New York State Court of Claims

New York State Court of Claims

PARTMAN v. THE STATE OF NEW YORK, #2001-017-614, Claim No. 99589, Motion No. M-62333


Synopsis


An action seeking a direction that the State pay a judgment that was entered against a State employee in Supreme Court, pursuant to Public Officers Law section 17, must be brought as an Article 78 proceeding, not an action for damages in the Court of Claims.

Case Information

UID:
2001-017-614
Claimant(s):
IRMA PARTMAN, as Administratrix of the Estate of KAREN PARTMAN, Deceased
Claimant short name:
PARTMAN
Footnote (claimant name) :

Defendant(s):
THE STATE OF NEW YORK
Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
99589
Motion number(s):
M-62333
Cross-motion number(s):

Judge:
ANDREW P. O'ROURKE
Claimant's attorney:
Worby Borowick Groner, LLPby: Michael Taub
Defendant's attorney:
Eliot Spitzer, Attorney Generalby: Frederick McGown, III, Assistant Attorney General
Third-party defendant's attorney:

Signature date:
February 23, 2001
City:
New City
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)



Decision

The following papers were considered in connection with defendant's motion for summary judgment:

Notice of Motion, Affirmation of Frederick McGown, III, and Exhibits

Affirmation in Opposition of Michael Taub and Exhibits

Claim

Answer

This claim arises from a March 15, 1990 automobile accident on the Taconic State Parkway involving two vehicles, one owned and operated by William C. Horel, Jr. and the other owned by Budget Rent-a-Car and operated by Ronald Godwin. Karen Partman, who suffered fatal injuries in the collision, was a passenger in the Godwin vehicle. Horel was a Senior Investigator for the State Liquor Authority. At his deposition taken in the Supreme Court action that also arose from this accident, Horel testified that he arrived at work at 8:30 a.m., conducted a lunchtime "undercover investigation" involving drinking five alcoholic beverages, went back to the office, had dinner at a diner in Yonkers, stopped at a rest area in Brewster for an hour, conducted another undercover "investigation" at a tavern in Carmel, and proceeded to drive towards his home in Hopewell Junction, stopping at another highway rest area. His tragic encounter with the Godwin vehicle ensued, at about 11:30 p.m. Horel was charged with driving while intoxicated and vehicular manslaughter and he was convicted, after a jury trial, of criminally negligent homicide.

Claimant brought suit in Supreme Court against Horel and Godwin in July, 1991. A jury trial was held, liability against both defendants found, and on May 5, 1998, judgment was entered against Godwin and Horel in the amount of $279, 574.68. Horel was defended in that action by the State Farm Insurance Company and, subsequent to the entry of judgment, State Farm paid the full amount of its policy, $100,000.00, to the claimant. The balance of the judgment apparently remains unsatisfied.

Claimant never instituted a claim in the Court of Claims seeking damages against the State for Horel's conduct. Claimant's alternative legal strategy is reflected in the following correspondence, submitted as exhibits to the within motion papers:
Letter dated October 15, 1991 from claimant's counsel to the Attorney General advising of the accident, Horel's status as a State employee, and the Supreme Court action, and requesting that the Attorney General consider the letter "a formal demand that The State of New York defend and indemnify Mr. Horel in this litigation pursuant to §17(2) and §17(3) of the Public Officers Law of the State of New York.

Letter dated October 17, 1991 from Kent Mardon, Assistant Attorney General, to claimant's counsel stating: "A request for such representation must come from the employee through his agency of employment. In the instant matter, the defense should be provided by the insurance carrier on Mr. Horel's vehicle. Your letter indicates that State Farm is defending the lawsuit, which is appropriate. Accordingly, the Attorney General's Office will not be defending this lawsuit."

Letter dated October 21, 1991 from claimant's counsel responding to Mr. Mardon's letter advising that counsel's prior letter was not only a demand that the State defend Mr. Horel but "also a demand for indemnification of Mr. Horel" and stating that "if such demand is refused, we will initiate an Article 78 proceeding or such other application as may be appropriate against the State."[1]

Letter dated October 23, 1991 from counsel representing Horel pursuant to his insurance contract with State Farm to the Attorney General, stating that their investigation revealed that Horel was a State employee who was acting within the course of his employment at the time of the subject accident and further stating: "Therefore, in accordance with and pursuant to Sections 17(2) and 17(3a) of the Public Offices [sic] Law of the State of New York, please consider this a formal demand."

