New York State Court of Claims

New York State Court of Claims

PENSKE v. THE STATE OF NEW YORK, #2002-013-017, Claim No. 104086, Motion No. M-64766


Synopsis


A claim resulting from a county clerk's negligence in failing to record a judgment accrues on the date that property which would have been used to satisfy that judgment is transferred to someone else or, if there no injury has occurred at that point when damages are actually suffered.

Case Information

UID:
2002-013-017
Claimant(s):
PENSKE TRUCK LEASING CO., L.P.
Claimant short name:
PENSKE
Footnote (claimant name) :

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

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
104086
Motion number(s):
M-64766
Cross-motion number(s):

Judge:
PHILIP J. PATTI
Claimant's attorney:
BOYLAN, BROWN, CODE, VIGDOR & WILSON, LLPBY: CHRISTOPHER K. WERNER, ESQ.
Defendant's attorney:
HON. ELIOT SPITZER
Attorney General of the State of New York
BY: REYNOLDS E. HAHN, ESQ.Assistant Attorney General
Third-party defendant's attorney:

Signature date:
May 24, 2002
City:
Rochester
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)


Decision



On March 20, 2002, the following papers were read on Claimant's motion for an order dismissing Defendant's third affirmative defense or, alternatively, for permission to file an untimely claim:

1. Notice of Motion and Attached Papers (captioned "Motion to Dismiss Defense or Alternatively for Leave to File Late Notice of Claim") of Christopher K. Werner, Esq., with Annexed "Motion" and Exhibits

2. Affirmation in Opposition of Reynolds E. Hahn, Esq. ("Hahn Affirmation")


3. Filed Papers: Claim; Answer


This claim results from the failure of a county clerk to properly enter a judgment. When a county clerk "performs acts that are in themselves a part of the judicial system", he or she is acting as an officer of the State, and the State is a proper defendant for claims arising from negligence in the performance of such acts (National Westminster Bank, USA v State of New York, 76 NY2d 507, 509).

In May 1999, Claimant corporation commenced an action against one James Ricci, and in September of that year received a judgment against him in the amount of $18,819.60 (Werner "Motion," exhibit). The Statement for Judgment and Order for Judgment were filed with the Office of the Clerk of Monroe County in September 1999 and given Index No. 1999/5021. Unknown to Claimant, however, the County Clerk failed to enter the judgment. At the time the judgment was filed, Ricci owned, jointly with his wife Lisa Ricci, real property located in the Town of Perinton, Monroe County. In March 2000, that parcel of property was transferred from James A. and Lisa A. Ricci to the sole ownership of Lisa A. Ricci. The deed making that transfer and a $412,500.00 mortgage issued by Flagstar Bank to Lisa Ricci were both filed in the Monroe County Clerk's Office on April 7, 2000. This transfer of property was carried out without satisfaction of Claimant's judgment lien against James Ricci.

On January 5, 2001, when one of its employees was conducting a search of real property records, Claimant became aware that its September 1999 judgment had not been properly entered. The County Clerk was immediately notified, and on January 16, 2001, the judgment was entered, with the following notation by the Clerk's Office: "01/16/2001 this judgment should have been entered on 9/16/1999 but was not entered until 1/16/2001" (Werner "Motion", exhibit).

Claimant commenced this action on April 5, 2001, alleging that as a result of the Clerk's negligence, its lien had not been satisfied as a condition of the April 2000 transfer of real property by the judgment debtor. As its third affirmative defense, Defendant alleged, with sufficient particularity, that the action was untimely because neither a claim nor a notice of intention had been served or filed within ninety days of the accrual of the claim. Claimant takes the position that the claim is timely because it accrued on the date that the error was discovered (January 5, 2001). Alternatively, Claimant contends that because James Ricci has continued to carry out his agreement to pay Claimant the sum of $1,000.00 each month in satisfaction of the judgment, the amount of damages cannot be ascertained with certainty at this time and thus the claim is actually premature. In an exercise of caution, however, Claimant has also moved for permission to file a late claim in the event it is held that the claim accrued at some earlier date. Defendant argues that the claim accrued at the time of the negligent act, September 1999, or alternatively, that the claim is premature, for the same reason given by Claimant.


