to respond to the jury’s first note, the People argue that the court’s subsequent instructions to the jury cured the error. The first, undisclosed jury note requested “definitions of 3 counts.” Without reaching the trial court’s treatment of the second and the third notes, we cannot say with requisite certainty that the jury request for “definitions” was cured by the court’s later responses (see People v Lykes, 81 NY2d 767, 768-769 [1993] [where jury requested “(l)egal (terminology,” and court asked whether it wanted “the legal definition of each crime . . . or . . . the elements repeated”]).

Finally, though it hardly needs restating, we underscore the desirability of adherence to the procedures outlined in O’Rama.

Accordingly, in each case, the order of the Appellate Division should be affirmed.

Judges Ciparick, Graffeo, Read and Smith concur; Judges Pigott and Jones taking no part.

In each case: Order affirmed.


text:
    [863 NE2d 96, 831 NYS2d 92]
    In the Matter of Sheena D. and Others. Niagara County Department of Social Services, Respondent; Darwin E, Appellant.
    Argued January 4, 2007;
    decided February 13, 2007

      POINTS OF COUNSEL

      Alan P. Reed, Canandaigua, for appellant.
    I. The appellate court erred in importing findings in a time frame beyond any ostensible period of appellant being a legally responsible person. (Matter of Jasmine A., 18 AD3d 546; Matter of Jessica S., 18 AD3d 562; Matter of Koran C., 26 AD3d 328; Di Simone v Good Samaritan Hosp., 100 NY2d 632; Fidelity & Deposit Co. of Md. v Andersen & Co., 60 NY2d 693; Matter of Ashley AA., 212 AD2d 937; Matter of Christina A., 216 AD2d 928.) II. The Appellate Division overstates the record that grounds were stated in the record in supporting the orders of protection as the Court’s disposition under Family Court Act § 1052 (b) (i). (Matter of Jasmine N., 15 AD3d 491; Matter of Ice S., 30 AD3d 428; Matter of Crowell v Livziey, 20 AD3d 923.) III. The Appellate Division erred in failing to apply the constitutional standards as set forth in Santosky v Kramer (455 US 745 [1982]) and Matter of Tammie Z. (66 NY2d 1 [1985]). (Matter of Esther CC., 194 AD2d 949; Matter of Erin G., 139 AD2d 737; Matter of Sarah S., 9 Misc 3d 1109[A]; Matter of Le Favour v Koch, 124 AD2d 903; Matter of Nassau County Dept. of Social Servs. v Denise S., 173 AD2d 830; Matter of Walter K., 15 AD3d 404.) IV. The Appellate Division was in error to relieve itself and the lower court of the ruling in Matter of Yolanda D. (88 NY2d 790 [1996]) in applying factors to determine whether a person is a “legally responsible person.” (Matter of Jessica QQ., 200 AD2d 887; Matter of Catherine G. v County of Essex, 3 NY3d 175.)

      Thomas W. Scirto, Lockport, for respondent.
    I. It was established that appellant was legally responsible for Sheena D. and had abused her. (Matter of Yolanda D., 88 NY2d 790; Matter of Tammie Z., 66 NY2d 1; Matter of H. Children, 276 AD2d 485; Matter of Shaylee R., 13 AD3d 1106; Matter of Nichole SS., 296 AD2d 618; Matter of Mary Ellen P. v John R., 278 AD2d 750; Matter of Emily PP., 274 AD2d 681; Matter of Kimberly X., 133 AD2d 226; Matter of Daniella HH., 236 AD2d 715; Matter of Ramsay M., 17 AD3d 678.) II. Appellant was not prejudiced in Family Court failing to state the “specific sex offense” in its findings and failing to state grounds in its disposition. (Matter of Jasmine N, 15 AD3d 491; Matter of Jessica D., 208 AD2d 626; Matter of Rachel G., 185 AD2d 382; Matter of Christina A.,
      216 AD2d 928; Matter of Ashley AA., 212 AD2d 937; Matter of Nassau County Dept. of Social Servs. v Steven K., 176 AD2d 326.) III. Family Court had authority to issue the orders of protection for appellant’s children until the boys reached the age of 18. (Matter of Esther CC., 194 AD2d 949; Matter of Chanel Monique L., 30 AD3d 424.)

