Next the court discussed whether an adoption by the biological father would contradict New York’s policy against surrogate parenting contracts.
Matter of John (Joseph G.), 2019 NY Slip Op 05132, Decided on June 26, 2019, Appellate Division, Second Department:

“This Case Does Not Involve Validation or Enforcement of an Illegal Surrogacy Contract

The first reason given by the Family Court for its dismissal of the adoption petition was that it would not validate “a patently illegal surrogacy contract.” This assertion is plainly erroneous.

It is true that New York’s present public policy, unchanged since 1993 [FN1], is that all surrogate parenting contracts are against public policy and are void and unenforceable (see Domestic Relations Law § 122). Surrogate parent contracts are defined for this purpose to mean any agreement in which: (a) a woman agrees to be inseminated with the sperm of a man other than her husband or to be impregnated with an embryo that is the product of an ovum fertilized with sperm of a man other than her husband; and (b) the woman agrees to, or intends to, surrender or consent to the adoption of the child born as the result of such insemination or impregnation (see Domestic Relations Law § 121[4]). An agreement to pay compensation is not part of the statutory definition. Hence, a surrogate parenting contract is void as against public policy even where no payment of funds is involved. The agreement made by the appellant in this case with the gestational surrogate is within the statutory proscription. However, that does not end the discussion.

Apart from the general policy directive that surrogate parenting contracts are void and unenforceable, the Legislature has restricted active measures for a one-time violation of the expressed public policy to the imposition of civil penalties only and, even at that, only as against those involved in commercial surrogacy contracts. A civil monetary penalty is to be assessed against parties to a commercial surrogacy contract, as well as against persons who induce, arrange, or otherwise assist in the formation of such contracts (see Domestic Relations Law § 123). Where a birth mother or her husband, a genetic father and his wife, or a genetic mother and her husband pay compensation in connection with a surrogate parenting contract, each is subject to a civil penalty of up to $500 (see Domestic Relations Law § 123[2][a]). The penalty is far more severe for those who arrange such contracts for profit. A first offense is punished by a civil penalty of up to $10,000 and forfeiture to the State of the fee or other compensation paid to the arranger (see Domestic Relations Law § 123[2][b]). A second offense committed by an arranger who has already been subject to the civil penalty is punishable as a felony (see id.).

A commercial surrogacy contract is one in which a party receives from, or pays a fee to, the other party, as well as one in which someone is paid for inducing, arranging, or assisting in the formation of the contract (see Domestic Relations Law § 123[1]). The penalty provisions do not apply where the only monies paid are either: (a) the type of payments that may appropriately be made in connection with adoption proceedings and which are disclosed in affidavits required by the adoption statute (see Domestic Relations Law § 115); and (b) payments for reasonable and actual medical fees and hospital expenses for artificial insemination or in vitro fertilization services incurred by the mother in connection with the birth of the child (see Domestic Relations Law § 123[1]).

Parties to a surrogacy contract which does not involve the payment of proscribed [*2]compensation are not subject to any civil or criminal penalty. Thus, the Legislature, while rendering all surrogate parenting agreements void as against public policy, has drawn a distinction between commercial surrogacy contracts and noncommercial surrogacy contracts. While commercial surrogacy contracts subject participants, and those who assist in the formation of such contracts, to civil penalties or felony conviction (see Domestic Relations Law § 123; Social Services Law §§ 374[6]; 389), the only sanction against unpaid surrogacy contracts is to treat them as void and unenforceable (see Domestic Relations Law § 122; Matter of Giavonna F.P.-G. [Frank G.—Renee P.-F.], 142 AD3d 931, 933; Itskov v New York Fertility Inst., Inc., 11 Misc 3d 68, 69 [App Term, 2d Dept]).

The Legislature, though it declared surrogate parenting contracts to be against public policy, recognized the prospect that, notwithstanding its declaration, parties might proceed to enter into such contracts and that children would be born as the result of such contracts. The Legislature provided for this prospect. Domestic Relations Law § 124 states that, in any action or proceeding “involving a dispute between the birth mother” and one or more genetic parents or grandparents “regarding parental rights, status or obligations with respect to a child born pursuant to a surrogate parenting contract . . . the court shall not consider the birth mother’s participation in a surrogate parenting contract as adverse to her parental rights, status, or obligations” (Domestic Relations Law § 124[1]). This statute “simply provides that the gestational carrier’s participation in a surrogate parenting contract should not be held against her” where there is a dispute regarding parentage (T.V. v New York State Dept. of Health, 88 AD3d 290, 301). Where, as here, there is no dispute because the genetic and gestational parents are in agreement with respect to the legal parentage of the child, the protection of the gestational mother contemplated in Domestic Relations Law §§ 122 and 124 is not implicated (see T.V. v New York State Dept. of Health, 88 AD3d at 301).

The Legislature also made provision for the gestational surrogate to validly terminate her parental rights to a child born of a surrogate parenting contract. The statute expressly provides that a gestational surrogate may execute “a valid surrender or consent to the adoption” (Domestic Relations Law § 124[2]). Thus, it is plain that the fact that a child was born as the result of an unenforceable surrogacy agreement does not foreclose an adoption of the resulting child, upon the surrogate’s consent (see Matter of J.J., 44 Misc 3d 297, 304 [Fam Ct, Queens County] [holding that a paid surrogacy contract did not foreclose an adoption]).

The Family Court should not have viewed the adoption petition presented by the appellant as requiring the court to validate or enforce a surrogate parenting contract. The appellant was not, and is not, seeking to have the surrogate parenting contract specifically enforced or otherwise seeking a remedy for a purported breach of the contract. The contract had, in fact, been performed and a child conceived and born on account of it. The court was asked only to approve an adoption which had been agreed to, by use of a statutorily-prescribed mechanism and form, by the gestational mother, exercising her right to do so as expressly recognized by governing statute. Thus, the petition before the court only sought to invoke the court’s power and its responsibility to provide for a child subject to its jurisdiction. The court’s exercise of its judicial authority did not, and does not, involve any judicial sanction for the underlying circumstances by which the child was conceived and born.”