Letter dated November 7, 1991 from Harvey Golubock, Deputy First Assistant Attorney General responding to the October 23rd letter from State Farm's counsel, stating: "Since Mr. Horel was driving his own car when the accident occurred, his liability insurance on that car is his primary source of defense and indemnification. If Mr. Horel's actions are covered by section 17, it would provide excess coverage and the State would cooperate with the liability carrier in the same manner as an excess liability carrier. We are unable to determine at this time whether Mr. Horel is entitled to coverage under section 17. Please keep us advised of the status of and developments in the litigation and please consult us if you receive a settlement proposal."

Letter dated September 4, 1992 from Mr. Golubock to insurance counsel, stating: "I am writing in response to your August 26th letter demanding the State to acknowledge that Mr. Horel is entitled to excess coverage under POL §17.[2] The duty of the State to indemnify an employee under section 17(3) does not arise until the employee has submitted a proposed settlement or a judgment to the head of his agency. Since Mr. Horel has submitted neither, your demand is premature. We have not yet determined whether Mr. Horel is entitled to coverage under section 17. Please keep us advised of all developments in the litigation and please consult us if you receive a settlement proposal."

Letter dated January 26, 1993 from claimant's counsel to Mr. Golubock advising that depositions had been completed, that State Farm had offered to pay the full amount of its $100,000.00 policy to settle the action, and that a preliminary conference was scheduled for March 4, 1993. Counsel suggested that a representative of the Attorney General appear at the conference.

Letter dated February 22, 1993 from insurance counsel to Mr. Golubock advising of the March 4th conference and suggesting that the Attorney General "may wish to have a representative present at this conference."[3]

Letter dated September 14, 1993 from claimant's counsel to Mr. Golubock advising that the action had been scheduled for trial on May 9, 1994.

Letter dated June 23, 1994 from claimant's counsel to Mr. Golubock and Mr. Mardon recapitulating the prior correspondence and "calling upon the Attorney General's office to commence settlement discussions, in its excess capacity pursuant to the Public Officers' law in view of a September 6, 1994 trial date.

Letter dated March 7, 1995 from claimant's counsel to Mr. Golubock and Mr. Mardon advising that the action had been tried and that a verdict had been rendered in the sum of $280,000.00, although entry of judgment would have to await post-trial motion practice. Counsel then reiterated his position that Horel was acting within the course of his employment at the time of the accident, and stated: "We will forward to you a copy of the Judgment as soon as it is entered, and we will then file a claim for indemnification in the Court of Claims."
The post-trial motion practice, not involving any issue germane to the instant claim, delayed entry of judgment until May 5, 1998. Claimant's counsel advises that a copy of the judgment was sent to the Attorney General's office "in July, 1998." Thomas McKeon, Counsel to the State Liquor Authority, states that the Authority received a package from the Attorney General's office on July 24, 1998 containing, inter alia, a July 14, 1998 cover letter from claimant's counsel to the Attorney General, a copy of the Supreme Court judgment entered May 5, 1998, and a Notice of Intention to file a Claim on behalf of the claimant herein.

Claimant filed the instant claim on January 4, 1999. The claim, after stating that it was "brought pursuant to the Public Officers Law of the State of New York," recites the pertinent facts concerning the underlying accident, the Supreme Court litigation, the entry of judgment in the amount of $279, 574.68, and the payment by State Farm of the sum of $100,000.00, its policy limit, to the claimant in partial satisfaction of the judgment. Paragraphs 22 and 23 of the claim then allege:
22. Pursuant to Public Officers Law Section 17, the Claimant and/or HOREL is now entitled to proceed against the State of New York, which is required to indemnify HOREL for this incident, since HOREL was acting in the scope of his employment at the time of the accident.