      Jeffrey M. Harrington, Lackawanna, Law Guardian. The Appellate Division acted within its authority when it made necessary findings in order to uphold a finding of neglect against appellant.

      (Matter of Christine II., 13 AD3d 922; Matter of Rebecca X., 18 AD3d 896, 5 NY3d 707; Matter of Devon W., 9 AD3d 830; Matter of Yolanda D., 88 NY2d 790; Matter of Christina A., 216 AD2d 928; Matter of Nichole SS., 296 AD2d 618; Matter of Shaylee R., 13 AD3d 1106; Matter of Mary Ellen P. v John R., 278 AD2d 750; Matter of Emily PP., 274 AD2d 681; Matter of Nicole OO., 262 AD2d 808.)
   OPINION OF THE COURT

Ciparick, J.

In this appeal we are asked to decide whether, pursuant to article 10 of the Family Court Act, Family Court had the authority to issue orders of protection in favor of respondent father’s children until they reached the age of 18, as the fact-finding dispositional order incorporating the orders of protection had no expiration date. We conclude that Family Court was without authority to set the duration of the orders of protection as it did.

The Department of Social Services (DSS) filed a petition under article 10 of the Family Court Act alleging that Darwin F. abused his 16-year-old sister-in-law, Sheena D., and neglected his biological sons, Chase F. and Vincent F. After a fact-finding hearing, on June 21, 2004 Family Court made a finding of abuse as to Sheena based on the following: in late August 2002 then 16-year-old Sheena moved in with her sister Jessica and her brother-in-law Darwin, and while Darwin was responsible for Sheena, he had sexual intercourse with her at his residence and at a hotel room where the family lived for a short time. The court made a derivative finding of neglect as to Chase, who was present during the sexual abuse, and direct findings of neglect as to both Chase and Vincent, as Darwin also kept a loaded shotgun in the residence that was accessible to both boys — a baby and a toddler. After the dispositional phase of the hearing, Family Court, in an order dated September 7, 2004, awarded custody of the boys to the mother, imposing no conditions, and issued orders of protection, entered on June 25, 2004, ordering Darwin to have no contact with Chase or Vincent until their respective eighteenth birthdays — 14 and 16 years later. No dispositional order was entered as to Sheena as she had reached her eighteenth birthday.

Darwin appealed to the Appellate Division contending, among other things, that Family Court lacked the authority to order him not to have contact with his sons until their eighteenth birthdays. The Appellate Division disagreed, and affirmed, holding that Family Court had the authority to issue the orders of protection since “the order of fact-finding and disposition ha[d] no expiration date” (27 AD3d 1128, 1129 [4th Dept 2006]). We granted leave to appeal and now modify by remitting to Family Court to establish appropriate expiration dates with periodic court review.

Family Court Act § 1056 provides that a “court may make an order of protection in assistance or as a condition of any other order made under this part” (Family Ct Act § 1056 [1]). The statute did not originally provide a temporal limitation for an order of protection; it provided only that an order of protection be made for a “specified time” (see L 1970, ch 962, § 9). In Matter of Erin G. (139 AD2d 737 [2d Dept 1988]), the Appellate Division sustained Family Court’s issuance of an order of protection lasting until a child’s eighteenth birthday. The Court found that the duration of the order of protection was “rather extensive” but that the statute contained “no specification as to the duration of such orders” (id. at 739).

In response, the Legislature in 1989 amended section 1056 (1) to add the current language that an “order of protection shall remain in effect concurrently with, shall expire no later than the expiration date of, and may be extended concurrently with, such other order made under this part” (see L 1989, ch 220, § 1). As such, Family Court Act § 1056 (1) prohibits the issuance of an order of protection that exceeds the duration of any other dispositional order in the case (see Family Ct Act § 1052 [a]).

The legislative history of the 1989 amendment evinces the Legislature’s intent to place a temporal limitation on all orders of protection issued pursuant to article 10 in order to effectuate periodic court review. The Assembly Memorandum in Support of the amendment cites with disapproval Family Court’s ability to issue orders of protection of extended duration without court review, and specifically cites Matter of Erin G. as an example of what the bill was intended to prohibit (see also Matter of Gabriel A., 5 Misc 3d 479, 482 [Fam Ct, Queens County 2004]). As the Assembly Memorandum states:

“Other dispositional provisions of child protective proceedings have a limited duration and require a hearing for extension. Those provisions insure periodic court review of the need for extension, compliance with the order, and the progress of the family. Since an order of protection may exclude a parent from custody of his or her child, similar to an order of placement, the duration and review procedure should be similar” (Assembly Mem in Support, Bill Jacket, L 1989, ch 220).