Applicable Law

In Hudleasco, Inc. v State of New York (90 Misc 2d 1057, affd 63 AD2d 1042), the Secretary of State erroneously certified to the potential purchaser of some property that no financing statement had been filed against the property's owner, Leasemore Equipment, Inc. At the time of such certification, April 1973, there in fact was such a statement establishing that a third party, Industralease, had a security interest in Leasemore's property. The purchaser bought the property but later suffered a loss of $14,060 when it was sued by Industralease. That lawsuit was commenced in September 1974 and the amount of the purchaser's loss was fixed in November 1976, when the matter was settled. In that situation, former Judge Albert A. Blinder held that the purchaser's claim against the State accrued on November 5, 1976, when the lawsuit was settled, because that was " the first date upon which the claimant could ascertain the extent of its damages." The Third Department affirmed, stating:


Although claimant was well aware of the extent of its potential liability to Industralease in November of 1974, the essence of its claim rests on a theory of indemnification or contribution and, therefore, the Court of Claims correctly chose the later November, 1975 [sic] date of stipulation as the time when the claim accrued for the purpose of section 10 of the Court of Claims Act [citations omitted]. (63 AD2d 1042.)



The factual background of Hudleasco, Inc. differs in several material respects from the background of the cases discussed below and from the instant claim. In Hudleasco, Inc., the party suing the State was the third-party purchaser of property who, because of the State's negligence, incurred a loss in order to retain the property it had purchased in good faith. In the other actions, and in the instant claim, the party bringing suit was the one who held a type of secured interest in property (i.e., the party in the position of Industralease in the scenario described above) and who was depending on the State to protect that interest. This distinction is critical in understanding the different rulings that have been made.

In Marine Midland Bank v State of New York (195 AD2d 871), a bank loaned money based on a Department of Motor Vehicles (DMV) title showing that A.W. Trucking was the owner of a certain vehicle. In fact, the vehicle actually belonged to another company, Telmark. When A.W. Trucking defaulted, the bank took possession of the vehicle, but DMV then issued a notice stating that the original title had been in error. Telmark sued, got possession of the vehicle, and had the bank's lien extinguished. The late Judge Condon A. Lyons applied the rule of Hudleasco, Inc. and held that the claim accrued when the bank's lien was extinguished, but the appellate court reversed, stating:

Unlike the situation in Hudleasco v State of New York (63 AD2d 1042, affg 90 Misc 2d 1057), where the claim against the State was in the nature of reimbursement by way of indemnity or contribution, here the true source of the claim is the unpaid defaulted loan that claimant made to A.W. Trucking, not a judgment resulting from a third-party lawsuit. Claimant could have brought an action as soon as it became aware -- as it must have during the course of the Telmark litigation, at the very latest -- that the State's actions had caused it to lend money on the basis of a "security interest" in property that was not owned by the debtor. [Supra, at 873.]



As to the exact point when the cause of action against the State actually accrued, the court declined to choose between the other possible dates -- "the date claimant made its loan to A.W. Trucking in reliance on the erroneous title, the date that party defaulted, the date notice was sent by DMV [notifying of the error] or the date claimant alleges it learned of the error" -- because all these events had occurred more than three years before the date on which the motion to late file was made.

The alternative points of accrual were further narrowed in Johnson v State of New York (131 Misc 2d 630), where a change of beneficiary form was made out by a member of the State Retirement System in August 1980, but the member's State employer never filed the form with the Comptroller's office as required for a change to become effective. When the member died in September 1982, the death benefit was paid to his ex-wife (the original beneficiary) rather than to the person he had designated in 1980. Claimant, the intended beneficiary, attempted to overturn the Comptroller's decision in several ways, the last of which was an Article 78 proceeding that concluded, unsuccessfully, in November 1984. Within 90 days of that decision, she brought suit in the Court of Claims to recover the money that she would have received but for the ministerial negligence of a State employee. Former Presiding Judge Harold E. Koreman observed that New York did not accept the "discovery accrual rule" and held that the claim accrued either at the time of the original misfiling, 1980, or, at the latest, when the member died, 1982:


[A]n injury occurs and the action accrues when "there is a wrongful invasion of personal or property rights *** even though the injured party may be ignorant of the existence of the wrong or injury" [citations omitted]. In this instance the wrong was committed when the form was lost or misfiled, and the injury to claimant's property rights occurred on September 22, 1982 when the Retirement System member died, thereby fixing the interests of the parties to any death benefit. At that moment claimant was excluded from receiving any benefit, injury occurred, and the action accrued [id., at 633].



The Hudleasco ruling was not to the contrary, the court stated, because that had been a claim for indemnification or contribution, which does not accrue until payment is made (id., at 632 fn).

