Gunn v. Mahoney

• Decision Date: 29 August 1978
• Citation: 95 Misc.2d 943,408 N.Y.S.2d 896
• Parties: William J. GUNN, Plaintiff, v. Donald T. MAHONEY, Defendant.
• Court: New York Supreme Court

Page 896

408 N.Y.S.2d 896

95 Misc.2d 943

William J. GUNN, Plaintiff, v. Donald T. MAHONEY, Defendant.

Supreme Court, Erie County.

Aug. 29, 1978.

Sheldon M. Markel, Buffalo, for plaintiff.

Ogden R. Brown, Brown, Kelly, Turner, Hassett & Leach, Buffalo, for defendant.

Harold P. Bulan, Buffalo, Trustee in Bankruptcy for William Gunn.

MEMORANDUM DECISION

RUDOLPH U. JOHNSON, Justice.

Defendant herein seeks an Order pursuant to C.P.L.R. 3211(3) dismissing the Plaintiff's Complaint upon the grounds that Plaintiff has no legal capacity to sue.

Harold J. Bulan, as Trustee in Bankruptcy for William Gunn, seeks a denial of Defendant's motion and alternate relief of an Order substituting himself as said Trustee of Plaintiff in the above-captioned action and allowing continuation of said action.

The Plaintiff herein initiated a claim against the Defendant for damages allegedly occurring as a result of Defendant's failure to complete the incorporation of Gunn Metal Sales Inc., as Defendant had contracted to do in November, 1973. The Defendant is an Attorney. As a consequence, Plaintiff claims he was unable to afford himself the protection of the corporate shield in his business activities and was ultimately required to file a personal Petition in Bankruptcy.

Subsequent to being adjudicated a Bankrupt, Plaintiff commenced the suit herein, which claim was not, however, listed as an asset in Plaintiff's Bankruptcy Petition.

The applicable statutes read as follows: Bankruptcy Act, Sect. 70(a)(5) and (6), 11 U.S.C. Sect. 110(a)(5) and (6):

"The trustee of the estate of a bankrupt . . . shall . . . be vested by operation of law with the title of the bankrupt as of the date of the filing of the petition initiating a proceeding under this title . . . to all of the following kinds of property . . . (5) property, including rights of action, which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him, or otherwise seized, impounded, or sequestered: Provided, That rights of action ex delicto for libel, slander, injuries to the person of the bankrupt or of a relative, whether or not resulting in death, seduction, and criminal conversation shall not vest in the trustee unless by the law of the State such rights of action are subject to attachment, execution, garnishment, sequestration, or other judicial process . . . (6) rights of action arising upon contracts, or usury, or the unlawful taking or detention of or injury to his property . . ."

New York General Obligations Law Sect. 13-101:

"Any claim or demand can be transferred, except in one of the following cases:

(1) Where it is to recover damages for a personal injury;

(2) Where it is founded upon a grant, which is made void by a statute of the state; or upon a claim to or interest in real property, a grant of which, by the transferer, would be void by such a statute;

(3) Where a transfer thereof is expressly forbidden by a statute of the state, or of the United States, or would contravene public policy."

It is argued by Defendant that the Plaintiff's claim is one based on a breach of contract through the Defendant's alleged malpractice; that, therefore, Plaintiff's cause of action arose in early 1974 and prior to the Plaintiff's filing a Bankruptcy Petition in January, 1976; and that title to Plaintiff's claim vested solely in the Bankruptcy Trustee. Accordingly, Defendant concludes that Plaintiff is not the real party in interest, has no standing to sue, and his cause of action should be dismissed.

The Bankruptcy Trustee argues that Defendant's motion is erroneously made; that, pursuant to Sect. 13-101 of the General Obligations Law, as Trustee he accedes to all causes of action of the Bankrupt that are transferrable; and that he ought now be substituted as in place and stead of the Plaintiff and be allowed to continue the action herein.

The Plaintiff, on the other hand, maintains that his cause of action did not accrue until after he filed his Petition in Bankruptcy because only then did the injuries and damage occur. As his cause of action had not yet "ripened", Plaintiff argues it was not a transferrable action within the context of Sect. 70(a)(5) of the Bankruptcy Act and could not, therefore, vest in the Bankruptcy Trustee.

Additionally, Plaintiff notes that Sect. 70(a) of the Bankruptcy Act provides that, in the instance of injury to the person, relevant State law is determinative of whether or not a cause of action passes to a Trustee in Bankruptcy. Plaintiff, therefore, contends that, inasmuch as his claim is for loss of business standing, injury to reputation, and humiliation, it is a "uniquely personal" cause of action and is exempt from transfer pursuant to Sect. 13-101(1) of the General Obligations Law.