Many agencies, including DSS, supported the amendment as the belief was that an open-ended or lengthy duration “could constitute unduly harsh punishment and intrusion into parental rights” (Mem of Dept of Social Servs, Bill Jacket, L 1989, ch 220).

Since the 1989 amendment, and despite the new statutory language that purports to limit the duration of orders of protection, some Family Courts have continued to issue orders against family members that run until a child’s eighteenth birthday (see Matter of Commissioner of Social Servs. [David G.], 233 AD2d 325 [2d Dept 1996]; see also Matter of Esther CC., 194 AD2d 949 [3d Dept 1993] [upholding an order of protection indefinitely suspending visitation until the age of majority subject to modification if respondent father satisfied certain conditions]; see also Matter of A.G., 253 AD2d 318 [1st Dept 1999]). In Matter of Gabriel A., however, the court recognized that Matter of Erin G. had been superseded by statutory amendment.

Here, the Appellate Division cited to Matter of Erin G. in support of its affirmance of the orders of protection, concluding that this was proper pursuant to Family Court Act § 1056 (1) since the order of fact-finding and disposition had no expiration date. It is thus useful to review the duration of dispositional orders that may be entered pursuant to Family Court Act § 1052 (a).

A court may order suspended judgment (see Family Ct Act § 1052 [a] [i]; § 1053) with a “maximum duration of any term or condition . . . [of] one year” (Family Ct Act § 1053 [b]). It may release the child to the custody of his parents or other legally responsible person (see Family Ct Act § 1052 [a] [ii]; § 1054), and it “may place the person to whose custody the child is released under supervision” (Family Ct Act § 1054 [a]) “for an initial period of no more than one year” (Family Ct Act § 1054 [b]). Family Court may “plac[e]” a child outside of the home (see Family Ct Act § 1052 [a] [iii]; § 1055) “until the court completes the initial permanency hearing” (Family Ct Act § 1055 [b] [i] [E]), which “in no event [may be] more than eight months from the date of removal of the child from his or her home” (Family Ct Act § 1055 [b] [i] [C]). Finally, the court may place a respondent under supervision (see Family Ct Act § 1052 [a] [v]; § 1057) “for an initial period of no more than one year” (§ 1057).

Thus, most dispositional orders pursuant to Family Court Act § 1052 (a) have a statutorily defined maximum duration of not more than one year. The statute is silent, however, when it comes to awarding custody of a child to a parent where no corresponding order of supervision has been entered (see Family Ct Act § 1052 [a] [ii]; § 1054).

The literal reading of the statute employed by the courts below had the effect of cutting off the father’s presumptive rights to visitation (see Family Ct Act § 1030 [c]) without periodic review as anticipated by the legislation. Professor Merril Sobie in his Supplementary Practice Commentary writes that the result below is both “problematic, and puzzling” as it “would appear to be impossible; by operation of law every Article 10 dispositional [hearing] order expires at a date certain” (McKinney’s Cons Laws of NY, Book 29A, Family Ct Act § 1056, 2007 Pocket Part, at 184-185). Thus, only after periodic hearings may a court extend orders of protection until a child reaches 18 — the limit specified by Family Court Act § 1056 (4) for persons “not related by blood or marriage to the child or a member of the child’s household” (Family Ct Act § 1056 [4] [emphasis supplied]). Such court oversight and periodic review of orders of protection should take place whether or not the underlying dispositional order contains an expiration date.

In its dispositional order of September 7, 2004, Family Court released the two children to the custody of their mother with no specific expiration date and continued orders of protection against Darwin, their biological father, until the children attained their eighteenth birthdays. The court further declined every opportunity for court oversight, by indicating “N/A” next to “Progress Reports and Notices,” “Visitation Plans” and the like, and failed to provide for any periodic court review of the progress of the family by issuing orders of protection for such a protracted period (14 years and 16 years respectively). The court did not impose terms or conditions for treatment in order to address the situation presented. The order evinced no effort toward reuniting the children with their father, nor did it recite any mechanism that would allow father to bring the order of protection back before the court for modification.

