author: Graffeo, J.

text:
    [910 NE2d 976, 883 NYS2d 147]
    Eurycleia Partners, LP, et al., Appellants, v Seward & Kissel, LLP, Respondent, et al., Defendants.
    Argued April 29, 2009;
    decided June 4, 2009

      POINTS OF COUNSEL

      Reed Smith LLP, New York City (Lance Gotthoffer, Gil Feder, Darren Pascarella and Casey D. Laffey of counsel), Bartlett, Pontiff, Stewart & Rhodes, P.C., Glens Falls (Richard J. Bartlett and Robert S. McMillen of counsel), for appellants.
    I. The amended complaint pleads fraud. (Breard v Sachnoff & Weaver,

      Ltd., 941 F2d 142; Cohen v Goodfriend, 665 F Supp 152; Securities & Exch. Commn. v Frank, 388 F2d 486; Goldfine v DeEsso, 309 AD2d 895; Koncelik v Abady, 179 AD2d 942; In re Simon II Litig., 407 F3d 125; Fraternity Fund Ltd. v Beacon Hill Asset Mgt., 376 F Supp 2d 385; Calcutti v SBU, Inc., 273 F Supp 2d 488; Securities & Exch. Commn. v Coffey, 493 F2d 1304; Williams v Sidley Austin Brown & Wood, L.L.P., 38 AD3d 219.) II. The amended complaint pleads breach of fiduciary duty. (Franco v English, 210 AD2d 630; Breslin Realty Dev. Corp. v Shaw, 17 Misc 3d 1110[A], 2007 NY Slip Op 51919[U]; Briarpatch Ltd., L.P. v Frankfurt Garbus Klein & Selz, B.C., 13 AD3d 296, 4 NY3d 707; Dembitzer v Chera, 285 AD2d 525; Town Line Plaza Assoc. v Contemporary Props., 223 AD2d 420; Pucci v Santi, 711 F Supp 916; Matter of Clarke, 12 NY2d 183; Heaven v McGowan, 40 AD3d 583; AUSA Life Ins. Co. v Ernst & Young, 206 F3d 202.) III. Plaintiffs properly allege aiding and abetting claims. (Global Mins. & Metals Corp. v Holme, 35 AD3d 93, 8 NY3d 804; Houbigant, Inc. v Deloitte & Touche, 303 AD2d 92; Wight v BankAmerica Corp., 219 F3d 79; State St. Trust Co. v Ernst, 278 NY 104; Wedbush Morgan Sec., Inc. v Robert W. Baird & Co., 320 F Supp 2d 123; OSRecovery, Inc. v One Groupe Intl., Inc., 354 F Supp 2d 357; Lehman Bros. Commercial Corp. v Minmetals Intl. Non-Ferrous Metals Trading Co., 179 F Supp 2d 118; Whitney v Citibank, N.A., 782 F2d 1106; Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486; Lanzi v Brooks, 43 NY2d 778.) IV. The amended complaint pleads recklessness/ gross negligence claims. (Ultramares Corp. v Touche, 255 NY 170; Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushby, Palmer & Wood, 80 NY2d 377; Caprer v Nussbaum, 36 AD3d 176; Foothill Capital Corp. v Grant Thornton, L.L.P., 276 AD2d 437; Ambassador Factors v Kandel & Co., 215 AD2d 305; Velazquez v Decaudin, 49 AD3d 712; Houbigant, Inc. v Deloitte & Touche, 303 AD2d 92; Bank of Tokyo Trust Co. v Friedman, 197 AD2d 354; Sommer v Federal Signal Corp., 79 NY2d 540; Novak v Kasaks, 216 F3d 300.)

      Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York City (Gerard E. Harper, Jacqueline P. Rubin, Jana C. Ramsey and Jaren E. Casazza of counsel), for respondent.
    I. Plaintiffs’ amended complaint states no cause of action for fraud. (Lama Holding Co. v Smith Barney, 88 NY2d 413; Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486; Matter of Zorach v Clauson, 303 NY 161; Polonetsky v Better Homes Depot, 97 NY2d 46; Greschler v Greschler, 51 NY2d 368; Simcuski v Saeli, 44 NY2d 442; Friedman v Arizona World Nurseries, Ltd.

      Partnership, 730 F Supp 521, 927 F2d 594; Schatz v Rosenberg, 943 F2d 485; Abbott v Herzfeld, & Rubin, 202 AD2d 351; National Westminster Bank v Weksel, 124 AD2d 144.) II. Plaintiffs’ amended complaint states no cause of action for breach of fiduciary duty. (In re Bayou Hedge Funds Inv. Litig., 472 F Supp 2d 528; Estate of Ginor v Landsberg, 960 F Supp 661, 159 F3d 1346; Ackerman v National Prop. Analysts, Inc., 887 F Supp 494; Morin v Trupin, 778 F Supp 711, 809 F Supp 1081, 823 F Supp 2d 201; Quintel Corp., N.V. v Citibank, N.A., 589 F Supp 1235; Briarpatch Ltd., L.P. v Frankfurt Garbus Klein & Selz, P.C., 13 AD3d 296; Goldstein v Securities & Exch. Commn., 451 F3d 873; Franco v English, 210 AD2d 630; Breslin Realty Dev. Corp. v Shaw, 17 Misc 3d 1100[A], 2007 NY Slip Op 51919[U]; Pucci v Santi, 711 F Supp 916.) III. Plaintiffs’ amended complaint states no cause of action for aiding and abetting. Williams v Sidley Austin Brown & Wood, L.L.P., 38 AD3d 219; Caprer v Nussbaum, 36 AD3d 176; Briarpatch Ltd., L.P. v Frankfurt Garbus Klein & Selz, P.C., 13 AD3d 296; Kaufman v Cohen, 307 AD2d 113; Shea v Cornell Univ., 192 AD2d 857; National Westminster Bank v Weksel, 124 AD2d 144; In re Sharp Intl. Corp., 403 F3d 43; In re Bayou Hedge Funds Inv. Litig., 472 F Supp 2d 528; JP Morgan Chase Bank v Winnick, 406 F Supp 2d 247; VTech Holdings, Ltd. v Pricewaterhouse Coopers, LLP, 348 F Supp 2d 255.) IV. Plaintiffs’ amended complaint states no cause of action for gross recklessness/negligence. (East Meadow Driving School v Bell Atl. Yellow Pages Co., 273 AD2d 270; Ultramares Corp. v Touche, 255 NY 170; Colnaghi, U.S.A. v Jewelers Protection Servs., 81 NY2d 821; Sommer v Federal Signal Corp., 79 NY2d 540.)
   OPINION OF THE COURT

Graffeo, J.

Following the collapse of a hedge fund, certain limited partners brought this action sounding in fraud and breach of fiduciary duty against the fund’s attorneys based on the law firm’s failure to disclose improper fund activities and its misrepresentations in the offering memoranda. For the reasons that follow, we affirm the Appellate Division order dismissing the complaint.

In February 2003, John Whittier launched Wood River Partners, LI) a hedge fund in the form of a limited partnership. Whittier was the sole principal and managing member of Wood River Associates, LLC, the hedge fund’s general partner. According to Wood River’s offering memorandum, the fund sought “to achieve capital appreciation through the combination of long and short equity investments in a diversified number of industries, with a particular emphasis in media and communications, technology and technology-related companies.” The offering memorandum also represented that American Express Tax and Business Services, Inc. (TBS) was Wood River’s auditor and that, to ensure adequate investment diversification, individual holdings in the fund’s portfolio would be capped at 10% of the total assets at any given time, based on the original cost of the stock. As Wood River’s legal counsel, defendant Seward & Kissel, LLP (S&K) drafted the original offering memorandum as well as periodic updates.

Plaintiffs are 16 of Wood River’s limited partners who invested in the fund between 2003 and 2005. Unbeknownst to plaintiffs, in 2004 or early 2005, Wood River—at Whittier’s direction—began to invest heavily in the stock of Endwave Corporation. By the summer of 2005, Wood River’s investment in Endwave shares represented approximately 65% of the fund’s total assets and over 35% of Endwave’s outstanding shares. After peaking at $54 per share in mid-July, Endwave’s share price gradually declined until it plummeted to $14 in late September. As a result, Whittier was unable to meet plaintiffs’ redemption requests. S&K resigned as Wood River’s counsel on September 30, 2005.

In October 2005, the Securities and Exchange Commission (SEC) brought an action in federal court against Whittier and the Wood River entities seeking to enjoin them from violating various securities laws and to impose civil penalties. At the SEC’s request, the United States District Court for the Southern District of New York appointed a receiver for the Wood River entities and issued an injunction preventing any lawsuits against Wood River absent the court’s permission. A federal grand jury subsequently indicted Whittier for securities fraud and he pleaded guilty to three counts in May 2007. During his allocution, Whittier admitted that he intentionally concealed the extent of Wood River’s position in Endwave.

Plaintiffs commenced this action against S&K, TBS and a third entity in March 2006, alleging causes of action against S&K for, among other things, fraud, aiding and abetting fraud, gross negligence and breach of fiduciary duty. They seek $200 million in damages.

The July 2006 amended complaint presents three main allegations against S&K. First, plaintiffs assert S&K learned at some point in 2005 that Wood River invested more than 10% of its assets in Endwave stock in violation of the 10% restriction contained in the offering memoranda. According to plaintiffs, S&K nonetheless persisted in drafting offering memoranda falsely representing that Wood River was adhering to the 10% cap as part of its investment policy. Second, plaintiffs claim that S&K falsely stated in the offering memoranda that TBS was Wood River’s auditor even though S&K knew from the inception that TBS had not been retained to perform any auditing work. Third, plaintiffs allege S&K learned in January 2005 that Wood River had violated securities laws by failing to file required notices when Wood River obtained 5% and, later, 10% of End-wave’s stock. Plaintiffs maintain that S&K breached fiduciary duties owed to them, as limited partners, by failing to disclose the SEC violations to them.

S&K and TBS each moved to dismiss the complaint pursuant to CPLR 3211. Supreme Court denied the motions. The Appellate Division reversed, granted the motions and dismissed the complaint as against them (46 AD3d 400 [1st Dept 2007]). We granted plaintiffs leave to appeal (11 NY3d 705 [2008]).

Plaintiffs principally argue that the Appellate Division erred in dismissing their fraud and aiding and abetting fraud claims against S&K. They contend that the complaint adequately pleads these claims because it alleges that S&K drafted offering memoranda falsely representing that a 10% investment cap was in place and that TBS was Wood River’s auditor, despite knowing that these representations were false. S&K counters that, even under CPLR 3211’s liberal pleading requirements, the fraud and aiding and abetting fraud claims fail because plaintiffs’ allegations relating to S&K’s knowledge of falsity are too conclusory and without a factual basis.