23. On or about August 19, 1998, HOREL assigned his claim pursuant [to] Public Officers Law Section 17 to IRMA PARTMAN, as Administratrix of the Goods, Chattels and Credits of KAREN PARTMAN.
Attached to the claim is a two-page document entitled "Assignment of Claim Form," signed by Horel on August 19, 1998, which references the accident and the litigation brought by claimant against Horel and Godwin, and concludes:
I, WILLIAM C. HOREL, do agree to assign any and all claims to which I am or may be entitled pursuant to Section 17(a) of the Public Officers Law of the State of New York to IRMA PARTMAN, as Administratrix of the Goods, Chattels and Credits of KAREN PARTMAN; and

I Further Agree that this assignment is made in consideration of Ten and 00/100 ($10.00) Dollars, and other good and valuable consideration.
Claimant seeks judgment for the difference between the amount of the judgment and the $100,000.00 payment by State Farm. Although not specifically stated in the papers before the court, whatever efforts were made to enforce the judgment against Horel and Godwin were apparently unsuccessful, leaving an unpaid balance of $179,574.68 plus interest.

The State submitted its answer, contending that the court lacks subject matter jurisdiction, that the claim fails to state a cause of action, that claimant has no standing to bring an action pursuant to Public Officers Law §17, that the benefits that accrue to a State employee pursuant to that statute are non-assignable, that the procedural requirements set forth in the statute in order to trigger the State's obligation to indemnify an employee were not followed, and that Horel was not within the scope of his employment when his vehicle collided with the Godwin vehicle, causing the death of Karen Partman. Disclosure was completed, a note of issue filed, and defendant now moves for summary judgment.

Public Officers Law §17(3) provides, in relevant part:
(a) The state shall indemnify and save harmless its employees in the amount of any judgment obtained against such employees in any state or federal court, or in the amount of any settlement of a claim, or shall pay such judgment or settlement; provided, that the act or omission from which such judgment or settlement arose occurred while the employee was acting within the scope of his public employment or duties; the duty to indemnify and save harmless or pay prescribed by this subdivision shall not arise where the injury or damage resulted from intentional wrongdoing on the part of the employee.

***

(d) Upon entry of a final judgment against the employee, or upon the settlement of the claim, the employee shall cause to be served a copy of such judgment or settlement, personally or by certified or registered mail within thirty days of the date of entry or settlement, upon the head of the department, commission, division, office or agency in which he is employed ***.
Paragraph (5) provides:
The benefits of this section shall inure only to employees as defined herein and shall not enlarge or diminish the rights of any other party ***.
Paragraph (6) provides:
This section shall not in any way affect the obligation of any claimant to give notice to the state under section ten of the court of claims act or any other provision of law.
Defendant raises a number of technical challenges arising from the procedural requirements of §17: that Horel did not deliver a copy of the summons and complaint to the Attorney General within five days of being served, as required by §17(4), that Horel in fact never requested that the State defend or indemnify him (although the request from the attorney representing Horel in the Supreme Court action could reasonably be construed to be a request from Horel), and that instead of being served on the State Liquor Authority within thirty days of entry, a copy of the judgment was served on the Attorney General over two months after entry. The court will not address any of these issues because they are irrelevant to the resolution of this motion, except to note that claimant's attempt to fashion a "substantial compliance" argument based on the particular facts of this case is not without support in the reported decisions construing these procedural requirements.

The court will also not address the question of whether Horel was acting within the scope of his employment on the date and time in question, except to note that the submitted papers indicate that such is a legitimately disputed issue of fact that would not be amenable to resolution on a summary judgment motion.