Lastly, Plaintiff argues that, even if his malpractice claim has vested in the Trustee in Bankruptcy, the Trustee by his inaction has abandoned his right to pursue the claim, thereby causing the claim to revert to the Plaintiff.

Preliminarily, this Court must make certain observations, namely, that, when title to a bankrupt's rights of action is under consideration, both Clause (5) and (6) of Sect. 70(a) of the Bankruptcy Act must be considered together. Tamm v. Ford Motor Co., 80 F.2d 723 (C.C.A. 8th Cir. 1935); Chandler v. Nathans, 6 F.2d 725 (C.C.A. 3rd Cir. 1925); Gochenour v. George & Francis Ball Foundation, 35 F.Supp. 508 (S.D.Ind.1940) aff'd, 117 F.2d 259 (C.C.A. 7th Cir. 1941), cert. den., 313 U.S. 566, 61 S.Ct. 942, 85 L.Ed. 1525 (1941). However, the actual determination of ownership of property interest, as here a right of action, and whether that interest is transferrable, is made in accord with relevant State law wherein that property is situated. Arnold v. Phillips, 117 F.2d 497 (C.C.A. 5th Cir. 1941), cert. den., 313 U.S. 583, 61 S.Ct. 1102, 85 L.Ed. 1539; Matter of Fahys, 18 F.Supp. 529 (D.C.N.Y.1937); Richardson v. Brainard-Powers Corp., 260 App.Div. 836, 22 N.Y.S.2d 558 (4th Dept. 1940).

Plaintiff's suit is founded on an implied contract of hire between a lawyer and his client, which said contract calls for a specific result, that is, the incorporation of Plaintiff's business. Within a certain period of time after this contractual arrangement, the Defendant breached his contract with Plaintiff when he failed to diligently perform and incorporate the Plaintiff's business.

In deciding the issues as raised by the Plaintiff, we find no authority to support Plaintiff's contention that his cause of action did not accrue until the moment of establishing damages, i. e. filing the Bankruptcy Petition. As stated in Cappuci v. Barone, 266 Mass. 578, 165 N.E. 653 quoted as authority in Conklin v. Draper, 229 App.Div. 227, 230, 241 N.Y.S. 529, 532, aff'd, 254 N.Y. 620, 173 N.E. 892 (1930):

"When did the cause of action accrue? The defendant as a surgeon, on May 11, 1924, impliedly undertook to use care in the operation which he was about to perform. Any act of misconduct or negligence on his part in the service undertaken was a breach of his contract, Which gave rise to a right of action in contract or tort, and the statutory period began to run at that time, and not when the actual damage results or is ascertained, as the plaintiff contends. The damage sustained by the wrong done is not the cause of action . . ."

In the case at hand, the Plaintiff's cause of action accrued at a time subsequent to the contractual arrangement when, within a reasonable time, Defendant should have completed the incorporation of Plaintiff's business. Eppens, S. & W. Co. v. Littlejohn, 164 N.Y. 187, 58 N.E. 19 (1900); Maier v. Rebstock, 92 App.Div. 587, 87 N.Y.S. 85 (4th Dept. 1904), 10 N.Y.Jur. Sect. 262, pp. 195-196.

The gravamen of Plaintiff's action can, however, be found by looking to the basis for which damages are sought. The question, therefore, is not whether the action is in contract or ex delicto, but whether Plaintiff's Complaint, on the facts alleged, states a cause of action for personal injuries and/or for injuries to property.

In many malpractice cases there may be two independent causes of action, that is, breach of contract and negligence constituting a tort. As pointed out by the Court in Colvin v. Smith, 276 App.Div. 9, 92 N.Y.S.2d 794 (3rd Dept. 1949):

"A doctor and his patient are at liberty to contract for a particular result, and if that result be not attained, the plaintiff has a cause of action for breach of contract. (Keating v. Perkins, 250 App.Div. 9, 293 N.Y.S. 197) This cause of action is entirely separate from malpractice, even though they both, as here, may arise out of the same transaction. (Conklin v. Draper, 229 App.Div. 227, 241 N.Y.S. 529, affd. 254 N.Y. 620, 173 N.E. 892; Monahan v. Devinny, 223 App.Div. 547, 229 N.Y.S. 60; Frankel v. Wolper, 181 App.Div. 485, 169 N.Y.S. 15.) The two causes of action are dissimilar as to theory, proof and damages recoverable. Malpractice is predicated upon the failure to exercise requisite medical skill and is tortious in nature. The action in contract is based upon a failure to perform a special agreement. Negligence, the basis of the one, is foreign to the other. The damages recoverable in malpractice are for personal injuries, including the pain and suffering which naturally flow from the tortious act. In the contract action they are restricted to the payments made and to the expenditures for nurses and medicines or other damages that flow from the breach thereof . . ."

While inartfully drawn, the Plaintiff's Complaint appears to frame separate claims on each...