The elements of a cause of action for fraud require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages (see Ross v Louise Wise Serus., Inc., 8 NY3d 478, 488 [2007]; Lama Holding Co. v Smith Barney, 88 NY2d 413, 421 [1996]). A claim rooted in fraud must be pleaded with the requisite particularity under CPLR 3016 (b).

We recently explored the pleading requirements of CPLR 3016 (b) in Pludeman v Northern Leasing Sys., Inc. (10 NY3d 486 [2008]). In that case, we noted that the purpose underlying the statute is to inform a defendant of the complained-of incidents. We cautioned that the statute “should not be so strictly interpreted as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud” (id. at 491 [internal quotation marks and citation omitted]). Although there is certainly no requirement of “unassailable proof’ at the pleading stage, the complaint must “allege the basic facts to establish the elements of the cause of action” (id. at 492). We therefore held that CPLR 3016 (b) is satisfied when the facts suffice to permit a “reasonable inference” of the alleged misconduct (id.). And, “in certain cases, less than plainly observable facts may be supplemented by the circumstances surrounding the alleged fraud” (id. at 493).

Here, whether the claim is labeled fraud or aiding and abetting fraud, we conclude that neither the allegations in the complaint nor the surrounding circumstances give rise to a reasonable inference that S&K participated in a scheme to defraud or knew about the falsity of the two contested statements in the offering memoranda. The amended complaint conclusorily alleges that at some unspecified point in 2005 S&K became aware that more than 10% of Wood River’s holdings were invested with Endwave but, nonetheless, S&K continued to issue offering memoranda falsely representing that Wood River would not invest more than 10% of its assets in any given security. In support of this allegation, plaintiffs assert that S&K was informed in January 2005 that Wood River had purchased 10% of End-wave’s stock. But the fact that S&K may have been aware that Wood River owned 10% of Endwave’s stock is not material to whether Wood River invested more than 10% of its total assets in Endwave, particularly where there is no indication that S&K was ever informed of Wood River’s overall asset levels or the cost basis of the Endwave shares. Plaintiffs’ reliance on a 2002 letter—predating the existence of Wood River by nearly a year— from a S&K attorney to Whittier discussing the performance of a separate fund is similarly unavailing.

Nor do the surrounding circumstances breathe life into plaintiffs’ fraud claim premised on the 10% cap representation. Unlike the individual corporate officer defendants in Pludeman, each of whom managed a company implicated in a nationwide fraudulent scheme covering a span of years, S&K was outside counsel to Wood River, whose manager—Whittier—was convicted of securities fraud. Notably, plaintiffs do not dispute S&K’s assertion that they secured Whittier’s assistance in drafting the amended complaint. The absence of any firm factual pleadings relevant to S&K’s knowledge that Wood River breached the 10% restriction or any fraudulent scheme between Whittier and S&K is even more conspicuous in light of Whittier’s cooperation with plaintiffs.

We likewise find the amended complaint’s alternative allegation of fraud or aiding and abetting fraud—that S&K knew TBS was not Wood River’s auditor yet continued to list TBS in the offering memoranda—to be similarly conclusory. As the Appellate Division recognized, the complaint elsewhere alleges that in the summer of 2005 TBS falsely represented that it was the fund’s auditor and would conduct an audit. In short, although we are mindful that a plaintiff need not produce absolute proof of fraud and that there may be cases in which particular facts are within a defendant’s possession, it is also true that the strength of the requisite inference of fraud will vary based on the facts and context of each case. Under the facts of this case, we believe that the allegations in the complaint, coupled with the surrounding circumstances, do not give rise to a reasonable inference that S&K committed fraud or aided and abetted Wood River’s or Whittier’s fraudulent activities.

Plaintiffs next contend that the Appellate Division erroneously dismissed their breach of fiduciary duty claim. They claim that S&K owed them a fiduciary duty and breached that duty by failing to reveal Wood River’s fraudulent actions, in particular, the fund’s violation of SEC reporting requirements in connection with its ownership of 5% and, later, 10% of Endwave’s stock.

A fiduciary relationship arises “between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation” (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005] [internal quotation marks and citation omitted]). Put differently, “[a] fiduciary relation exists when confidence is reposed on one side and there is resulting superiority and influence on the other” (AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 11 NY3d 146, 158 [2008] [internal quotation marks and citation omitted]). Ascertaining the existence of such a relationship inevitably requires a fact-specific inquiry.

Here, plaintiffs do not allege that they had direct contact or any relationship—contractual or otherwise—with S&K. Indeed, plaintiffs acknowledge that the offering memoranda advised prospective limited partners to consult their own legal counsel prior to investing in Wood River. Plaintiffs nevertheless contend that S&K’s attorney-client relationship with Wood River in and of itself created a fiduciary relationship between S&K and the limited partners themselves. We disagree.

The Appellate Divisions have held that the fiduciary duties owed by a limited partnership’s attorney to that entity do not extend to the limited partners (see Briarpatch Ltd., L.P. v Frankfurt Garbus Klein & Selz, P.C., 13 AD3d 296, 297 [1st Dept 2004], lv denied 4 NY3d 707 [2005]; Kushner v Herman, 215 AD2d 633 [2d Dept 1995]; but see Franco v English, 210 AD2d 630, 634 [3d Dept 1994]). Federal courts applying New York law likewise have consistently rejected such a duty (see e.g. In re Bayou Hedge Funds Inv. Litig, 472 F Supp 2d 528, 531 [SD NY 2007]; Estate of Ginor v Landsberg, 960 F Supp 661, 667 [SD NY 1996], affd 159 F3d 1346 [2d Cir 1998]; Quintel Corp., N.V v Citibank, N.A., 589 F Supp 1235, 1241-1242 [SD NY 1984]; see also 3 Mallen and Smith, Legal Malpractice § 26:8 [2009] [citing New York cases with approval]).

We concur with these precedents, particularly given that we have found similarities between limited partners and the shareholders of a corporation (see Lichtyger v Franchard Corp., 18 NY2d 528, 536 [1966] [observing that a limited partner “is in a position analogous to that of a corporate shareholder, an investor who likewise has limited liability and no voice in the operation of an enterprise” (internal quotation marks omitted)]; Ruzicka v Rager, 305 NY 191, 198 [1953], rearg denied 305 NY 798 [1953] [recognizing the “quasi-corporate aspects of a limited partnership and the quasi-shareholder status of a limited partner”]; see also 3 Bromberg and Ribstein on Partnership § 11.01 [c]). It is well settled that a corporation’s attorney represents the corporate entity, not its shareholders or employees (see Talvy v American Red Cross in Greater N.Y., 205 AD2d 143, 149 [1st Dept 1994], affd for reasons stated below 87 NY2d 826 [1995]; Rechberger v Scolaro, Shulman, Cohen, Fetter & Burstein, P.C., 45 AD3d 1453 [4th Dept 2007]; Griffin v Anslow, 17 AD3d 889, 893 [3d Dept 2005]; see also Rules of Professional Conduct rule 1.13 [a] [22 NYCRR 1200.13 (a)]). We therefore hold that S&K’s representation of this limited partnership, without more, did not give rise to a fiduciary duty to the limited partners. Hence, plaintiffs’ breach of fiduciary duty claim against S&K was properly dismissed.

To the extent plaintiffs assert claims for fraud or aiding and abetting predicated on S&K’s silence, they similarly fail for lack of a duty to disclose (see Gurnee v Hasbrouck, 267 NY 57, 62 [1935]; Mitschele v Schultz, 36 AD3d 249, 254-255 [1st Dept 2006]; Kreindler, Rodriguez, Beekman and Cook, New York Law of Torts § 1.70, at 73-76 [14 West’s NY Prac Series 1997]). In the absence of a fiduciary relationship, we perceive no legal duty obligating S&K to make affirmative disclosures to plaintiffs under the circumstances of this case. We have considered plaintiffs’ remaining arguments and find them to be without merit.

Accordingly, the order of the Appellate Division, insofar as appealed from, should be affirmed, with costs.

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

Order, insofar as appealed from, affirmed, with costs.

      . Whittier was also the principal executive of Wood River Capital Management, LLC, the hedge fund’s investment manager.

      . The record contains two 29-page offering memoranda dated June 2004 and April 2005. The parties agree that each of the offering memoranda prepared by S&K from 2003 to 2005 was identical in all aspects relevant to this appeal.

      . As of June 2004, new limited partners were obligated to invest at least $500,000.

      . Plaintiffs never sought permission to sue Wood River.

      . The Securities Exchange Act of 1934 requires persons to report the acquisition of more than five percent of a corporation’s common stock (see 15 USC § 78m [d]). The Act contains similar reporting requirements upon the acquisition of more than 10% of a single equity security (see 15 USC § 78p [a]).

      . Plaintiffs do not challenge the dismissal of the complaint as against TBS and apparently have not pursued their claims against a third defendant—Trident Financial Services, LLC. Therefore, this appeal solely concerns plaintiffs’ causes of action against S&K.

      . As S&K points out, most of the plaintiffs had already invested in Wood River before S&K allegedly learned of the 10% cap violation and, therefore, could not have relied on this representation—a necessary element of a fraud claim.


source: Caselaw Access Project

license: Public Domain

text:
    [910 NE2d 983, 883 NYS2d 154]
    The People of the State of New York, Respondent, v Tyrone Mingo, Appellant. The People of the State of New York, Respondent, v Dzemil Balic, Appellant.
    Argued May 5, 2009;
    decided June 9, 2009

      POINTS OF COUNSEL

      Legal Aid Society, Criminal Appeals Bureau, New York City (Susan Epstein and Steven Banks of counsel), for appellant in the first above-entitled action.
    Because the only evidence the People submitted to support the assignment of 30 points to appellant on the Risk Assessment Instrument, under risk factor 1, for being armed with a dangerous instrument, was a “Data Analysis Form” and “Grand Jury Synopsis Sheet,” which contained handwritten notes made by unknown persons and derived from unacknowledged sources, the evidence failed to qualify as reliable hearsay and, therefore, the People failed to meet the standard of clear and convincing evidence to support appellant’s classification as a level two sex offender. (Doe v Pataki, 481 F3d 69; People v David W., 95 NY2d 130; E.B. v Verniero, 119 F3d 1077; Addington v Texas, 441 US 418; Matter of Poldrugovaz, 50 AD3d 117; Colorado v New Mexico, 467 US 310; Matter of Westchester County Med. Ctr. [O’Connor], 72 NY2d 517; Matter of Storar, 52 NY2d 363; Calhoun v Bailar, 626 F2d 145; Richardson v Perales, 402 US 389.)

