Case Holding Judgment Creditor Not Liable for Damage Marshal Does to Third Party's Property in Course of Levy Offers Opportuni
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No. 555 March 2006 CASE HOLDING JUDGMENT CREDITOR NOT LIABLE FOR DAMAGE MARSHAL DOES TO THIRD PARTY’S PROPERTY IN COURSE OF LEVY OFFERS OPPORTUNITY TO TREAT MARSHAL’S ENFORCEMENT PROCEDURES AND LIABILITIES IN GENERAL As long as the judgment creditor (JC) relies entirely on the marshal’s office to levy on the judgment, damage done to the property of a third person in the course of the marshal’s levy is the responsibility of the marshal, not the JC. Hence an action by the third person to make the JC pay for the damages fails. Cla-Mil East Holding Corp. v. Medallion Funding Corp., .... N.Y.3d ...., .... N.Y.S.2d .... (Feb. 9, 2006). The JC in this case had financed the judgment debtor’s (JD’s) purchase of laundromat equipment, which stood as collateral for the financing. The equipment was located on premises that JD leased from landlord L. When JD defaulted on its payments to JC, JC secured a judgment against JD and used the New York City marshal’s office to enforce the judgment. The marshal proceeded to levy on the equipment. In the course of disconnecting the pipes, wires, and air vents so as to free the equipment for removal, the marshal allegedly damaged the premises. For that, L claimed that JC bore liability and sued JC. No liability, rules the Court of Appeals in an opinion by Judge Rosenblatt. The marshal (or sheriff or other enforcement officer) in such circumstances is not the agent of the JC, but of the government, and is bonded to protect third parties in cases like this. Hence as long as the JC acts entirely through the marshal’s office, as the JC did in this case, it is insulated from liability. In the Court’s words, [f]ar from abusing legal process [as L claimed], [JC] submitted to legal authority at every step. Such conduct is consistent with public policy disfavoring parties taking matters into their own hands. JC might have taken matters into its own hands by relying on the UCC’s self- help provisions. Had JC done so, it would have indeed been liable to a damaged third party. UCC § 9-604(d) provides that a secured party that “removes collateral shall promptly reimburse” the owner of real property damaged by the removal. The statute is not in point here because the JC at no time relied on self-help. The case presents us with an opportunity to address the procedures and liabilities of the marshal’s office in a treatment relevant to the sheriff’s office as well. The first thing to be noted is that the Cla-Mil case must not be read as taking the JC off the hook entirely for the activities of the marshal in levying on the judgment. Under Cla-Mil, the JC is off L’s hook, all right — the party allegedly damaged in the course of the marshal’s enforcement steps — but because of common procedures in the marshals’ world, the JC will likely have to reimburse the marshal for any damages suffered by L. A levy of this kind, involving personal property affixed to real property, will necessarily require the closing off of vents, pipes, electric lines, etc., a situation almost tailor made for a potential damages claim by L. The marshal therefore does not ordinarily perform these tasks himself, but hires a licensed contractor (plumber, electrician, etc.) to do the physical job. He will ascertain the likely expense of retaining such contractors in advance of the levy, and bill the JC for those expenses right up front, before proceeding to levy. All of this up-front stuff, moreover, is necessarily an estimate only. Perhaps an over-estimate, in fact, or, less likely but possible, an under-estimate. Then what happens if the marshal does do damage to the premises in the course of the levy, generating a liability that exceeds the amounts prepaid by the JC to cover contractors’ activities? Here another item in the marshals’ world puts in its appearance: a hold- harmless agreement. Marshals will usually exact one from the JC — again in advance of the levy — if there’s any possibility that damages may result to the landlord in the course of the levy, such as through alleged negligence by the marshal. Especially in that situation do the marshals want the hold- harmless agreement. The marshal will always claim that he used due care in the levying process, but the landlord — and ultimately a court — may disagree. For that, the marshal or his surety — the marshal is bonded, see New York City Civil Court Act §§ 1604 and 1605 — wants to be able to look to a hold-harmless agreement exacted of the JC. These issues, always lurking in the wings of such enforcement cases, were not involved in