In Flushing Natl. Bank v State of New York (156 Misc 2d 979, affd 210 AD2d 294), the claimant bank obtained a judgment against property owners named Morton, and the judgment was docketed in December 1975. In October 1982, Joan Morton filed for bankruptcy, which prevented an execution against the Morton home to satisfy the lien. Claimant then filed to extend its lien, and an order was issued in February 1986 extending it until three months after the bankruptcy stay was lifted. That order was filed in May 1986, but it was not docketed. In April 1986, after the extension order was issued, but before it was filed, the Mortons transferred the property to their sons for no consideration, and the sons subsequently sold the property to a third party in October 1989, well after the date the order was issued and filed and well after the date that it should have been docketed. Claimant, unaware of these events, obtained a further extension of its lien in September 1990, and in the process of filing that lien extension learned both that the February 1986 order had never been docketed against the Mortons, and that the Mortons property had been sold in the interim.

Stating that "[a] claim accrues when damages accrue," former Judge Leonard Silverman rejected claimant's position that the claim accrued upon its discovery of the error in December 1990, stating, "Claimant's argument that the claim should be deemed to accrue upon its discovery may have logic and equity on its side, but the argument is contrary to the law of this State" (Flushing Natl. Bank v State of New York, 156 Misc 2d 979, supra at 981). Judge Silverman therefore followed Johnson, holding that while the wrongful act occurred in May 1986 when the clerk failed to docket the order, the claim did not accrue at that time because no harm had been suffered. Ignoring the transfer to the sons (which was intended to defraud creditors and could have been set aside), claimant's injury therefore occurred in October 1989 when the property was sold to a bona fide, third-party purchaser.

On appeal, the Second Department affirmed, holding that "[u]nder the most generous reading of the facts in this case, damages were readily ascertainable on or before November 30, 1990 [when the sale was discovered]" (210 AD2d 294, lv denied 86 NY2d 706). In a concurring decision, Justice Pizzuto discussed in greater depth this State's rejection of a "discovery accrual" rule, stating "the Court of Appeals has consistently refused to extend the discovery rule beyond the limited instances provided by the Legislature" (id., at 295, concurring opn).

The position taken in Johnson (supra) and in Flushing Natl. Bank (supra) has been echoed in a number of unreported Court of Claims decisions (see, Hwang v State of New York, Ct Cl, Oct. 3, 2000 [Claim No. 94968 - Motion Nos. M-61539, CM-62041, MacLaw No. 2000-014-526], Nadel, J.[1] [claim of judgment creditor, whose judgment was erroneously listed as satisfied, accrued when property that could have satisfied it was transferred to a third party]; Lobel Financial v State of New York, Ct Cl, Aug. 2, 2000 [Claim No. 99833 - Motion Nos. M-61627, CM-61743, MacLaw No. #2000-015-052], Collins, J. [where DMV neglected to list a lien on a vehicle title, claim of lien holder against the State accrued when the vehicle was sold to a third party without the lien being satisfied]; Chrysler Credit Corp. v State of New York, Ct Cl [Claim No. 84573, Motion No. M-48288, Cross-Motion No. CM-48411] Benza, J. [cause of action based on negligent issuance of a defective title does not accrue at the time the error is discovered]). In at least two of those decisions, Lobel Financial (supra) and Chrysler Credit Corp. (supra), the claimants also moved for permission to late file in the event their claim was found to be untimely, and in both cases, it was held that their lack of knowledge of the wrong constituted an acceptable excuse for failing to comply with the time requirements for instituting an action in this Court.


Discussion

The State's liability in all of these claims is based on the negligence of State officers in carrying out a ministerial duty, a duty that "envisions direct adherence to a governing rule or standard with a compulsory result" (Tango v Tulevech, 61 NY2d 34, 41 ; see also, Tarter v State of New York, 68 NY2d 511). As a result of the ministerial negligence, the injured party was deprived of a type of property right to which he or she was lawfully entitled. Where the monetary loss represents the amount that must be paid by a good faith purchaser in order to retain title to property which it purchased in reliance on the erroneous information, the cause of action is one for indemnification and accrues at the time that the purchaser actually suffers a loss ( Hudleasco, Inc. v State of New York, 63 AD2d 1042, supra). Where, however, the amount of the loss represents sums to which the injured party would have been entitled if the error had not occurred, it has been held that the cause of action arises when the right to receive such sums is legally extinguished (Flushing Natl. Bank v State of New York, 210 AD2d 294, supra; Johnson v State of New York, 131 Misc 2d 630, supra) . Under that rule, Claimant's cause of action would have accrued in March 2000, when the property that should have been used to satisfy Claimant's judgment was transferred to another by Ricci, the judgment debtor.