      Charles J. Hynes, District Attorney, Brooklyn (Anthea H. Bruffee and Leonard Joblove of counsel), for respondent in the first above-entitled action.
    The hearing court properly considered as reliable hearsay evidence documents generated by the District Attorney’s office in prosecuting the underlying sex crime. Thus, defendant’s designation as a risk level two sex offender was based upon clear and convincing evidence. (People v Vasquez, 20 Misc 3d 37; People v Stirrup, 91 NY2d 434; People v Giordano, 87 NY2d 441; Rocovich v Consolidated Edison Co., 78 NY2d 509; People v Imbert, 48 AD3d 297; People v Concepcion, 38 AD3d 739; People v Wroten, 286 AD2d 189; People v Hines, 24 AD3d 524; People v Smolen, 47 AD3d 623; People v Smith, 5 AD3d 752.)

      James Ching, of the California bar, admitted pro hac vice, pro se, amicus curiae in the first above-entitled action.
    I. The evidence before the trial court was official and business records to which defendant made no specific objection, and therefore the issue cannot be raised on appeal. (People v Cratsley, 86 NY2d 81; People v Guidice, 83 NY2d 630; People v Kennedy, 68 NY2d 569.) II. The evidence before the trial court was official and business records which does not appear to contain testimonial hearsay. (Doe v Pataki, 3 F Supp 2d 456; People v Brooks, 308 AD2d 99; United States v Feliz, 467 F3d 227.)

      Legal Aid Society, Criminal Appeals Bureau, New York City (Amy Donner and Steven Banks of counsel), for appellant in the second above-entitled action.
    Double hearsay by an unsworn complainant in a criminal court complaint pursuant to which appellant pleaded guilty to misdemeanor assault did not constitute “reliable hearsay” or satisfy the standard of clear and convincing evidence necessary to support an upward departure under the Sex Offender Registration Act (SORA), where this hearsay was the sole source of evidence supporting the sexual nature of the misdemeanor assault conviction and, therefore, the People failed to meet the standard of clear and convincing evidence to support appellant’s classification as a level two sex offender under SORA. (People v Guarnan, 8 AD3d 545; People v David W., 95 NY2d 130; E.B. v Verniero, 119 F3d 1077; Doe v Pataki, 3 F Supp 2d 456; Doe v Department of Pub. Safety ex rel. Lee, 271 F3d 38; Mathews v Eldridge, 424 US 319; Valmonte v Bane, 18 F3d 992; Matter of VanDover v Czajka, 276 AD2d 945; Addington v Texas, 441 US 418; Matter of Poldrugovaz, 50 AD3d 117.)

      Robert M. Morgenthau, District Attorney, New York City (Dana Poole and Patrick J. Hynes of counsel), for respondent in the second above-entitled action.
    The facts underlying defendant’s third-degree assault conviction were properly considered by the hearing court and supported an upward departure to a level two risk adjudication. (People v Windham, 10 NY3d 801; People v Charache, 9 NY3d 829; People v Costello, 35 AD3d 754; People v Johnson, 11 NY3d 416; People v Moore, 16 AD3d 190; People v Wheeler, 59 AD3d 1007; People v Warren, 42 AD3d 593; People v Cannon, 34 AD3d 1227; People v Warrior, 57 AD3d 1471; People v Arotin, 19 AD3d 845.)
   OPINION OF THE COURT

Graffeo, J.

In these appeals, we address what constitutes “reliable hearsay” that is admissible for purposes of determining the appropriate risk level of a sex offender under the Sex Offender Registration Act (SORA). In People v Mingo, we conclude that, with the proper foundation, internal documents generated by the District Attorney’s office may support a risk level adjudication but, since Supreme Court did not require such a foundation, we reverse and remit to afford the District Attorney’s office an opportunity to supply that proof. We affirm the determination in People v Balic because the Appellate Division did not err in designating defendant a level two risk based on a victim’s statement included in a criminal court complaint prepared by a police officer under oath.

People v Tyrone Mingo

In 1990, defendant Tyrone Mingo pleaded guilty to rape in the first degree in satisfaction of a series of charges relating to a 1988 incident in which he pulled a stranger into an abandoned van and raped her. The victim managed to escape and flag down a passing police officer and defendant was arrested at the scene. At a SORA redetermination hearing in February 2006, defendant was adjudicated a level two risk—that is, a moderate risk of reoffense—based, in part, on the assessment of 30 points under factor 1 of the Risk Assessment Instrument (RAI) for having been armed with a dangerous instrument at the time of the rape. To establish defendant’s possession of a dangerous instrument, the District Attorney relied on three documents that are apparently used internally by the District Attorney’s office: a Data Analysis Form, a Grand Jury Synopsis Sheet and an Early Case Assessment Bureau Data Sheet. Various entries on these forms indicated that, in the course of the incident, defendant had threatened the victim with a “chrome strip” or “piece of metal”—a dangerous instrument.

Defense counsel objected to the District Attorney’s reliance on these unsworn, unsigned documents, contending they did not constitute “reliable hearsay” under Correction Law § 168-n (3) and were therefore inadmissible at the SORA proceeding. Defendant did not, however, testify at the hearing, nor did he offer any evidence rebutting the dangerous instrument allegations. Without requiring the People to offer foundation evidence, Supreme Court relied on the documents, along with the indictment charging defendant with a weapon possession offense, to sustain the assessment of 30 points. This brought defendant within the moderate risk category (75 to 105 points) and the court therefore adjudicated defendant a level two offender. Absent the assessment of 30 points, defendant would have fallen within the presumptive level one, low risk category.

A divided Appellate Division affirmed the level two designation, concurring with Supreme Court that the internal documents of the District Attorney’s office constituted reliable hearsay admissible at a SORA proceeding (49 AD3d 148 [2008]). The dissent did not rule out the possibility that the documents could support a point assessment but was troubled by the District Attorney’s failure to lay a foundation to support the inference that the victim was the source of the information contained in the documents. Thus, the dissent would have reversed and remitted the case to the SORA court for further proceedings. This Court granted defendant leave to appeal (10 NY3d 929 [2008]) and, like the Appellate Division dissenter, we conclude that a reversal and remittal is warranted.

People v Dzemil Balic

Dzemil Balic pleaded guilty to sexual abuse in the first degree based on a 2004 incident in which he forcibly fondled the breasts and buttocks of a woman who attended classes in a building where he worked as a custodian. In the RAI prepared for the SORA proceeding, the District Attorney assessed defendant 40 points under the prior convictions section as a result of a 1985 misdemeanor assault conviction that occurred when defendant was 19 years old. The People imposed 10 points for factor 8 since defendant’s age at the time of that offense was 20 years or less and 30 points for factor 9 because they viewed the 1985 crime as a prior “sex crime.” Absent the inclusion of these points, defendant’s point assessment would have resulted in presumptive level one, the low risk category.

Since the elements of misdemeanor assault do not require conduct of a sexual nature (see Penal Law § 120.00 [1]), at the SORA hearing the District Attorney relied on the criminal complaint filed in connection with the prior 1985 prosecution, which had culminated in defendant entering a guilty plea. The criminal complaint was signed under oath by a police officer who stated that, on the day of the crime, the victim—a 14-year-old girl identified by name—told the officer that defendant had forcibly fondled her, attempted to remove her clothes, and threatened that he would shoot her unless she did as he said. The People had attempted to locate other information regarding the 1985 assault, twice obtaining an adjournment to search for additional evidence, but discovered that all other relevant documents had been destroyed by fire or flood.

Defense counsel objected to the assessment of 40 points, arguing that the references to “sexual misconduct” and “[s]ex crime” in factors 8 and 9 required that defendant have a prior conviction of one of the sex offenses enumerated in SORA and misdemeanor assault did not qualify. In the alternative, defendant asserted that the criminal complaint was insufficient proof that the assault involved acts of a sexual nature. Supreme Court rejected both arguments, adjudicating defendant a level two offender. The court noted that, even if it credited defendant’s argument that the provisions relied on in the criminal history section of the RAI required a prior sex offense conviction and the point values therefore rendered defendant a presumptive level one risk, an upward departure to level two would be appropriate given the sexual nature of the 1985 attack.

On defendant’s appeal, the People conceded that it had been improper to assess 40 points for defendant’s 1985 misdemeanor assault offense, acknowledging that the SORA Guidelines indicate points should be assessed under the factors relied on only when a defendant has been convicted of a prior sex offense or endangering the welfare of a child. Defendant should instead have received only five points under factor 9 for having prior criminal convictions that were neither sex crimes nor felonies. Even though the disallowance of 35 points brought defendant within the presumptive level one range under the RAI, the District Attorney maintained that the level two designation should be affirmed because an upward modification was appropriate given the nature of the conduct underlying defendant’s 1985 conviction. The Appellate Division agreed with the District Attorney, reasoning that the RAI did not take into account defendant’s prior violent sexual attack on a child (52 AD3d 201 [2008]), and we now affirm.

SORA Risk Level Determinations

SORA requires individuals convicted of sex offenses to register with law enforcement officials and authorizes the dissemination of certain information about those individuals to vulnerable populations and the public. The length of time that an offender must register may turn on the crime for which the offender was convicted or the offender’s previous criminal history. For example, since 2002, SORA has compelled a defendant convicted of a “sexually violent offense” to register at least annually for life (Correction Law § 168-h [2]; see Correction Law § 168-a [3] [a]; [7] [b]; L 2002, ch 11, § 13) . The same is true of a predicate sex offender—a person who is convicted of a sex offense or sexually violent offense after having previously been convicted of such an offense (Correction Law § 168-a [7] [c]; § 168-h [2]). But for others, the registration period depends on the risk level designation that is assigned at the SORA proceeding—level one, evidencing a low risk of reoffense, level two, a moderate risk, and level three, a high risk. Individuals determined to have the lowest risk of reoffense—level one offenders—are relieved of the duty to register after 20 years while level two and three offenders must register at least once each year for life (Correction Law § 168-h).

SORA also contains community notification and disclosure provisions that vary depending on risk level designation. As a result of the 2006 amendments to SORA, law enforcement agencies can disseminate information relating to level one offenders to vulnerable populations and the public—just as they are authorized to do with level two and three offenders, except that the statute authorizes release of exact addresses only for level three offenders (see Correction Law § 168-Z [6]). The public can obtain information about level one offenders by calling a toll-free telephone number maintained by the Division of Criminal Justice Services (Correction Law § 168-p [1]); information relating to level two and three offenders is also publically available on an Internet directory (see Correction Law § 168-q [1]).