The more germane, and ultimately dispositive, issues raised on this motion center around defendant's related contentions that (1) claimant has no standing to bring an action pursuant to Public Officers Law §17, such standing being limited to State employees, and (2) any challenge to the State's failure to "indemnify" Horel was required to have been brought as an Article 78 proceeding in Supreme Court, not a claim for damages in the Court of Claims. Claimant, relying on Frontier Ins. Co. a/s/o Scalea v State of New York (197 AD2d 177, affd 87 NY2d 864) argues in response to these arguments that the Court of Claims has jurisdiction over claims for indemnification brought pursuant to §17 and that persons other than State employees may bring such an action. The court in Frontier (Scalea) wrote, with respect to §17(3)(a):
That section has been construed as "creating a cause of action on behalf of State employees against the State for indemnification" (Ott v Barash, 109 AD2d 254, 257; see, DeVivo v Grosjean, 48 AD2d 158, 160). It is abundantly clear that the Court of Claims has jurisdiction to hear actions for indemnification (see, Court of Claims Act §9[2], [4]; cf., County of Broome v State of New York, 119 AD2d 358) and that a claim therefore accrues on the date when final payment is made by the party seeking to be indemnified (see, Bay Ridge Air Rights v State of New York, 44 NY2d 49, 54). (Id., 181, emphasis supplied).
It is also abundantly clear from that decision as well as the many other reported and non-reported decisions that persons other than the State employee – specifically an insurance company who has paid a judgment or settlement on behalf of a State employee and thereby succeeded to the employee's rights via subrogation – have standing to bring a claim for damages in the Court of Claims. What neither party has realized, however, is that there is no claim for indemnification to be brought here because there is nothing to be indemnified. While claimant quoted the emphasized portion of the above quotation in support of her position herein, notably absent from such quotation was the balance of the sentence, where the Appellate Division restated the long-established principle that "a cause of action for indemnity accrues on the date payment is made by the party seeking indemnity" (Bay Ridge Air Rights v State of New York, 44 NY2d 49, 54; see also, Tavernier v Toner, 155 AD2d 948; Jackson v Long Island Lighting Co., 59 AD2d 523; Satta v City of New York, 272 App Div 782). In connection with the judgment that is the subject of this claim, the only party with standing to bring a claim for indemnification would be State Farm, based on that company's payment of $100,000.00 towards satisfaction of the judgment. State Farm has not elected to bring such a claim. Horel, having not paid anything on the judgment, has nothing to be indemnified against and he thus had no claim of "indemnification" that he could assign to claimant even assuming that such a purported assignment could be valid.[4]

The language of §17(3)(a) does provide basis for further inquiry into the remedies it affords a State employee in Horel's position, inquiry that is relevant here based on the assumption that by executing the assignment agreement Horel intended to assign whatever rights he had under §17 to the claimant.[5] The statute provides that the State "shall indemnify and save harmless its employees in the amount of any judgment obtained against such employees in any state or federal court, or in the amount of any settlement of a claim, or shall pay such judgment or settlement *** " and later refers to "the duty to indemnify and save harmless or pay" (emphasis supplied). Based on the familiar maxim that words in statutes are presumed to have discrete and substantive meaning, the references to the State's duty to "pay" a judgment refer to something different from the State's duty to "indemnify." The distinction is obvious. Where the employee has paid a judgment or settlement arising out of acts or omissions occurring in the scope of his employment, the statute creates a duty on the part of the State to indemnify the employee, a duty that may be enforced by an action by the employee (or his subrogee, in the context of the Frontier cases) for damages in the Court of Claims. Where the employee has become liable pursuant to a judgment or settlement arising from such circumstances, but has not paid, the statute creates a duty on the part of the State to pay.

It is thus clear that the concept of "indemnification" has nothing to do with the claim before the court, notwithstanding paragraph 22 of the claim. A judgment was obtained against a State employee and the judgment remains partially unsatisfied. Not having paid anything, Horel has nothing to be indemnified for, rather he has, necessarily, some right to enforce the State's statutory duty to "pay" the judgment, because without such a right the statutory obligation is meaningless.[6] The issues thus presented are what is the nature of that right, in what forum is it enforced, and may it be the subject of an assignment to a third party?