We cannot interpret the Family Court Act as allowing for such unbridled discretion by reading Family Court Act § 1056 (1) to preclude periodic review of orders of protection. It seems unwise to treat this dispositional order and the accompanying orders of protection differently from an article 10 order placing the children outside the home. In both instances parties should be required to return to court on a regular basis to assess whether circumstances may warrant continued placement, continued orders of protection or reunification of the family.

Thus, a dispositional order that has no expiration date, such as the one here placing the children in the custody of the mother with no requirement of supervision, cannot be accompanied by an order of protection with no time limit. To read the statute otherwise would contradict the purpose of the 1989 amendment — to limit the length of orders of protection in child protective proceedings and to provide for periodic court review.

We have reviewed Darwin’s remaining contentions and find them to be without merit.

Accordingly, the order of the Appellate Division should be modified, without costs, by remitting to Family Court for further proceedings in accordance with this opinion and, as so modified, affirmed.

Chief Judge Kaye and Judges Graffeo, Read and Smith concur; Judges Pigott and Jones taking no part.

Order modified, etc.

      . The abuse and neglect petition likewise named Jessica E, Sheena’s sister and mother of Chase and Vincent, as a corespondent. A separate fact-finding and dispositional hearing occurred on July 8, 2004, not the subject of this appeal.

      . In a separate criminal proceeding, Darwin pleaded guilty to rape in the third degree (Penal Law § 130.25 [2]) and attempted use of a child in a sexual performance (Penal Law §§ 110.00, 263.05). He admitted to having sexual intercourse with Sheena when she was 16 years old. His wife, Jessica, also pleaded guilty to use of a child in a sexual performance (Penal Law § 263.05), admitting to taking photos of her sister involved in sexual activity.

      . We note that on July 8, 2004, after the orders of protection were already in place, Jessica admitted certain allegations of abuse and neglect, and was found in neglect of Chase and Vincent. At a dispositional hearing, DSS was given temporary custody of Chase and Vincent for 12 months, since Jessica was incarcerated at the time. Jessica was placed under DSS supervision for 12 months.


author: Graffeo, J.

text:
    [863 NE2d 585, 831 NYS2d 364]
    J.A.O. Acquisition Corp. et al., Appellants, v Jeffrey D. Stavitsky et al., Defendants, and First Union National Bank, Formerly Known as CoreStates Bank, N.A., Respondent. (And a Third-Party Action.)
    Argued January 2, 2007;
    decided February 13, 2007

      POINTS OF COUNSEL

      Fischer Porter & Thomas, PC., New York City (Jay D. Fischer, Arthur L. Porter, Jr., and Matthew L. Seldin of counsel), for appellants.
    I. Liability for negligent misrepresentation to nonprivy parties under the Credit Alliance Corp. v Arthur Andersen & Co. (65 NY2d 536 [1985]) test is not restricted to certain categories of defendants. (Glanzer v Shepard, 233 NY 236; Ultramares Corp. v Touche, 255 NY 170; European Am. Bank & Trust Co. v Strauhs & Kaye, 65 NY2d 536; Ossining Union Free School Dist. v Anderson LaRocca Anderson, 135 AD2d 518, 73 NY2d 417; Crossland Sav. FSB v Rockwood Ins. Co., 692 F Supp 1510; Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushby, Palmer & Wood, 80 NY2d 377; Parrott v Coopers & Lybrand, 95 NY2d 479; White v Guarente, 43 NY2d 356; First Union Natl. Bank v Tecklenburg, 2 AD3d 575; Carver Fed. Sav. & Loan Assn. of N.Y. v Glanzer, 186 AD2d 706.) II. The amount of evidence necessary to demonstrate the “necessary link” to defendant’s understanding of a nonprivy plaintiffs reliance should be determined on a qualitative not quantitative basis. (Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536; Security Pac. Bus. Credit v Peat Marwick Main & Co., 79 NY2d 695; Ultramares Corp. v Touche, 255 NY 170; White v Guarente, 43 NY2d 356; Parrott v Coopers & Lybrand, 95 NY2d 479; Securities Inv. Protection Corp. v BDO Seidman, 95 NY2d 702; Point O’Woods Assn. v Those Underwriters at Lloyd’s, London Subscribing to Certificate No. 6771, 288 AD2d 78; Glanzer v Shepard, 233 NY 236.) III. The evidence presented in opposition to CoreStates Bank, N.A.’s motion for summary judgment presents material issues of fact. (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395; Rodriguez v Parkchester S. Condominium, 178 AD2d 231; Robinson v Strong Mem. Hosp., 98 AD2d 976; Polka v Servicemaster Mgt. Servs. Corp., 83 NY2d 579; Kimmell v Schaefer, 89 NY2d 257; Brunetti v Musallam, 11 AD3d 280; Shea v Hambros

      PLC, 244 AD2d 39; Zuckerman v City of New York, 49 NY2d 557.)