A defendant’s risk level is adjudicated at a SORA hearing, which is civil in nature (see People v Windham, 10 NY3d 801 [2008]; Matter of North v Board of Examiners of Sex Offenders of State of N.Y., 8 NY3d 745, 752 [2007]). Correction Law § 168-n (3) directs that “[t]he State shall appear by the district attorney . . . who shall bear the burden of proving the facts supporting the determinations sought by clear and convincing evidence” (see also Correction Law § 168-d [3]). In determining the appropriate risk level, “the court shall review any victim’s statement and any relevant materials and evidence submitted by the sex offender and the district attorney and the recommendation and any materials submitted by the board, and may consider reliable hearsay evidence submitted by either party, provided that it is relevant to the determinations” (Correction Law § 168-n [3]; see also Correction Law § 168-d [3]). The Board of Examiners of Sex Offenders has explained that the information used to determine defendant’s risk level “can be derived from the sex offender’s admissions; the victim’s statements; the evaluative reports of the supervising probation officer, parole officer or corrections counselor; or from any other reliable source” (Board of Examiners of Sex Offenders, Sex Offender Registration Act: Risk Assessment Guidelines and Commentary, General Principles ¶ 7, at 5 [2006]). Beyond this, neither the Legislature nor the Board of Examiners of Sex Offenders have further specified the types of evidentiary materials admissible in a SORA proceeding. But one thing is undisputed—the Legislature did not limit the proof to what would be admissible at a civil or criminal trial.

Defendants suggest that this Court apply the standards developed in other administrative and preliminary hearing contexts to fashion an admissibility standard, such as the multifactored analysis employed in federal disability benefits cases (see e.g. Richardson v Perales, 402 US 389 [1971]) or the Aguilar-Spinelli test used by New York courts to assess whether there was probable cause for a search or arrest (see People v Hetrick, 80 NY2d 344 [1992]). While the approaches taken in these other spheres are certainly helpful in identifying factors relevant to our analysis, SORA proceedings further an important and unique public safety function and we therefore decline to adopt wholesale a body of evidentiary rules developed in another context.

Reliable Hearsay

To determine a standard of admissibility for risk level determination hearings, we begin by reviewing the evidence New York courts have consistently deemed reliable in SORA proceedings. The Appellate Divisions have routinely upheld determinations based on information found in case summaries prepared by the Board of Examiners of Sex Offenders and presentence reports prepared by a probation department for use by sentencing courts (see e.g. People v Lewis, 45 AD3d 1381 [4th Dept 2007], lv denied 10 NY3d 703 [2008]; People v Craig, 45 AD3d 1365 [4th Dept 2007], lv denied 10 NY3d 702 [2008]; People v Ahlers, 10 AD3d 770 [3d Dept 2004], lv denied 4 NY3d 704 [2005]; People v Burgess, 6 AD3d 686 [2d Dept 2004], lv denied 3 NY3d 604 [2004]; People v Dorato, 291 AD2d 580 [3d Dept 2002]). The Board of Examiners of Sex Offenders is charged with producing accurate case summaries as an integral part of its functions and it has expertise culling through records to produce a concise statement of the factual information relevant to defendant’s risk of reoffense. Similarly, to assist the court in imposing an appropriate sentence, probation departments are charged with gathering a wide variety of information for inclusion in presentence reports—reports that “may well be the single most important document at both the sentencing and correctional levels of the criminal process” (People v Hicks, 98 NY2d 185, 189 [2002] [internal quotation marks and citations omitted]).

Case summaries and presentence reports are prepared with the knowledge that they will be relied on by courts. No foundation is necessary for their consideration at SORA hearings because such documents are created under statutory mandates and their origins and function are well-known to SORA courts (see e.g. People v Fiene, 56 AD3d 921 [3d Dept 2008] [no testimony was required to explain the uses of the RAI, the presentence investigation report or the case summary]). Of course, information found in a case summary or presentence report need not always be credited—it may be rejected when it is unduly speculative or its accuracy is undermined by other more compelling evidence. But case summaries and presentence reports certainly meet the “reliable hearsay” standard for admissibility at SORA proceedings.

Similarly, grand jury testimony has been deemed sufficiently trustworthy for SORA purposes (see e.g. People v Imbert, 48 AD3d 297 [1st Dept 2008], lv denied 10 NY3d 714 [2008]; People v Concepcion, 38 AD3d 739 [2d Dept 2007], lv denied 9 NY3d 801 [2007]; People v Dort, 18 AD3d 23 [3d Dept 2005], lv denied 4 NY3d 885 [2005]). Although not subject to cross-examination, this evidence is taken under oath, a significant, though not indispensable, indication of reliability. Other sworn documents have also been consistently accepted by SORA courts, including misdemeanor and felony complaints (see People v Moore, 16 AD3d 190 [1st Dept 2005], lv denied 4 NY3d 889 [2005]; People v Conway, 47 AD3d 492 [1st Dept 2008], lv denied 10 NY3d 708 [2008]). Similar to case summaries and presentence reports, no foundation is necessary to justify receipt of this type of evidence at a SORA hearing because the circumstances surrounding the development of the proof are evident from the face of the document and are well understood by a SORA court.

With this in mind, we turn to the purpose underlying SORA—to protect the public from sex offenders. Given the significance of the mission, an accurate determination of the risk a sex offender poses to the public is the paramount concern. We conclude that hearsay is reliable for SORA purposes—and, therefore, admissible—if, based on the circumstances surrounding the development of the proof, a reasonable person would deem it trustworthy.

It is impossible to list the types of evidence that will meet this standard because the proof will vary depending on the circumstances of the case. If the District Attorney is relying on facts relating to a prior conviction that involved a trial, the sources relied on at the SORA proceeding will likely be different than would be the case if a defendant had waived indictment and pleaded guilty. A higher quality of proof may be expected where the proof relates to a criminal case that was recently adjudicated versus one that was resolved decades ago. Among the factors considered in evaluating the reliability of proffered hearsay evidence are the age of the conviction and the efforts made to locate relevant documents; whether the proof is corroborated either by the nature of the conviction or other evidence in the record; whether the declarant was under oath or was acting under a duty to accurately report, record or convey information; and whether the circumstances surrounding the making of the statement otherwise bear indicia of reliability. SORA courts must have the flexibility to make reliability determinations on a case-by-case basis.

Since accuracy is the goal, the District Attorney should proffer the best evidence available to illuminate the relevant facts, with the caveat that the Legislature did not contemplate that victims of sex crimes be compelled to appear and testify under oath at SORA proceedings. As the New Jersey Supreme Court has observed, such a requirement would undermine the practice often utilized by prosecutors of entering guilty pleas in cases involving sex crimes to avoid putting the victim through the trauma of a criminal trial (see Matter of C.A., 146 NJ 71, 97-98, 679 A2d 1153, 1166 [1996]).

Mingo: The District Attorney’s Office Documents

Applying this standard to the internal District Attorney’s office documents in Mingo, the evidence used to establish that defendant was armed with a dangerous instrument at the time of the rape may have constituted “reliable hearsay” but the record is presently insufficient to determine that this is the case. It appears that the District Attorney’s inability to locate other types of proof, such as grand jury testimony, stemmed from the fact that the offense was committed almost 20 years ago. Defendant did not argue at the SORA proceeding that the District Attorney failed to undertake a diligent search for additional records or was not proffering the best available evidence.

As the People argue, internal documents generated by a prosecuting agency share similarities with case summaries and presentence reports in that all are prepared in furtherance of a governmental function. The District Attorney’s office documents may be reliable for reasons similar to the business records exception to the hearsay rule, that is “records systematically made for the conduct of a business . . . are inherently highly trustworthy because they are routine reflections of day-to-dáy operations and because the entrant’s obligation is to have them truthful and accurate for purposes of the conduct of the enterprise” (People v Rawlins, 10 NY3d 136, 150 [2008] [internal quotation marks and citations omitted]; see People v Cratsley, 86 NY2d 81, 88-91 [1995]). It may well be that these forms are generally produced based on information supplied by the victim, the arresting officer or some other knowledgeable witness under circumstances bearing indicia of reliability.

But the documents relied on here differ in at least one significant respect from case summaries and presentence reports. Since SORA courts are aware of how case summaries and presentence reports are prepared and, in fact, these documents are generated with knowledge that they will be submitted to and relied on by courts, foundation testimony is unnecessary to establish their admissibility. But the same is not true with respect to the unsworn, internal District Attorney’s office documents proffered in Mingo. Some explanation of how these documents were generated, the personnel who prepared them, the sources typically relied upon for the information contained therein, and the function they served is needed before they can be viewed as trustworthy. Furthermore, where the documents contain a code or shorthand not readily interpreted by the court, this should be deciphered on the record to assist the court and facilitate appellate review. For example, in a brief submitted in this Court, the District Attorney explains some of the notations appearing on the Early Case Assessment Bureau form, indicating that they reveal the sources of the information contained on the form. This type of basic information should be presented at the SORA proceeding, either through a prehearing affirmation, an offer of proof, or by testimony from a witness with knowledge of the internal procedures of the District Attorney’s office.

We do not suggest that any formal incantation, such as the recitation typically preceding the admission of a business record under CPLR 4518, is required. Nor will it be necessary in every case for the District Attorney to call a witness to supply the requisite foundation. But, in Mingo, since the SORA court accepted the forms used by the District Attorney’s office without requiring foundation evidence of any type, the record contains no information supplying the requisite indicia of reliability. Hence, this case should be remitted to the SORA court to provide the District Attorney an opportunity to establish a foundation supporting the documents’ admissibility. Defendant remains free to rebut the District Attorney’s proffer and the SORA court will determine whether the documents are sufficiently trustworthy to constitute “reliable hearsay” based on the considerations identified above.

Balic-. The Criminal Complaint

Remittal is unnecessary in Balic since the criminal complaint was a sworn statement created by a police officer with a duty to report. Here, the record supports the conclusion that the document constituted reliable hearsay. The source of the information in the complaint is clear; the police officer indicates that he is recounting statements made by the child victim on the same day as the crime. Needless to say, a police officer is charged with the duty to accurately record statements made by a complaining witness—and nothing in this record suggests that the officer did not fulfill this command.

Defendant argues that the document is unreliable because, although the police officer was under oath, the complainant was not. Thus, defendant suggests that SORA courts can consider only sworn victim statements. We find this assertion to be inconsistent with the broad statutory language directing the court to consider “any victim’s statement” (Correction Law § 168-n [3] [emphasis added]). The Legislature’s decision not to restrict the proof to sworn statements recognizes that there are circumstances when a sworn statement of the victim is unavailable either due to the victim’s age or mental capacity, or the early resolution of the case by a waiver of indictment and guilty plea. Moreover, as these appeals demonstrate, sometimes sworn statements cannot be located due to the age of the conviction and the unintentional loss or destruction of documents. Courts in other jurisdictions with comparable regulatory schemes have similarly determined that victim statements can be relied on even if not made under oath (see Matter of C.A., supra, 146 NJ 71, 679 A2d 1153 [1996] [victim statements recounted in police and medical reports constituted reliable hearsay]; Doe v Sex Offender Registry Bd., 70 Mass App Ct 309, 873 NE2d 1194 [App Ct, Suffolk 2007], review denied 450 Mass 1110, 881 NE2d 1142 [2008] [court did not err in relying on victim statement recounted in police report]). Of course, where an unsworn statement is equivocal, inconsistent with other evidence, or seems dubious in light of other information in the record, a SORA court is free to disregard it.