In Frontier Ins. Co. a/s/o Scalea v State of New York, (197 AD2d 177, affd 87 NY2d 864), supra., the court had before it a claim brought by an insurance company who had defended State-employed physicians against malpractice claims and had paid settlements of the claims and thereby had become subrogated to the employees' claims for indemnification. Although Frontier's right to reimbursement of its defense costs and its right to indemnification of the amounts paid for the settlement both arose from the operation of Public Officers Law §17, the court distinguished the rights and remedies available to a State employee when the State is alleged to have breached its obligation to defend, on the one hand, or its obligation to indemnify, on the other. With respect to the obligation to provide a defense, the court wrote:
Here, the Attorney General declined to offer such defenses and his determinations were "much like that of an insurer reviewing a complaint to determine if a defense must be provided" (Matter of Spitz v Abrams, 123 Misc 2d 446, affd 105 AD2d 904; see, Matter of Garcia v Abrams, 98 AD2d 871). There can be no doubt that the Attorney-General is an "officer" as defined in CPLR article 78 and that claimant seeks relief on the ground that the Attorney-General failed to perform a duty enjoined upon him by law (see, CPLR 7802[a]; 7803[1]). Accordingly, at the time the Attorney-General declined to defend the physicians, his determinations became final and binding, thereby invoking the provisions of CPLR 217, and the physicians were obliged to commence a CPLR article 78 proceeding within four months to compel him to provide such a defense. (Id., 181).
The court then distinguished the right to bring a proceeding to compel the Attorney General to do its statutory duty – i.e., provide a defense – from the right to seek indemnification for an amount paid pursuant to a judgment or settlement and, in the excerpt quoted herein at page 8, noted that a cause of action for indemnification was simply a cause of action seeking the payment of money damages and not a proceeding seeking a direction to compel the performance of a duty.

The court, in Frontier(Scalea), did not discuss the third obligation that Public Officers Law §17 imposes on the State, i.e. the duty to pay a judgment or settlement entered against an employee for liability incurred in the course of his or her employment. The parties herein did not address the issue at all and the court's research has not disclosed any appellate decisions construing that portion of the statute, undoubtedly because most of the §17 litigation has occurred in the insurance context, with an insurance company paying the judgment and then filing a claim for damages sounding in indemnification. The question before the court is: given that the State's alleged breach of its duty to defend gives rise to a cause of action on behalf of the employee under CPLR article 78 (in Supreme Court), and given that the State's alleged breach of its duty to indemnify gives rise to a cause of action on behalf of the employee for damages (in the Court of Claims), what rights accrue to the employee when the State allegedly breaches its obligation to "pay" a judgment and no right of indemnification arose because no payment was made by the employee? Specifically, does such an alleged breach give rise to a cause of action for damages cognizable in the Court of Claims?

The jurisdiction of this court, defined in Court of Claims Act §9, is essentially limited to claims against the State and certain quasi-State entities for money damages.
Fundamentally, although "in determining claims for money damages against the State, the Court of Claims may apply equitable considerations and, perhaps to some extent, may grant some sort of incidental equitable relief" (Psaty v Duryea, 306 NY 413, 417), that court's primary jurisdiction is limited to actions seeking money damages against the State in appropriation, contract or tort cases (see, Court of Claims Act §9[2]; Psaty v Duryea, supra, at 416; Sidoti v State of New York, 115 AD2d 202, 203). As such, the Court of Claims has "no jurisdiction to grant strictly equitable relief ... with the return of money to follow as a consequence of the equitable relief, if granted" (Psaty v Duryea, supra, at 416-417). (Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d 670).
See also, Harvard Financial Services v State of New York
(266 AD2d 685); Amberge v State of New York (186 AD2d 962).

In light of this fundamental principle, what remedy accrues to the State employee against whom a judgment is entered, who wishes to enforce his right to have the State pay the judgment on the ground that it was incurred in the scope of his or her employment and who complies with State Finance Law §17(3)(d) by serving a copy of the judgment upon the head of the employer agency within thirty days of entry of the judgment? In contrast with the employee who has paid such a judgment and thereby acquired a statutory cause of action for damages based upon an indemnification theory, the employee against whom a judgment has been entered, but who has not paid anything, has no cause of action for damages. Rather, such an employee has the right to seek a direction that the State official involved (the head of the relevant agency) pay the amount of the judgment to a third party. Such an action is analogous to an employee's right to enforce the State's statutory obligation to provide a defense and is a classic example of what used to be referred to as the equitable writ of mandamus, now encompassed in an action pursuant to CPLR article 78.