It is difficult to apply that rule of accrual in this case, however, as there has not as yet been any loss. It is axiomatic that the elements necessary to a cause of action in negligence are "(1) the existence of a duty on defendant's part as to plaintiff; (2) a breach of this duty; and (3) injury to the plaintiff as a result thereof" (Akins v Glens Falls City School Dist., 53 NY2d 325, 333, citing to Prosser and Keeton, Torts §30, at 143 [4th ed]). In other words, without injury, there can be no liability. In addition, the general rule, for purposes of Court of Claims Act §10, is that the claim accrues when the Court is able to determine when a claimant's damages became "reasonably ascertainable" (Augat v State of New York, 244 AD2d 835, 836, lv denied 91 NY2d 814; see, Conner v State of New York, 268 AD2d 706). This requirement has been recognized, and in several instances relied upon, in most of the cases described above (see, e.g., Flushing Natl. Bank v State of New York, supra).

Here, Claimant's damages cannot yet be ascertained because there simply has been no injury. It is possible, in fact, that there may never be any damages, should Ricci continue to make monthly payments to Claimant until the amount of the judgment is satisfied. Similarly, in the cases involving motor vehicle titles that erroneously omit reference to a lien holder, it would not matter whether the vehicle securing the loan has been transferred to another as long as the lien holder continues to receive loan payments.

In many, perhaps most, instances, actual injury will be suffered at the same time as the ministerial error becomes legally effective and the interests of the parties become fixed (see, Johnson, supra; Flushing National Bank, supra). Where, however, no demonstrable injury occurs at that point in time, it is difficult to see, as a matter of logic, how the cause of action can accrue, until such time as damages are actually suffered by the Claimant as a result of the ministerial negligence. This was not seen as a controlling consideration, however, in Lobel Financial v State of New York (Ct Cl, Aug. 2, 2000 [Claim No. 99833 - Motion Nos. M-61627, CM-61743 - MacLaw No. 2000-015-052], Collins, J., supra). In that case, a motor vehicle on which the title mistakenly listed no lien holder was transferred to a third party in June 1998, but the claimant continued to receive payment on the auto loan until October 1998. Judge Collins held that the cause of action accrued on the earlier date. It does not appear, however, that either party in that action raised the issue of prematurity, as was done by both parties here.

When that issue is considered, I believe that the better rule would be to hold that the date of accrual in actions such as this is the date on which damages are inflicted and their amount can be ascertained. Under that rule the instant claim would be dismissed as premature, and Claimant's motion for permission to late file would also be denied as premature. There is concern, however, that in so holding, an injustice may befall Claimant's meritorious claim should there be a default in the future after time for this application has run. With this in mind, I reluctantly conclude that Claimant should be allowed to file its claim to preserve its cause of action against the State. I recognize full well that it may become unnecessary to pursue this action should Ricci completely satisfy the judgment. Should that circumstance occur, Claimant could stipulate to discontinue the action with prejudice. Should a default occur, Claimant could then pursue its claim and Defendant would be entitled to an offset of the money paid to the date of default by Ricci. While this is an imperfect result, it is one which in my opinion serves the purpose of protecting each party's interest and serving the interests of justice in this unusual claim.

Accordingly, that portion of Claimant's motion seeking dismissal of Defendant's third affirmative defense must be denied. In addition, the untimely claim must be dismissed sua sponte. I also conclude, however, that that portion of Claimant's motion seeking permission to file an untimely claim should be granted. Claimant's lack of knowledge that a wrong occurred certainly provides an excusable reason for delay in commencing an action, and the other factors enumerated in Court of Claims Act §10(6) either favor granting the requested relief or do not provide sufficient basis for its denial.

Claimant is therefore directed to file and serve a claim identical to the claim that has been dismissed and to do so in conformity with the requirements of Court of Claims Act §§10 and 11 within sixty (60) days after this order is filed. The Defendant will be entitled to claim an offset against the amount claimed up to the sums received by Claimant to the date a default should occur.


May 24, 2002
Rochester, New York

HON. PHILIP J. PATTI
Judge of the Court of Claims




  1. [1]This and other Court of Claims decisions may be found on the Court of Claims website at www.nyscourtofclaims.state.ny.us.