But, in Balic, there is no basis to set aside the determination that the criminal complaint was sufficiently reliable to render it admissible at the risk level proceeding. Moreover, we reject defendant’s assertion that the District Attorney failed to meet the clear and convincing evidence burden of proof, particularly since defendant did not actually controvert the allegations of sexual assault by offering a contrary account of the 1985 incident and defendant’s guilty plea confirmed that defendant physically assaulted the victim, partially corroborating the information in the criminal complaint. We therefore decline to disturb Balic’s level two designation.

Accordingly, in People v Mingo, the order of the Appellate Division should be reversed, without costs, and the case remitted to Supreme Court for proceedings not inconsistent with this opinion; in People v Balic, the order of the Appellate Division should be affirmed, without costs.

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

In People v Mingo: Order reversed, without costs, and case remitted to Supreme Court, Kings County, for further proceedings in accordance with the opinion herein.

In People v Balic-. Order affirmed, without costs.

      . Defendant, who was among the class of sex offenders who were incarcerated, on parole or on probation when SORA became effective in January 1996, was afforded a redetermination hearing as a result of a settlement in federal litigation that involved a challenge to the procedures used to determine sex offenders’ initial risk level determinations (see Doe v Pataki, 3 F Supp 2d 456 [SD NY 1998]).

      . A risk assessment instrument is prepared by the District Attorney or the Board of Examiners of Sex Offenders to assist the court in its classification of the risk defendant poses to the community. The RAI contains a series of factors that permit the assignment of specified point values depending on the characteristics of the victim, the circumstances surrounding the crime, a defendant’s prior history of sexual offenses, and the like. Point totals under the RAI presumptively place a person convicted of a qualifying sex offense in one of three categories—level one, low risk of reoffense (1 to 70 points); level two, moderate risk of reoffense (75 to 105 points); and level three, high risk of reoffense (110 to 300 points). There are also override factors that warrant a level three designation no matter the point totals. In addition, the level suggested by the RAI is merely presumptive and a SORA court possesses the discretion to impose a lower or higher risk level if it concludes that the factors in the RAI do not result in an appropriate designation.

      . Defendant’s guilty plea to rape in the first degree—which required an admission that defendant engaged in “forcible compulsion” (see Penal Law § 130.35 [1])—did not establish that defendant was armed. Forcible compulsion involves the use of physical force or a threat that places a person in fear of immediate death or physical injury (Penal Law § 130.00 [8]), either of which could have been accomplished without a weapon.

      . In Mingo, defendant pleaded guilty to rape in the first degree under Penal Law § 130.35. The defendant in Balic was convicted of sexual abuse in the first degree under Penal Law § 130.65. Both of these crimes are “sexually violent offenses” under SORA (Correction Law § 168-a [3], [7] [b]). It appears from the briefs that, by virtue of a federal lawsuit, Mingo’s commission of a sexually violent offense may not automatically render him subject to lifetime registration (see generally Doe v Pataki, 481 F3d 69 [2d Cir 2007]).

      . Level two offenders who are not sexually violent offenders, sexual predators or predicate sex offenders can apply to be relieved of the duty to register after 30 years (Correction Law § 168-h [2]).


author: Chief Judge Lippman.

text:
    [910 NE2d 997, 883 NYS2d 168]
    In the Matter of Lackawanna Community Development Corporation, Appellant, v Frank E. Krakowski, as Assessor of the City of Lackawanna, et al., Respondents.
    Argued April 28, 2009;
    decided June 11, 2009

      POINTS OF COUNSEL

      Hurwitz & Fine, P.C., Buffalo (Michael F. Perley and Audrey A. Seeley of counsel), for appellant.
    I. A local development corporation (LDC) should enjoy tax-exempt status under Real Property Tax Law § 420-a (1) for lease of its real property to for-profit businesses where the LDC’s action is consistent with the LDC’s core charitable purpose. (Matter of Ellis Hosp. v Assessor of City of Schenectady, 288 AD2d 581; Matter of Brooklyn Assembly Halls of Jehovah’s Witnesses, Inc. v Department of Envtl. Protection of City of N.Y., 11 NY3d 327; Matter of Yeshivath Shearith Hapletah v Assessor of Town of Fallsburg, 79 NY2d 244; Gospel Volunteers v Village of Speculator, 29 NY2d 622; Matter of Adult Home at Erie Sta., Inc. v Assessor & Bd. of Assessment Review of City of Middletown, 10 NY3d 205; Matter of Genesee Hosp. v Wagner, 47 AD2d 37, 39 NY2d 863; Matter of County of Erie v Kerr, 49 AD2d 174; Matter of Nassau County Council Boy Scouts of Am. v Board of Assessors of Town of Rockland, 84 AD2d 862, 55 NY2d 607; Matter of Canton Human Servs. Initiatives, Inc. v Town of Canton, 4 Misc 3d 413; Sisters of St. Joseph v City of New York, 49 NY2d 429.) II. Respondents erroneously removed the tax-exempt status of Lackawanna Community Development Corporation’s real property at 100 Ridge Road. (Matter of Regional Economic Community Action Program v Ritter, 270 AD2d 492, 95 NY2d 758.)

      Hodgson Russ LLP, Buffalo CDaniel A. Spitzer, Michael B. Risman and Joshua Feinstein of counsel), for respondents.
    I. The property does not meet the requirements for an exemption under the Real Property Tax Law. (Matter of Charter Dev. Co., L.L.C. v City of Buffalo, 6 NY3d 578; Matter of Adirondack Land Trust v Town of Putnam Assessor, 203 AD2d 861, 84 NY2d 809; Mohonk Trust v Board of Assessors of Town of Gardiner, 47 NY2d 476; Matter of Ksiaze Chylinski-Polubinski Trust, Inc. v Board of Assessment Review for Town of De Kalb, 21 AD3d 620; Matter of Genesee Hosp. v Wagner, 47 AD2d 37; Matter of Ellis Hosp. v Assessor of City of Schenectady, 288 AD2d 581; Matter of Chautauqua Inst. v Town of Chautauqua, 35 AD2d 1; Matter of Cornell Univ. v Board of Assessors of City of Ithaca, 24 AD2d 526; Matter of Julia L. Butterfield Mem. Hosp. Assn. v Town of Philipstown, 48 AD2d 289; Matter of Shrine of Our Lady of Martyrs of Auriesville v Board of Assessors of Town of Glen, 54 Misc 2d 145.) II. Lackawanna Community Development Corporation’s contentions are meritless. (Matter of Charter Dev. Co., L.L.C. v City of Buffalo, 6 NY3d 578; Matter of Adult Home at Erie Sta., Inc. v Assessor & Bd. of Assessment Review of City of Middletown, 10 NY3d 205; Matter of Yeshivath Shearith Hapletah v Assessor of Town of Fallsburg, 79 NY2d 244; Matter of Nassau County Council Boy Scouts of Am. v Board of Assessors of Town of Rockland, 84 AD2d 862; Gospel Volunteers v Village of Speculator, 33 AD2d 407; Matter of St. Luke’s Hosp. v Boyland, 12 NY2d 135; Matter of Ksiaze Chylinski-Polubinski Trust, Inc. v Board of Assessment Review for Town of De Kalb, 21 AD3d 620; Matter of Ellis Hosp. v Assessor of City of Schenectady, 288 AD2d 581; Matter of Julia L. Butterfield Mem. Hosp. Assn. v Town of Philipstown, 48 AD2d 289; Matter of Genesee Hosp. v Wagner, 47 AD2d 37.)
   OPINION OF THE COURT

Chief Judge Lippman.

The tax assessor for the City of Lackawanna seeks to tax real property owned by the Lackawanna Community Development Corporation (LCDC), a local development corporation organized under section 1411 of the Not-For-Profit Corporation Law. LCDC leases the property to a for-profit corporation that carries out for-profit manufacturing activities on the property. The Appellate Division found the property taxable under the Real Property Tax Law (50 AD3d 1469 [4th Dept 2008]). Because the property is “used” within the meaning of RPTL 420-a (1) (a) by the for-profit lessee for manufacturing activities, and not by LCDC for an exempt purpose, we hold that the property is taxable and the Appellate Division order should be affirmed.

LCDC acquired the properties that comprise what is now known as 100 Ridge Road in Lackawanna, New York between 1981 and 1985, and in 1993 LCDC leased the real property to Now-Tech Industries, Inc., a for-profit corporation. Now-Tech Industries, Inc. subsequently assigned the lease to PCB Now-Tech, Inc., another for-profit corporation. Prior to 2006, LCDC was not assessed real property taxes on the 100 Ridge Road property. In 2006, relying on the New York State Office of Real Property Services Exemption Administration Manual that, in relevant part, largely mirrors the statute, Lackawanna’s tax assessor concluded that the 100 Ridge Road property was not entitled to an exemption under section 420-a (1) (a), and LCDC commenced this action.

“Generally, the burden of proof lies with the taxpayer who is seeking to have real property declared tax exempt,” but when, as here, a municipality seeks “to withdraw a previously granted tax exemption, the municipality bears the burden of proving that the real property is subject to taxation” (Matter of New York Botanical Garden v Assessors of Town of Washington, 55 NY2d 328, 334 [1982]). The Lackawanna tax assessor has satisfied his burden.

We first pause to note what we are not deciding today. This case does not present for our consideration, under either the Not-For-Profit Corporation Law or the Real Property Tax Law, whether the 100 Ridge Road property was exempt from taxation prior to LCDC’s leasing it to an entity that carries out for-profit manufacturing activities on the property. For present purposes, therefore, we assume without deciding that prior to it being leased, the 100 Ridge Road property held by LCDC was exempt from taxation.

It is the actual or physical use of the property that the Real Property Tax Law is concerned with when it exempts from taxation property “used exclusively for carrying out thereupon one or more” exempt purposes (RPTL 420-a [1] [a] [emphasis added]; see Matter of Adult Home at Erie Sta., Inc. v Assessor & Bd. of Assessment Review of City of Middletown, 10 NY3d 205, 216 [2008] [the “issue is . . . whether the property is ‘used exclusively’ ” for an exempt purpose, and property used to provide housing for the indigent and property used to provide housing for people “while they participate in social work programs” is “used” within the meaning of the statute]).