      Greenberg Traurig LLP, New York City (Louis Smith of counsel), for respondent.
    I. Plaintiffs failed to establish the elements required for a negligent misrepresentation claim; accordingly, such claim was properly dismissed. (Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536; Hudson Riv. Club v Consolidated Edison Co. of N.Y., 275 AD2d 218; United Safety of Am. v Consolidated Edison Co. of N.Y., 213 AD2d 283; FAB Indus. v BNY Fin. Corp., 252 AD2d 367; Banque Nationale de Paris v 1567 Broadway Ownership Assoc., 214 AD2d 359; River Glen Assoc. v Merrill Lynch Credit Corp., 295 AD2d 274; Fleet Bank v Pine Knoll Corp., 290 AD2d 792; Polzer v TRW, Inc., 256 AD2d 248; Trustco Bank, N.A. v Cannon Bldg. of Troy Assoc., 246 AD2d 797; Murphy v Kuhn, 90 NY2d 266.) II. Plaintiffs’ fraud claims against CoreStates Bank, N.A. are not supported by the record and thus were properly dismissed. (Channel Master Corp. v Aluminium Ltd. Sales, 4 NY2d 403; LaSalle Natl. Bank v Ernst & Young, 285 AD2d 101; Lanzi v Brooks, 54 AD2d 1057, 43 NY2d 778; Alexander & Alexander of N.Y. v Fritzen, 114 AD2d 814, 68 NY2d 968; Matter of Disston Co. [Aktiebolag], 187 AD2d 283.)
   OPINION OF THE COURT

Graffeo, J.

In this action arising out of a stock purchase transaction, we conclude that plaintiff did not raise a triable issue of fact on its negligent misrepresentation and fraud claims against defendant bank. We therefore affirm the order of the Appellate Division dismissing the complaint.

In June 1997, plaintiff J.A.O. Acquisition Corp. entered into an agreement to purchase the stock of D.B. Brown, Inc., a meat and fish distributor, from Jeffrey Stavitsky and W. Paul Brogowski. The agreement listed D.B. Brown’s net worth at $2.2 million and, as relevant here, obligated J.A.O. to satisfy D.B. Brown’s loans from its bank, defendant First Union National Bank, formerly known as CoreStates Bank, N.A. (CoreStates). Prior to the stock transfer, J.A.O. undertook a due diligence review, finding that D.B. Brown was worth about $1 million less than what Stavitsky and Brogowski had represented. As a result, J.A.O. and the sellers amended the stock purchase agreement by lowering D.B. Brown’s net worth to approximately $1.17 million and providing for a price adjustment to be made within 90 days after the closing, at which time D.B. Brown’s net worth as of the date of the closing would be determined.

Chase Manhattan Bank acted as J.A.O.’s primary financier for the transaction. Pursuant to the loan arrangement between Chase and J.A.O., Chase agreed to loan J.A.O. funds sufficient to purchase D.B. Brown’s stock, including repayment of D.B. Brown’s debt to CoreStates. As a condition of its financing, Chase required J.A.O. and each of its affiliates to demonstrate excess borrowing availability of at least $2 million on the date of the closing. On October 9, 1997, Chase forwarded an outline of the terms of this loan agreement — including the borrowing availability requirement — to CoreStates.

On the afternoon of October 10, 1997, the scheduled closing date, CoreStates sent a payoff letter to D.B. Brown, calculating that D.B. Brown’s outstanding liabilities to CoreStates amounted to $26,564,628.29. Earlier that day, checks previously written by D.B. Brown were presented to CoreStates for payment, resulting in a deficiency of about $1.3 million in D.B. Brown’s operating account. The debt balance in the payoff letter, however, did not include the $1.3 million as part of D.B. Brown’s obligations to CoreStates. That same day, Chase determined that J.A.O. and its affiliated companies had not met the $2 million borrowing availability threshold. To satisfy that prerequisite, Stavitsky invoiced a number of foreign receivables valued in excess of $1 million in order to convince Chase that J.A.O. had complied with the availability requirement. Chase agreed to finance the transaction and the stock transfer was consummated. The following business day, CoreStates requested payment of the $1.3 million from Chase; Chase complied and paid the debt.

