Hayden v. L.I.L.C.O.
| Decision Date | 28 October 1982 |
| Parties | Charlotte HAYDEN, Plaintiff, v. L.I.L.C.O., Defendant. |
| Court | New York District Court |
Plaintiff commenced a small claims action against defendant, a publically owned domestic corporation, for money damages allegedly resulting from failure to turn on electrical service after payment was made by the plaintiff. The defendant appeared and has asserted a counterclaim for money damages in an amount within the monetary jurisdiction of the Small Claims Court.
The issue presented on this motion prior to trial is whether Article 18 of the UDCA prohibits a corporate defendant from interposing a counterclaim. This Court rules that a corporate defendant may not interpose a counterclaim in the small claims part of this Court. Accordingly, the small claims action without a counterclaim shall appear on the Trial Calendar for December 14, 1982.
The District Court by virtue of UDCA Section 1809 is without subject matter jurisdiction to entertain any counterclaims interposed by corporate defendants. In accordance with the language of UDCA Section 1809 this Court concludes that a corporation may not interpose any claim, counterclaim, or implead a third party in a small claims action. Furthermore, when a corporate defendant files a claim in the Civil Part of the District Court, this Court will exercise restraint in allowing consolidation of the small claims action with the civil action despite the existence of common questions of fact and law. (CPLR 602(b)) The basis of any decision with reference to small claims court should be consistent with the purposes espoused by the Small Claims Act (UDCA Art. 18): to permit an individual an opportunity to litigate the matter personally with the least possible delay or expense. D. Siegel, New York Practice (1978).
The practice and procedure in the small claims part of District Court differs from that used in other courts notwithstanding any other provisions of law to the contrary. The procedures as prescribed in Article 18 of the UDCA constitute a simple, informal procedure for the prompt determination of disputes. 1 Carmody-Wait 2d 2:121. UDCA Section 1804 dispenses with the formal procedures of litigation although the substantive law of New York is applied. The purpose of the UDCA Article 18 is to permit a method by which minor claims and grievances may be handled without requiring parties to resort to the use of counsel. Buonomo v. Stalker, 40 A.D.2d 733, 336 N.Y.S.2d 687 (Third Dept., 1972). The frequent appearance of counsel and the tendency to prolong trials of small claims is to be discouraged. Liberman v. American Lumbermen's Mutual Casualty Co., 203 Misc. 816, 120 N.Y.S.2d 43 (1953).
Under ordinary circumstances when a claimant commences a small claims action it is with the expectation that his claim will be resolved without resort to use of counsel. By allowing a corporate defendant to counterclaim, a pro se claimant is faced with defending himself against a corporation and its legal resources. It would be impracticable for the claimant to proceed on his claims without counsel when faced with such a corporate counterclaim. The actual result is that a small claims claimant is deterred from bringing suit against a corporation for fear of possibly having to hire an attorney to defend himself against a counterclaim.
Small Claims Court was created for the private citizen who does not have an attorney and cannot afford to get involved in a long drawn out confrontation. Hence, any vigorous attempt by a corporate defendant to remove the small claims nature of the action and require the claimant to engage an attorney should be discouraged. Defending a counterclaim against a corporate defendant with legal representation requires determination and skill that most laymen cannot muster.
By dismissing the corporate counterclaim against the plaintiff, the Court is maintaining the plaintiff's expectations that the small claims court is the forum for the simple administration of justice without necessity of attorneys and the myriad of legal devices available to thwart swift resolution of the small claim. An example of how the underlying policy of small claims court is eroded by allowing a corporate counterclaim is defendant LILCO's letter dated 7/9/82 to claimant Hayden:
This passage manifests a degree of coercion and prejudice that will result when a pro se claimant is faced with defending a claim against corporate attorneys.
In addition to the foregoing small claims policy arguments, there exist statutory grounds for prohibiting a corporation to interpose a counterclaim in a small claims action. Reference is made herein to Section 1809 of the UDCA:
"Section 1809. Procedures relating to corporations, insurers and assignees
1. No corporation, except a municipal corporation, public benefit corporation or school district wholly or partially within the municipal corporate limit, and no assignees of any small claim shall institute an action or proceeding under this article, nor shall this article apply to any claim or cause of action brought by an insurer in its own name or in the name of its insured whether before or after payment to the insured on the policy.
2. A corporation may appear in the defense of any small claim action brought pursuant to this article by a natural person who is a shareholder who owns not less than one-third of the issued shares of voting stock of such corporation or, in the case of a corporation having no more than ten holders of issued shares of voting stock, all of whom are natural persons, an officer of such corporation."
The important issue raised by this section is whether a counterclaim is an "action". In accordance with the language of the UDCA Section 1809, it is this Court's position that a corporation may not interpose any action in small claims court. A counterclaim is defined in CPLR Section 3019(a) as "any cause of action in favor of one or more defendants". CPLR 3019(d) provides that a counterclaim is to be treated as if it were in a complaint. Following the counterclaim definition in CPLR 3019(a) if a corporation may not interpose a complaint, it therefore should be prohibited from asserting a counterclaim. Notwithstanding the UDCA Section 1809 prohibition, when a counterclaim is treated as if it were in a complaint it cannot be used to subordinate the devices and procedural advantages of the original plaintiff. When the counterclaim will prejudice the plaintiff's case or impede proper distribution of litigation, the Court may sever the counterclaim and order a separate trial. (CPLR 407, 603)
A claimant will certainly be prejudiced and impeded in the adjudication of his claim should the corporate counterclaim be interposed in a small claims action. The prejudice may manifest itself by virtue of the fact that only a single judgment will be entered for the difference between the amounts awarded to each party. That judgment would be based on the counterclaim argued and posed by a corporate attorney against a pro se claimant. An alternative to ordering a separate trial may be to hold the counterclaim in abeyance pending the outcome of the main action. Notwithstanding the presence of the parties before the Court, a dismissal with the inconvenience of commencing a new action is preferred over a severance of the action and joint trials. The rationale again is that the effect of a joint trial is a judgment for which a pro se claimant had to defend himself on a counterclaim posed and argued by a corporation through its attorneys.
The UDCA refers to counterclaims in Section 208, subsection a. This section clarifies the fact that any claim which might be subject of an initial action in the Court may be interposed as a counterclaim. This section clearly eliminates a corporate counterclaim since a corporate claim may not "be subject of an initial action in the court ...". It is interesting to note a recent decision by this Court permitting the defendant corporation to interpose a counterclaim in small claims court was premised on interpretation of UDCA Section 1805, subsection b. In Cano v. LILCO, 113 Misc.2d 411, 449 N.Y.S.2d 136 (First District, Nassau County, 1982, Judge Mellan, Index No. NSC 2772) the Court held that the only restriction on a corporate counterclaim is that the counterclaim be within the court's monetary jurisdiction.
UDCA Section 1805, subsection b, states:
However, it is this Court's interpretation that, the language "if it had been filed as a small claims action" expressly presupposes that the counterclaim could be filed as a small claim. That being a prerequisite to satisfying the monetary jurisdiction referred to in UDCA Section 1805(b). Thus, this section alone is insufficient indication of legislative intent to allow corporations to counterclaim in small claims court.
The situation that existed before the 1979 amendments of UDCA Section 1805...
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