We find no support in the Real Property Tax Law or the Not-For-Profit Corporation Law for LCDC’s argument that the 100 Ridge Road property is “used” by LCDC because LCDC is leasing it in furtherance of LCDC’s purpose of spurring economic development. There is no question that local development corporations formed under the Not-For-Profit Corporation Law for the “charitable or public purposes of relieving and reducing unemployment . . . bettering and maintaining job opportunities, instructing or training individuals to improve or develop their capabilities for such jobs,” and “encouraging the development of, or retention of, an industry in the community or area,” among other purposes (N-PCL 1411 [a]), are pursuing laudable goals that better the State’s communities, and LCDC is no exception. Not all laudable activities, however, entitle the actor to a property tax exemption, and we decline LCDC’s invitation to read the Real Property Tax Law together with the Not-For-Profit Corporation Law in such a manner as to establish a “tax loophole” where one would not otherwise exist (see Sisters of St. Joseph v City of New York, 49 NY2d 429, 441 [1980]).

Moreover, if the Legislature had intended to provide a blanket real property tax exemption for local development corporations, it would have done so expressly, as it has in other contexts (compare N-PCL 1411 [f] [providing that the “income and operations” of local development corporations formed under the statute are exempt from taxation], with General Municipal Law § 874 [1] [providing that an industrial development agency “shall be required to pay no taxes or assessments upon any of the property acquired by it or under its jurisdiction or control or supervision or upon its activities”]).

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

Judges Ciparick, Graffeo, Read, Smith, Pigott and Jones concur.

Order affirmed, with costs.

       In Matter of Adult Home the use of the property at issue was said to be reasonably incident to an exempt purpose (10 NY3d at 216), and it has long been clear that the statute’s “used exclusively” language should be understood to mean “used principally” (see Matter of Symphony Space v Tishelman, 60 NY2d 33, 38 [1983]). Whether the use of real property to carry out an exempt purpose is characterized, as here, as the sole use of the property or, as in Matter of Adult Home, as a use reasonably incident to an exempt purpose, it is the actual or physical use of the real property that is determinative under section 420-a (1) (a).


author: Smith, J.

text:
    [912 NE2d 37, 884 NYS2d 205]
    The People of the State of New York, Respondent, v Noel Marte, Appellant.
    Argued May 6, 2009;
    decided June 11, 2009

      POINTS OF COUNSEL

      Paul Skip Laisure, New York City, and Lynn W.L. Fahey for appellant.
    I. Appellant was denied due process when the hearing court refused to suppress the complainant’s unreliable lineup identification, which was the product of an unduly suggestive pretrial photographic showup arranged by the complainant’s sister, on the ground that the suggestiveness was not the result of police misconduct. (People v McQueen, 170 AD2d 696; People v Pries, 206 AD2d 873; United States v Wade, 388 US 218; Neil v Biggers, 409 US 188; Manson v Brathwaite, 432 US 98; Stovall v Denno, 388 US 293; Foster v California, 394 US 440; People v Adams, 53 NY2d 241; People v Gee, 99 NY2d 158; People v Edmonson, 75 NY2d 672.) II. Because the People failed to prove, and the jury did not find beyond a reasonable doubt, that the assault and robbery stemmed from separate and distinct acts, appellant’s consecutive sentences are illegal under Penal Law § 70.25 (2) and violated his rights to due process and a jury trial under Apprendi v New Jersey (530 US 466 [2000]). (People v Laureano, 87 NY2d 640; People v Catone, 65 NY2d 1003; People v Rosas, 8 NY3d 493; People v Hamilton, 4 NY3d 654; People v Underwood, 52 NY2d 882; People v Martinez, 138 AD2d 251; People v Smiley, 121 AD2d 274; People v Whitaker, 97 AD2d 555; People v Murray, 299 AD2d 225; People v Amato, 1 AD3d 713.)

      Charles J. Hynes, District Attorney, Brooklyn (Camille O’Hara Gillespie and Leonard Joblove of counsel), for respondent.
    I. Defendant’s claim regarding the admission of the identification testimony of the complainant is in part unpreserved for appellate review. In any event, that claim is meritless because the police had no role in the complainant’s identification of defendant from a photograph. Moreover, the circumstances of the complainant’s photographic identification of defendant were not unnecessarily suggestive. (People v Montgomery, 88 NY2d 1041; People v Robinson, 74 NY2d 773, 493 US 966; People v Fleming,
      70 NY2d 947; People v Tutt, 38 NY2d 1011; Dowling v United States, 493 US 342; United States v Lovasco, 431 US 783; Mooney v Holohan, 294 US 103; Patterson v New York, 432 US 197; De-Shaney v Winnebago County Dept. of Social Servs., 489 US 189.) II. Defendant has failed to preserve for appellate review his claim that the imposition of consecutive sentences violated his constitutional right to a jury trial. In any event, both that claim and his claim that the imposition of consecutive sentences violated Penal Law § 70.25 are meritless. (Apprendi v New Jersey, 530 US 466; People v Salcedo, 92 NY2d 1019; People v Laureano, 87 NY2d 640; People v Day, 73 NY2d 208; People v Ramirez, 89 NY2d 444; People v Rosas, 8 NY3d 493; People v Abrew, 95 NY2d 806; People v Bryant, 92 NY2d 216; People v Lewis, 268 AD2d 249; People v Rubero, 294 AD2d 310.)
   OPINION OF THE COURT

Smith, J.

We held in People v Adams (53 NY2d 241 [1981]) that evidence of an unnecessarily suggestive police-arranged identification of a criminal suspect must be suppressed as a matter of state constitutional law. We hold today that no similar per se rule applies to an identification in which the police are not involved. While suggestiveness originating with private citizens can create a risk of misidentification, that risk does not justify an automatic, constitutional rule of exclusion.

I

The victim, whom we will call Peter L., was robbed and shot in the chest near his home. In the months following the robbery, he looked at hundreds of photographs shown him by the police, not including defendant’s. He did not identify any of the men pictured as his attacker, and eventually he gave up the effort, telling a police officer that he did not think he would be able to pick anyone out.

Peter’s 14-year-old sister, whom we will call Margaret, had known defendant in junior high school. Some six months after the crime, defendant and Margaret met again at Margaret’s home, and defendant told her, “I actually shot someone on this block.” Margaret, who had been violating family rules by meeting defendant, kept silent for some weeks, but then (according to her testimony) told Peter that she thought she knew who shot him, and showed him defendant’s picture. Peter first rejected the suggestion, then reconsidered, took the picture from Margaret, and decided that the person pictured was his attacker. Margaret reinforced this idea in a letter to her brother, quoting defendant’s admission and describing defendant as “[t]he kid that everyone thinks shot you.”

At this point, Peter and Margaret went to the police, who arranged a lineup, from which Peter selected defendant. At trial, Peter again identified defendant as his attacker. Defendant’s pretrial motion to suppress identification testimony was denied, and defendant was convicted of robbery and assault. The Appellate Division affirmed (52 AD3d 737 [2008]), and a Judge of this Court granted leave to appeal (11 NY3d 833 [2008]). We now affirm.

II

In United States v Wade (388 US 218, 236-237 [1967]), the United States Supreme Court held that a postindictment lineup is “a critical stage of the prosecution,” at which a defendant is entitled to counsel. In so holding, the Court remarked that “[a] major factor contributing to the high incidence of miscarriage of justice from mistaken identification has been the degree of suggestion inherent in the manner in which the prosecution presents the suspect to witnesses for pretrial identification” (id. at 228). The Supreme Court later declined to hold, however, that the federal Due Process Clause compels the exclusion of all pretrial identification evidence resulting from an unnecessarily suggestive police-arranged procedure (Manson v Brathwaite, 432 US 98 [1977]). The Court concluded that the admissibility of such evidence should depend on its reliability, judged according to “the totality of the circumstances” (id. at 110, 114).

We have interpreted the Due Process Clause of the New York Constitution differently. In Adams, we adopted a “rule excluding improper showups and evidence derived therefrom,” while allowing in-court identifications “based on an independent source” (53 NY2d at 250-251). Adams, like most other cases imposing constitutional limits on identification procedures, involved suggestiveness originating with law enforcement officers; Adams refers specifically to “suggestive identification procedures employed by the police” (53 NY2d at 251). Defendant here argues, however, that the rule of Adams should apply even where the source of suggestion is a private citizen.

Defendant says that this broadening of Adams is justified because the exclusionary rule applicable to suggestive identifications—unlike the rule applicable to coerced confessions, or evidence obtained in an unlawful search—is designed not just to deter police misconduct, but to advance the search for truth— “to reduce the risk,” as we said in Adams “that the wrong person will be convicted” (53 NY2d at 251). Since a private citizen’s suggestion can have the same tendency to produce wrongful convictions as a police officer’s, defendant argues that the resulting evidence should be suppressed in both cases.

We reject this argument. It is true that the rule of Adams is designed to enhance the truth finding process, and to prevent wrongful convictions. It does so, however, largely through its effect on police procedures: the knowledge that evidence resulting from unnecessarily suggestive identifications will be suppressed leads the police to avoid such suggestiveness, and to conduct careful and fair lineups whenever they can. As we said in People v Logan (25 NY2d 184 [1969]), “The exclusionary rules were fashioned to deter improper conduct on the part of law enforcement officials which might lead to mistaken identifications” {id. at 193 [citation omitted]). While the New York rule is different from the one adopted by the Supreme Court in Manson v Brathwaite, the rules have an important purpose in common: to assure that “[t]he police will guard against unnecessarily suggestive procedures . . . for fear that their actions will lead to the exclusion of identifications as unreliable” (432 US at 112 [footnote omitted]).

In other words, the primary goal of Adams is not to keep evidence of flawed identifications from the factfinder, but to assure, to the extent possible, that the identifications are not flawed in the first place. This goal cannot be advanced by extending the rule of Adams to cases like this one. The family, friends and acquaintances of crime victims, unlike police officers, are highly unlikely to regulate their conduct according to rules laid down by courts for the suppression of evidence. No imaginable rule of law could have discouraged Margaret from showing Peter defendant’s photograph, or from telling him her reason for doing so. A per se rule prohibiting the use of evidence that results from such private communications would deny much valuable information to the factfinder, without any corresponding gain in the fairness of the means used to identify alleged criminals.