J.A.O. commenced this action against CoreStates asserting claims for negligent misrepresentation and fraud. Specifically, J.A.O. alleged that CoreStates misrepresented D.B. Brown’s outstanding liabilities by negligently failing to include in the payoff letter the $1.3 million negative balance in D.B. Brown’s operating account. J.A.O. contended that it would not have purchased D.B. Brown’s stock had it known it would become liable to pay this additional debt to CoreStates, and that Chase would not have agreed to finance the transaction because the $2 million excess borrowing availability requirement would not have been met. Alternatively, J.A.O.’s fraud claim posited that CoreStates intentionally concealed the $1.3 million debt to cause J.A.O. to complete the asset purchase.

CoreStates moved for summary judgment dismissing the complaint, arguing that there was no privity or special relationship between it and J.A.O., the payoff letter was correct in listing only loans and J.A.O. did not reasonably rely on the letter. Supreme Court granted the motion and dismissed the complaint, holding that J.A.O. could not satisfy the privity or reliance elements. The Appellate Division affirmed for the same reasons. We granted J.A.O. leave to appeal.

A claim for negligent misrepresentation requires the plaintiff to demonstrate (1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information (see Parrott v Coopers & Lybrand, 95 NY2d 479, 484 [2000]; Murphy v Kuhn, 90 NY2d 266, 270 [1997]). Assuming that J.A.O. can meet the first two elements, we conclude that J.A.O. failed to raise a triable question of fact as to the reliance requirement because the evidence established that J.A.O.’s decision to purchase D.B. Brown’s stock was not dependent upon the payoff letter.

After entering into the June 1997 stock purchase agreement, J.A.O. performed its own due diligence review of D.B. Brown’s assets and liabilities, determining that the company was worth less than the amount represented in the agreement. As a result, the parties amended the stock purchase agreement to reflect a lower net worth and negotiated a postclosing price adjustment procedure. Similarly, as the Appellate Division recognized, J.A.O. should have had knowledge that it was not unusual for D.B. Brown to overdraw its operating account. Even before Stavitsky invoiced a number of questionable receivables, it was evident that J.A.O. strongly desired to complete the transaction. Indeed, J.A.O.’s chief financial officer testified that the amount in the payoff letter had no effect on JA.O.’s desire to purchase D.B. Brown’s stock. It is clear that J.A.O.’s decision to move forward with the deal resulted from its own investigation of D.B. Brown’s condition, not any reliance on the information contained in the payoff letter.

Furthermore, J.A.O.’s contention that Chase would have refused to close on October 10, 1997 had it been aware of the additional $1.3 million debt is misplaced. As previously discussed, Chase required that J.A.O. and its affiliated companies have an excess borrowing availability of at least $2 million on the closing date. But in determining whether it would finance the deal, it was Chase (a nonparty to this litigation), not J.A.O., that would have relied on the loan balance in the payoff letter. To the extent J.A.O. continues to press its fraud claim on this appeal, it likewise fails for lack of justifiable reliance.

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

Chief Judge Kaye and Judges Ciparick, Read, Smith and Pigott concur; Judge Jones taking no part.

Order affirmed, with costs.

      . J.A.O. Acquisition Corp. is a wholly owned subsidiary of plaintiff J.A.O. Holding Company, Inc. These entities will be referred to collectively as J.A.O.

      . In the months preceding the closing date, D.B. Brown often incurred a negative balance in its operating account and then borrowed against its commercial loan account to cover a particular day’s check presentments.

      . The financial health of D.B. Brown was tenuous over the next few years. In March 2000, D.B. Brown contracted to sell its assets to another company and, upon doing so, ceased operations. After creditors filed an involuntary bankruptcy petition, D.B. Brown was granted a discharge in bankruptcy in 2001.

      . The foreign receivables were ineligible for inclusion in the borrowing availability calculation because they were not backed by letters of credit.