Since it is basic that an assignee (i.e., the claimant herein) steps into the figurative shoes of an assignor, and since §17(5) provides that the benefits of §17 "shall inure only to employees *** and shall not enlarge or diminish the rights of any other party,"[7] even assuming that Horel's rights under §17 could be validly assigned to the claimant, such rights clearly did not include the right to bring a cause of action for damages in the Court of Claims. Thus, Horel's purported assignment of his rights under §17 to the claimant, even if a valid and enforceable assignment, did not operate to confer upon claimant the right to maintain an action in the Court of Claims.

Two points remain to be made. Part of the report of the Advisory Committee on Civil Practice to the Chief Administrative Judge, dated December 2000, was a proposal to add a new section 1405 to the CPLR, reading as follows:
Either a judgment creditor or a judgment debtor may recover on a judgment for contribution or indemnification regardless of whether the judgment debtor has satisfied the underlying judgment for which contribution or indemnification is sought. Where such underlying judgment is unsatisfied, any payment made by the contributing or indemnifying party shall be made directly to the judgment creditor.
The purpose of this proposed statute, as articulated in the Advisory Committee's report, is to remedy the perceived unfairness in the result of such cases as Klinger v Dudley (41 NY2d 362), where the court reaffirmed that a plaintiff cannot collect a judgment directly against a third-party defendant notwithstanding that the insolvency of the main defendant meant that the plaintiff's judgment would not be satisfied. Although Klinger involved contribution, and the instant claim involves indemnification, the principle that either claim does not accrue until payment is made (in the contribution case, by a defendant paying more than his or her equitable share of the damages, and in the indemnification case, by the party with a right to indemnification) is the same, as is the result. If the proposed statute had been in effect and applicable to the claim before the court, the result may well have been different (at least to the extent that the court would have had to consider the various issues referred to herein that were not necessary to decide).

Finally, it must be noted that any perception that the result herein is unfair or inequitable in that it leaves claimant with an unsatisfied judgment is unwarranted, since claimant had every right to file a claim against the State in the Court of Claims at the outset of the litigation, based on her assertion that Horel was acting within the scope of his employment, in addition to filing the Supreme Court action against Horel and Godwin (see, Morell v Balasubramanian , 70 NY2d 297; Pratt v State of New York, 181 Misc 2d 488). In that manner, she could have preserved her right to a jury trial against Horel while at the same time insured that the State would be ultimately responsible, without having to rely on Horel's cooperation (either by pursuing his § 17 rights or by having sufficient assets against which to enforce the judgment). For whatever reason, she chose not to do so.

Accordingly, for the foregoing reasons, the defendant's motion for summary judgment is granted and the claim is dismissed.


February 23, 2001
New City, New York

HON. ANDREW P. O'ROURKE
Judge of the Court of Claims




[1]By use of the word "we," counsel was presumably referring to his clients or his partners. At no time did counsel purport to be speaking on behalf of Mr. Horel, the State employee.
[2]This August 26th letter was not provided to the court.
[3]There is no indication in the submitted papers whether a representative of the Attorney General appeared at the conference.
[4]The court appreciates the potential merit of the argument that the benefits that accrue to an employee under §17 are not assignable, based upon the language of the statute (§17[5]) or based on an argument that such an assignment would "contravene public policy" (Gen. Ob. Law §13-101[3]), however determination of this issue is not necessary to a resolution of this motion.
[5]The assignment agreement refers to "any and all claims to which I am or may be entitled pursuant to Section 17(a) of the Public Officers Law *** ." There is no section 17(a); the drafter of that agreement presumably meant section 17(3)(a).
[6]The references to the State's "duty" recognize that the State has the right to take the position that the judgment or settlement did not arise from activities within the scope of employment, or arose from intentional wrongdoing.
[7]Claimant does not contend that the statute confers the right to bring a direct action against the State upon a person holding a judgment against a State employee and such a contention would be clearly without merit. The relief to which claimant aspires arises wholly from the assignment agreement.