No authority in our Court, and none in the United States Supreme Court, gives any support to defendant’s theory that rules authorizing suppression of eyewitness evidence tainted by suggestion should be applied when the suggestion did not come from law enforcement. Defendant relies, however, on several federal Court of Appeals cases: Raheem v Kelly (257 F3d 122 [2d Cir 2001]), Dunnigan v Keane (137 F3d 117 [2d Cir 1998]), United States v Bouthot (878 F2d 1506 [1st Cir 1989]), Thigpen v Cory (804 F2d 893 [6th Cir 1986]) and Green v Loggins (614 F2d 219 [9th Cir 1980]). We are not bound by these decisions, and need not decide whether we think them correct; none of them goes as far as defendant would have us go here.

In all these cases except Dunnigan, the suggestive identifications were the result of the actions of police or prosecutors. The suggestiveness was not the fault of the law enforcement officials, but the courts held that that did not immunize the identifications from scrutiny under the federal “totality of the circumstances” rule. (In Bouthot, the court emphasized the flexibility of the federal rule—in contrast to a “per se rule” like the rule of Adams—in justifying its holding [878 F2d at 1516].) In Dunnigan, the source of the suggestion was a private citizen, but he was a bank security official conducting an investigation. Thus it could not be said in Dunnigan, as it can here, that suppression of evidence would serve no deterrent purpose.

Defendant also cites cases from other states, including State v Chen (402 NJ Super 62, 952 A2d 1094 [App Div 2008]), State v Hibl (290 Wis 2d 595, 714 NW2d 194 [2006]) and Commonwealth v Jones (423 Mass 99, 666 NE2d 994 [1996]). Again, we need not express agreement or disagreement with these cases; none of them adopts the rule of constitutional law that defendant urges here—indeed, two of them reject it. Chen held that the defendant was not entitled to a Wade hearing where she had been identified as the result of a suggestive procedure originating with the victim’s husband; the court went on to decide that a preliminary hearing on reliability should have been held, in discharge of the trial court’s “gate-keeping function” under the New Jersey Rules of Evidence (402 NJ Super at 82, 952 A2d at 1105). Hibl, similarly, rejected the defendant’s due process argument but required the lower court to consider whether the probative value of the identification evidence was substantially outweighed by the danger of prejudice and confusion (290 Wis 2d at 615, 714 NW2d at 204). Jones did not decide any constitutional issue, but held that “[cjommon law principles of fairness dictate that an unreliable identification arising from the especially suggestive circumstances of this case should not be admitted” (423 Mass at 109, 666 NE2d at 1001).

Here, by contrast, the only issue before us is a constitutional issue. Defendant has not argued, and could not persuasively argue on this record, that the evidence he challenges should be excluded as more prejudicial than probative under common-law rules of evidence (see People v Scarola, 71 NY2d 769, 777 [1988] [“Even where technically relevant evidence is admissible, it may still be excluded by the trial court in the exercise of its discretion if its probative value is substantially outweighed by the danger that it will unfairly prejudice the other side or mislead the jury” (citations omitted)]). Like the courts in Chen and Hibl, we decline to extend a per se constitutional rule of exclusion to cases where an identification results from a suggestive communication by a private citizen (see also State v Pailon, 590 A2d 858 [RI 1991] [finding no state action, and thus no constitutional violation, where the source of suggestion was a private citizen]; State v Holliman, 214 Conn 38, 570 A2d 680 [1990] [finding no constitutional violation, but examining identification for reliability on nonconstitutional grounds]).

We acknowledge, as many courts have, the real possibility that suggestiveness that is not of police origin can contribute to misidentifications. But suggestiveness is only one of the possible sources of such mistakes. A witness to whom no one has made any suggestion can be mistaken for any one or more of many reasons—an inadequate opportunity to observe, bias, panic, racial stereotyping, difficulty in focusing on an attacker’s features, or simple bad memory, among others. Where no one in law enforcement is the source of the problem, nothing justifies the per se rule defendant seeks.

Ordinarily, where the need to regulate police conduct does not justify an exclusionary rule, our system relies on juries to assess the reliability of eyewitnesses, aided by cross-examination, by the arguments of counsel, and by whatever other evidence supports or contradicts the witnesses’ testimony (see State v Pailón, 590 A2d at 863 [“the best guarantee of due process . . . would be the opportunity for cross-examination”]; United, States v Zeiler, 470 F2d 717, 720 [3d Cir 1972] [“When . . . there is no evidence that law enforcement officials encouraged or assisted in impermissive identification procedures, the proper means of testing eyewitness testimony is through cross-examination” (footnote omitted)]). We have recently recognized, however, that where a case depends wholly or largely on eyewitness identification, the risk of error may be unacceptably large, and we have held that, in a proper case, expert evidence may be introduced about whether eyewitnesses are likely to err (People v LeGrand, 8 NY3d 449 [2007]). Perhaps other safeguards would be appropriate in particular cases, and we do not rule out the possibility that a court, in balancing probative value against prejudicial effect, may find some testimony so unreliable that it is inadmissible. The eyewitness testimony in this case was not of that description.

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

Chief Judge Lippman and Judges Ciparick, Grafpeo, Read, Pigott and Jones concur.

Order affirmed.


text:
    [912 NE2d 41, 884 NYS2d 209]
    The People of the State of New York, Respondent, v Jeremy Almeter, Appellant.
    Argued June 2, 2009;
    decided June 24, 2009

      POINTS OF COUNSEL

      Gary A. Horton, Public Defender, Batavia (Bridget L. Field of counsel), for appellant.
    Pursuant to Criminal Procedure Law § 340.40 (3), Jeremy Almeter was entitled to have a jury consider both the misdemeanor charge and the violation.

      Lawrence Friedman, District Attorney, Batavia (Robert R. Zickl of counsel), for respondent.
    Defendant was not entitled to have a jury consider both the serious offense and the petty offense. (Baldwin v New York, 399 US 66; Matter of Morgenthau v Erlbaum, 59 NY2d 143; People v Foy, 88 NY2d 742.)
   OPINION OF THE COURT

Chief Judge Lippman.

Based upon an incident occurring at complainant’s home, defendant Jeremy Almeter was charged, by distinct accusatory instruments, with assault in the third degree and trespass. The trespass charge, a violation, was based upon the allegation that, at approximately 2:00 a.m. on October 18, 2005, defendant refused to leave complainant’s property after complainant had asked him to do so. The assault charge, a misdemeanor, was based upon the allegation that, at the same time and place, defendant struck complainant under the chin with a soft-drink bottle, causing complainant to sustain a laceration requiring four stitches.

Notwithstanding the separate accusatory instruments, the matter(s) proceeded, to all appearances, as one prosecution: the charges were listed together on several documents, including the police incident report, the arrest report, the appearance ticket and the order of protection. And, although consolidation was not specifically requested, the charges were prosecuted under a single docket number. To say that the defendant might reasonably have expected the charges to be tried together before a single factfinder would not seem to venture too much.

However, after the parties had selected a jury and proceeded to trial, and, indeed, after the defense case had nearly concluded, the prosecutor, while discussing the jury charge, raised the issue of whether the trial court intended to render a decision as to the trespass charge. The court responded: “Yes. Yes. [Defense counsel], my practice, if I have violation charges as well as misdemeanor charges, is to have the jury handle statutorily their duty, which is misdemeanor verdict, and have the violation charge handled by this Court, decided by this Court.” Defense counsel then indicated that he had been unaware of the court’s practice, never having tried a case before this particular judge.

The court permitted defense counsel to consider the issue overnight. The following day, defense counsel reiterated that he had not been cognizant of the court’s procedure and observed that “no one ever brought that up to me for months while we had this case that this was going to be a separate matter, and I think that’s unfair for Mr. Almeter.” He also noted that he had made reference to an additional charge in front of the jury. Defense counsel did not specifically mention trespass in his opening statement but, when asking the jury not to form an opinion before hearing all of the evidence, stated that “the law is very specific [as] to each of the charges.” The court rejected defendant’s arguments and, although the jury ultimately acquitted defendant of assault, the court convicted him of trespass.

County Court affirmed defendant’s conviction, finding that a joint bench and jury trial was permissible under these circumstances, where there were two separate accusatory instruments. The court also found that there was no prejudice to defendant, since he had been acquitted of the assault charge. A Judge of this Court granted defendant leave to appeal (11 NY3d 784 [2008]) and we now reverse.

Section 340.40 (3) of the Criminal Procedure Law provides that a defendant who is entitled to a jury trial because he or she has pleaded not guilty to a misdemeanor, “shall be so entitled even though the information also charges an offense for which he is otherwise not entitled to a jury trial.” We need not reach defendant’s contention that even though the charges were preferred by separate informations he was entitled under this provision to have the jury decide both charges. It would appear to us evident that if, contrary to reasonable expectation, two trials were to be simultaneously held before different factfinders, the court was obliged to inform defendant and his counsel of this unique mode of proceeding from the outset.

Defendant was unaware that each of his offenses was being tried to a separate factfinder until the trial was nearly over. The charges were all along treated as if they had been consolidated and, until the prosecutor raised the issue, nothing happened to disabuse defendant of that notion. It would seem fundamental that a defendant should not be required to guess who the fact-finder is at his or her trial. As there was every indication that both charges were being tried by the jury, defendant should have been given notice that that in fact would not be the case, and, since there would be more than one factfinder, of which factfinder would be deciding which charge. This is so, at least in part, because counsel may well determine that a different trial strategy is warranted based upon whether a particular charge is being presented to a judge or to a jury.

While the court may have deemed this particular procedure economical, the economy was a false one where the defendant was not timely advised that his charges were to be tried by separate factfinders.

Accordingly, the order of the County Court should be reversed and the case should be remitted to Batavia City Court for further proceedings consistent with this opinion.

Judges Ciparick, Graffeo, Read, Smith, Pigott and Jones concur.

Order reversed, etc.


text:
    [913 NE2d 933, 885 NYS2d 241]
    Joseph Kassis et al., Appellants, v The Ohio Casualty Insurance Company, Respondent.
    Argued June 4, 2009;
    decided June 25, 2009

      POINTS OF COUNSEL

      Green & Seifter, PLLC, Syracuse (Lawrence M. Ordway Jr., John L. Valentino and Cecelia R. Cannon of counsel), for appellants.
    I. Under the clear and unambiguous contract terms Joseph Kassis is an additional insured entitled to coverage, including a defense, from respondent. (Pecker Iron Works of N.Y. v Traveler’s Ins. Co., 99 NY2d 391; Grefer v Anderson, 249 AD2d 892; Fay’s Drug Co. v British Am. Dev. Corp., 140 AD2d 810; Ingargiola v Waheguru Mgt., 5 AD3d 732; Bailey v Fish & Neave, 8 NY3d 523; Vermont Teddy Bear Co. v 538 Madison Realty Co.,
      1 NY3d 470; BP A.C. Corp. v One Beacon Ins. Group, 8 NY3d 708.) II. Any ambiguity in the policy must be construed against respondent. (Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487; Breed v Insurance Co. of N. Am., 46 NY2d 351, 940; Venigalla v Penn Mut. Ins. Co., 130 AD2d 974; Matter of Hanover Ins. Co. [St. Louis], 119 AD2d 529; Album Realty Corp. v American Home Assur. Co., 80 NY2d 1008; Sincoff v Liberty Mut. Fire Ins. Co., 11 NY2d 386.) III. Joseph Kassis is an intended third-party beneficiary. (Lake Placid Club Attached Lodges v Elizabethtown Bldrs., 131 AD2d 159; Fourth Ocean Putnam Corp. v Interstate Wrecking Co., 66 NY2d 38; Aireo Alloys Div. v Niagara Mohawk Power Corp., 76 AD2d 68; Albert J. Schiff Assoc. v Flack, 51 NY2d 692; National Union Fire Ins. Co. of Pittsburgh, Pa. v Red Apple Group, 309 AD2d 657.)