Cla-Mil, which addresses only the liability of the JC to the damaged third party. Given the fact that marshals — unlike sheriffs — keep their fees, if the marshal did not exact recompense from the JC in advance here, and doesn’t pursue it now should he be successfully sued by L, the marshal will be decorated in a public ceremony and earn a prominent place in the state museum. OTHER DECISIONS COMP CARRIER’S OFFSET RIGHTS Failure of Comp Carrier to “Unambiguously” Reserve Offset Rights Against Claimant’s Third-Party Recovery, Forfeits It The carrier here was the self-insured county that employed the claimant, who was injured on the job by a van and suffered injuries. Compensation was awarded by the Workers’ Compensation Board. Now the claimant sued the driver and owner of the van for ordinary tort damages. An opportunity to settle the case arose, and the comp carrier — in this case the county that was self-insured for comp coverage — of course had an interest in any such third-party recovery the plaintiff/claimant might realize. The carrier has a lien on the proceeds for past payment of comp benefits, and a right to offset future comp payments against the third-party recovery for a statutorily prescribed period of time. The question arose in Brisson v. County of Onondaga, .... N.Y.3d ...., .... N.Y.S.2d .... (Feb. 16, 2006), whether the county, through the administrator handling its workers’ compensation obligations, had waived the offset right as to future payments. The Court of Appeals holds that it did, for failing to reserve its right of offset “expressly and unambiguously” in consenting to a proposed settlement of the third-party claim when advised about it. The advice occurred in correspondence between the plaintiff’s lawyer and the administrator, in which the lawyer sought the consent and the administrator appeared to offer it, but in what the majority of the Court finds an ambiguous response. The administrator’s letter said to the lawyer that “[y]ou indicate that you believed we have no right” to invoke an offset, but “[t]his is not entirely correct”. It added that when “lost wages and medical” payments in this case exceed “basic economic loss” — as provided in the no-fault law — “we can take credit against net third party proceeds”. In an opinion by Judge Read, the Court finds this language ambiguous and therefore deems the issue at best a question of fact for the board to resolve. The board did resolve it, finding that the letter did not adequately preserve offset rights. The Court sees the board’s finding as supported by substantial evidence and therefore defers to the board’s determination that the county’s offset right had been waived. The legal point addressed and resolved by the Court is that any such offset must be absolutely clear, because the plaintiff/claimant is entitled to know, when considering a settlement offer in his third-party action against the tortfeasor, what an offset will mean to his overall recovery. Judge R.S. Smith in dissent agrees on that point, but sees no ambiguity in this case. To him, the county’s response was “as unambiguous a statement as can be imagined that the employer retained its offset right”. The lesson is that as unambiguous as the preservation of the offset right in this case might seem to some, it must be made more unambiguously unambiguous in the future. AGE DISCRIMINATION Existence of Other Ground (Corruption) for Firing Restaurant Workers Counters Their Contention That They Were Fired Because of Their Ages The plaintiffs in this age discrimination suit adduced proof that they were qualified for their positions and that their ages were 55 and 64. This sufficed to make out a prima facie case of age discrimination under the state’s Human Rights Law (Executive Law § 296), but that was only step one in the statutory process. In the second step the burden shifts to the defendant to come forward with a non-pretextual reason for the firing, which the defendant union did in this case with proof of the plaintiffs’ corruption and their facilitating organized crime’s infiltration of the union. In step three, the ball now shifted back to the plaintiffs’ court to show that the defendant’s assigned reason was merely pretextual. Here the plaintiffs are found to have failed. While the jury verdict was for the plaintiffs, and the trial judge refused to set it aside on defendant’s motion for judgment under CPLR 4404, the appellate division, reversing, finds that the defendant had indeed proved that it had a nondiscriminatory reason for the firing, so that the firing could not be attributed to age. The Court of Appeals affirms. Stephenson v. Hotel Employees and Restaurant Employees Union Local 100 of the AFL-CIO, ...