Surrogate Mother Denied Custody by Appeal Court : Law: The woman bore a child for couple for a $10,000 fee. The state panel sidesteps a decision on the overall legality of such contracts.

In the first surrogate-parent case to reach an appellate panel, a state Court of Appeal on Wednesday denied partial custody rights to a woman who agreed to bear a child for a Napa County couple for $10,000.

The court, however, refused to decide the overall legality of surrogate-parent contracts, and issued a plea to the Legislature to enact a law to cover the novel and emotionally charged issue.

The panel instead held unanimously that it was in the “best interests” of the child--a boy now 4 years old--to remain with the couple, where he has been since birth. The court rejected claims by the surrogate mother, who gave up all rights to the baby in 1986 and then changed her mind, contending that the pact was illegal.

“The primary casualty of this conflict is a child caught in the cross-fire between his birth mother on the one side, and his father and adopting mother on the other,” said Appellate Justice Ming W. Chin, joined by Justices Clinton W. White and Gary E. Strankman. “The best interests of this young child must be our paramount concern.”

Strankman, in a separate opinion, added that if required to rule on the issue, he would have “no hesitancy” in holding surrogate-parent contracts illegal under current law.

The couple’s attorney, Christian R. Van Deusen of Santa Ana, praised the decision, saying it established that even if surrogate contracts were found illegal, a judge still could award custody to the adoptive parents for the welfare of the child.

Rita L. Swenor of Sonoma, the attorney for the surrogate mother, denounced the ruling, saying it will encourage more surrogate contracts. She expects to appeal the ruling to the state Supreme Court.

“As long as these situations remain totally unfettered by any court ruling or legislative action, we are going to end up with many human tragedies,” Swenor said. “My client found that giving up a child is easier in theory than it is after carrying the child until birth.”

State Deputy Atty. Gen. Angela Botelho, who represented the child, welcomed the ruling, noting that the state and local agencies that investigated the case all believed the boy should remain with the adoptive parents. “The child has bonded to them,” she said.

The decision came in one of several cases that have emerged as new reproductive technologies open the way for surrogate births--and for attempts to reach binding agreements in which women are paid to have children and then relinquish them.

In California, a bill to prohibit paid surrogacy passed the state Assembly but failed in the Senate in 1988. Another bill making California the second state--after Arkansas--to legalize surrogacy under certain conditions has passed the Senate and is pending before the Assembly Judiciary Committee.

One high-profile case pending before a state appeals court in Santa Ana is that of Anna L. Johnson, who was denied any rights to a baby she bore for a childless couple in Orange County. Johnson has no genetic link to the child, but carried the fetus created by the couple’s egg and sperm.

In the case decided Wednesday, Nancy Barrass of Novato had inquired at the Center for Reproductive Alternatives about becoming a surrogate mother. She later agreed to bear a child for Charlotte and Timothy Myers of Napa for $10,000.

Barrass, artificially inseminated by Myers’ sperm, gave birth in September, 1986, listing Myers as the father. She gave the child to the couple and later staged an elaborate champagne picnic for them as she formally signed a consent form making Charlotte Myers the boy’s adoptive stepmother. In 1987, however, Barrass sued to withdraw her consent to the adoption, to nullify Myers’ paternity and to get periodic custody of the boy. She said she had been misled into giving up the child and that the contract was illegal.

A Sonoma County Superior Court judge rejected Barrass’ request, and the Court of Appeal, in a 42-page opinion by Chin, upheld that decision. The appellate panel said that since the woman and the couple had already performed under the contract, determining its legality was unnecessary. And even if the contract were to be found illegal, in this case the “paramount interest in (the child’s) welfare” overrode the legality issue, the court said.

The court found that the trial judge’s denial of rights to Barrass was validly based on the boy’s need for stability, and questions about Barrass’ parental fitness.

The panel said that while it had applied the principles of contract law to resolve the case, it was not suggesting that “children are commodities.”