      Damon & Morey LLP, Buffalo (Vincent G. Saccomando of counsel), for respondent.
    I. This Court should not consider the additional insured claim as it was never pleaded in appellants’ complaint and was raised for the first time in their memorandum of law. (Central State Bank v American Appraisal Co., 33 AD2d 1009; Cohen v City Co. of N.Y., 283 NY 112; Phelan v State of New York, 238 AD2d 882; Robinson v Kingston Hosp., 55 AD3d 1121.) II. Joseph Kassis is not entitled to coverage as he is not an additional insured on Kassis Superior Sign Co., Inc.’s policy with the Ohio Casualty Insurance Company. (Pecker Iron Works of N.Y. v Traveler’s Ins. Co., 99 NY2d 391; Portacci v Moran Towing & Transp. Co., 615 F2d 293; BP A.C. Corp. v One Beacon Ins. Group, 8 NY3d 708; Ingargiola v Waheguru Mgt., 5 AD3d 732; Grefer v Anderson, 249 AD2d 892; Fay’s Drug Co. v British Am. Dev. Corp., 140 AD2d 810; Glover v City of New York, 215 AD2d 146; Hogeland v Sibley, Lindsay & Curr Co., 42 NY2d 153; Great N. Ins. Co. v Interior Constr. Corp., 7 NY3d 412; North Star Reins. Corp. v Continental Ins. Co., 82 NY2d 281.) III. Joseph Kassis is not a third-party beneficiary under Kassis Superior Sign Co., Inc.’s policy because no such intention is expressed in the policy and Joseph Kassis does not have a judgment against Superior Sign. (Matter of James v State of New York, 90 AD2d 342; State of New York v American Mfrs. Mut. Ins. Co., 188 AD2d 152; Jefferson v Sinclair Ref. Co., 10 NY2d 422; Cole v Metropolitan Life Ins. Co., 273 AD2d 832; University Garden Apts, v Nationwide Mut. Ins. Co., 284 AD2d 975; Hershberger v Schwartz, 198 AD2d 859; Northland Assoc. v Joseph Baldwin Constr. Co., 6 AD3d 1214.) IV. Any contractual indemnification claim by Joseph Kassis against Kassis Superior Sign Co., Inc. must be brought as a third-party action in connection with the underlying action. (Northland Assoc. v Joseph Baldwin Constr. Co., 6 AD3d 1214.) V. Even if appellants were entitled to coverage, they would not be entitled to attorneys’ fees for the prosecution of this action. (Hershberger v Schwartz, 198 AD2d 859; Mighty Midgets v Centennial Ins. Co., 47 NY2d 12.)

      Siller Wilk LLP, New York City (M. William Scherer of counsel), for Siller Wilk LLP, amicus curiae.
    I. The “mutual benefit” requirement obligated the tenant to procure insurance, making the landlord an additional insured. (Grefer v Anderson, 249 AD2d 892; Fay’s Drug Co. v British Am. Dev. Corp., 140 AD2d 810; Ingargiola v Waheguru Mgt., 5 AD3d 732; Glover v City of New York, 215 AD2d 146; South Rd. Assoc., LLC v International Bus. Machs. Corp., 4 NY3d 272; Lawyers’ Fund for Client Protection of State of N.Y. v Bank Leumi Trust Co. of N.Y., 94 NY2d 398; BP A.C. Corp. v One Beacon Ins. Group, 8 NY3d 708; Album Realty Corp. v American Home Assur. Co., 80 NY2d 1008; Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of N.Y., 10 NY3d 187.) II. The majority’s reasoning is faulty because it overlooks General Obligations Law § 5-321.
   OPINION OF THE COURT

Chief Judge Lippman.

We are asked to determine whether a landlord is an additional insured under an insurance policy obtained by his tenant such that the insurer is obligated to defend and indemnify the landlord in an underlying personal injury lawsuit. Joseph Kassis (Kassis) leased property in Syracuse, New York to Kassis Superior Sign Co., Inc. (Superior Sign), and Superior Sign obtained a commercial general liability insurance policy on the property from The Ohio Casualty Insurance Company (Ohio Casualty). On February 25, 2004, Andrew Holden, a Superior Sign employee, slipped on an accumulation of snow and/or ice on the leased property and thereafter commenced the underlying action against Kassis. Ohio Casualty disclaimed on the ground that the policy, which names only Superior Sign, did not afford Kassis coverage. Kassis and Superior Sign commenced this action seeking a declaration that Ohio Casualty is obligated to defend and indemnify Kassis in the Holden action. Supreme Court granted plaintiffs’ motion for summary judgment in part and declared that Ohio Casualty is obligated to provide a defense in the Holden action (2007 NY Slip Op 34414[U]). The Appellate Division reversed and found no obligation to defend or indemnify (51 AD3d 1366 [4th Dept 2008]). Plaintiffs have appealed as of right, pursuant to CPLR 5601 (a), and we now reverse.

Under the lease, Superior Sign is obligated to pay for snow removal services and to

“indemnify, defend, and hold harmless Landlord from any and all damages, costs, expenses, and liabilities for anything arising out of the occupancy of the Premises caused by Tenant or its agents and from any loss or damage arising out of the acts of Tenant or its agents or the failure of Tenant to comply with the terms and conditions” of the lease.

The lease further provides that Superior Sign, “at its sole cost and expense and for the mutual benefit of Landlord and Tenant, shall maintain a general liability policy . . . providing coverage against claims for bodily injury, personal injury and property damage” with specified aggregate and per occurrence coverage amounts.

Superior Sign obtained a commercial general liability insurance policy from Ohio Casualty. The policy provides bodily injury coverage where “the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement” and that contract or agreement falls within the definition of an “insured contract.” The parties do not dispute that Superior Sign’s lease is an “insured contract” as that term is defined in the insurance policy. Moreover, the policy’s blanket additional insured provision extends coverage not simply to the named insured, i.e., Superior Sign, but also to “any person or organization whom [the named insured is] required to name as an additional insured on this policy under a written contract or agreement.” “ ‘Additional insured’ is a recognized term in insurance contracts,” and “the well-understood meaning of the term is an entity enjoying the same protection as the named insured” (Pecker Iron Works of N.Y. v Traveler’s Ins. Co., 99 NY2d 391, 393 [2003] [some internal quotation marks and citations omitted; emphasis added]). Notably, the insurance policy does not require Superior Sign to provide Ohio Casualty with notice of those persons or organizations Superior Sign is contractually required to name as an additional insured on the policy. Superior Sign is not required to complete and return to Ohio Casualty any notification forms listing those persons or organizations that it intended to name as additional insureds under the policy, nor does the policy require the submission of any additional insured certificates or the like.

Thus, in deciding the ultimate question—i.e., whether Kassis is an additional insured under the subject policy obligating Ohio Casualty to defend and indemnify him in connection with the underlying personal injury action—we need only determine whether, under the lease, Superior Sign was required to ensure that Kassis received general liability insurance coverage equivalent to the coverage Superior Sign enjoyed.

Pursuant to the general liability insurance provision of the lease in question, Superior Sign was obligated to obtain coverage at specified monetary levels in the aggregate and per occurrence against “claims for bodily injury, personal injury and property damage” “at its sole cost and expense and for the mutual benefit of [Kassis] and [Superior Sign].” The natural and intended meaning of the term “mutual benefit” as used in this provision is that Kassis and Superior Sign are intended to enjoy the same level of coverage.

The intent and meaning of the term “mutual benefit” in the provision becomes clear when juxtaposed with the language of the other insurance provisions of the lease. The lease expressly contemplates that both Kassis and Superior Sign will enjoy fire insurance, and the lease further provides in an “Additional Insurance” provision that Superior Sign may obtain certain types of insurance coverage just for itself. With respect to fire insurance, Kassis, “at Tenant’s sole cost and expense,” is to “keep the Premises insured for the benefit of the parties against loss or damage by fire,” and fire insurance “may be written either under separate policies in Landlord’s name or combined with other coverages acquired by Tenant.” As for the additional insurance provision, it specifies that Superior Sign, “at its sole cost and expense, may maintain insurance coverage for its benefit on Tenant’s leasehold improvements and Tenant’s personal property in such amounts as Tenant deems appropriate with Tenant assuming the risk of any co-insurance.” The additional insurance provision also expressly permits Superior Sign to “effect for its own account any insurance not required by the provisions of this Lease, including business interruption insurance or insurance covering Tenant’s equipment and personal property.” Plainly, where a disparity in coverage as between insureds was contemplated—i.e., where the insurance to be procured was not for the insureds’ “mutual benefit”—it was expressly noted.

It is therefore clear that Superior Sign was obligated under the lease to procure the same level of general liability insurance coverage for Kassis as it obtained for itself, and because of that, Kassis falls within the policy’s additional insured provision. Because Kassis is considered an additional insured, Ohio Casualty is obligated to defend him in the underlying personal injury action and, if appropriate, indemnify him as an additional insured in accordance with the policy. The parties’ remaining contentions are without merit.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the judgment of Supreme Court reinstated.

Judges Ciparick, Graffeo, Read, Smith, Pigott and Jones concur.

Order reversed, etc.

      .  Kassis has standing to bring this action because a person claiming to be an insured under an insurance policy may bring a declaratory judgment action against an insurer “when an actual controversy develops concerning the extent of coverage, the duty to defend, or other issues arising from the insurance contract” (Lang v Hanover Ins. Co., 3 NY3d 350, 353 [2004]).

      . Under the policy, an “insured contract” includes a “contract for a lease of premises” and “[t]hat part of any other contract or agreement pertaining to your business . . . under which you assume the tort liability of another party to pay for ‘bodily injury’ or ‘property damage’ to a third person or organization.” “[T]ort liability” is further defined as a “liability that would be imposed by law in the absence of any contract or agreement.”