Lanzano v. City of New York

• Decision Date: 12 January 1988
• Citation: 71 N.Y.2d 208,524 N.Y.S.2d 420,519 N.E.2d 331
• Parties: , 519 N.E.2d 331 Thomas LANZANO et al., Appellants, v. CITY OF NEW YORK, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 420

524 N.Y.S.2d 420

71 N.Y.2d 208, 519 N.E.2d 331

Thomas LANZANO et al., Appellants, v. CITY OF NEW YORK, Respondent.

Court of Appeals of New York.

Jan. 12, 1988.

Sherwood Allen Salvan and Harry Salvan, New York City, for appellants.

Peter L. Zimroth, Corp. Counsel (Lin Saberski and Stephen J. McGrath, New York City, of counsel), for respondent.

OPINION OF THE COURT

BELLACOSA, Judge.

The primary action is by an injured New York City sanitation employee seeking damages for personal injury. He appeals contending that the trial court's instruction to the jury that the award of damages would not be subject to income taxation constituted error and aggrieved him because the jury awarded him less than it would have absent that instruction. We affirm the Appellate Division, 127 A.D.2d 1015, 511 N.Y.S.2d 457, order upholding the trial court ruling because the instruction was not erroneous.

On February 20, 1980, plaintiff Thomas Lanzano suffered a line-of-duty injury while working as a laborer for the Department of Sanitation and was granted disability retirement in June 1981. He subsequently brought an action against his employer, the City of New York, which is not governed by the Workers' Compensation Law (see, Workers' Compensation Law § 3group 17), seeking damages for pain and suffering and loss of future income; his wife sued for loss of services and companionship. The issue of liability was determined against the City and is conclusive, and there is no appeal as to that. At the close of proof on the trial of damages, however, the Judge instructed the jury, over plaintiffs' objection, that "any amount of money damages you award the plaintiffs will not be subject to income taxes and you should not consider income taxes, therefore, on the award, in fixing the amount of your award".

The jury returned a verdict in favor of plaintiff, awarding him $75,000 damages for pain and suffering and $112,000 for past and future lost earnings. Plaintiff's wife was awarded $13,000 damages for loss of consortium. The Appellate Division affirmed, without opinion. Only the plaintiff appeals as limited to the claimed insufficient damages awarded to him, arguing that the jury should have been told nothing with respect to the nontaxability of the award.

Section 104(a)(2) of the Internal Revenue Code of 1954 (26 U.S.C. § 104) provides that the amount of damages received on account of personal injuries is not taxable income. The long-standing traditional rule in New York has been that Trial Judges are "not required to charge the jury that any award to the plaintiff would be free of income tax" (Coleman v. New York City Tr. Auth., 37 N.Y.2d 137, 145, 371 N.Y.S.2d 663, 332 N.E.2d 850 ). Numerous courts and commentators have recently expressed support for a more forthcoming and informative instruction, noting that the nontaxability of the personal injury damage award is an important reality which the jury should be at least aware of ( see, Norfolk & W. Ry. Co. v. Liepelt, 444 U.S. 490, 100 S.Ct. 755, 62 L.Ed.2d 689, reh. denied 445 U.S. 972, 100 S.Ct. 1667, 64 L.Ed.2d 250; Fritz v. Consolidated Rail Corp., 68 N.Y.2d 877, 508 N.Y.S.2d 422, 501 N.E.2d 30; see also, Vaughan, Tax Issues of Personal Injury and Wrongful Death Awards, 19 Tulsa L.J. 702, 724-728 Nordstrom, Income Taxes and Personal Injury Awards, 19 Ohio St.L.J. 212 Comment, Personal Injury Awards and the Nonexistent Income Tax--What is a Proper Jury Charge?, 26 Fordham L.Rev. 98, 102-103 ). In this respect, courts are mindful of the growing "tax consciousness" of the American public and the pervasiveness of tax realities in our society. While the average juror may be generally aware of the over-all impact of income taxes, it would be rare indeed if more than a handful would know that personal injury awards are excluded from taxation.

We should not blind ourselves to the possibility that ignorance of relevant rules in this highly specialized complex field could contribute to juries proceeding on erroneous speculations and assumptions and...