Neilson Realty Corp. v. Motor Vehicle Acc. Indemnification Corp.

• Decision Date: 26 May 1965
• Citation: 47 Misc.2d 260,262 N.Y.S.2d 652
• Parties: In the Matter of the Enforcement of Money Judgment: NEILSON REALTY CORP., Petitioner and Judgment Creditor, v. MOTOR VEHICLE ACCIDENT INDEMNIFICATION CORPORATION, Respondent and a Person Indebted to Benjamin Mailman, also known as Ben Mailman, Judgment Debtor, and Benjamin Mailman, also known as Ben Mailman, Respondent, for an order pursuant to Section 5227 of the Civil Practice Law and Rules.
• Court: New York Supreme Court

Page 652

262 N.Y.S.2d 652

47 Misc.2d 260

In the Matter of the Enforcement of Money Judgment: NEILSON REALTY CORP., Petitioner and Judgment Creditor, v. MOTOR VEHICLE ACCIDENT INDEMNIFICATION CORPORATION Respondent and a Person Indebted to Benjamin Mailman, also known as Ben Mailman, Judgment Debtor, and Benjamin Mailman also known as Ben Mailman, Respondent, for an order pursuant to Section 5227 of the Civil Practice Law and Rules.

Supreme Court, Special Term, Queens County, Part I.

May 26, 1965.

Janklow & Picard, Jamaica, for petitioner; Lincoln D. Harkow, Jamaica, of counsel.

Avrum J. Schrager, Far Rockaway, for respondent Benjamin Mailman, pro se and St. Joseph's Hospital of Far Rockaway, Dr. Morton Schwartz and Dr. Maurice Gershman.

Jack R. Morgan, New York City, for Commissioner of Public Welfare, City of New York.

Joel J. Kelleher, New York City, for Motor Vehicle Accident Indeminification Corp., respondent.

HAROLD J. CRAWFORD, Justice.

This is a motion to confirm the report dated March 18, 1965 of the Honorable Samuel S. Tripp, Special Referee, and for the entry of a judgment in accordance with its findings and recommendations.

This court had before it, in September, 1964, a special proceeding instituted by Neilson Realty Corp., a judgment-creditor, under CPLR 5227, to enforce payment of its judgment against Benjamin Mailman from the sum of $7,550 due him under a judgment he had obtained against the Motor Vehicle Accident Indemnification Corporation (MVAIC). A cross application was made, under CPLR 5240, by Avrum J. Schrager, appearing pro se and as attorney for Benjamin Mailman, for an order directing that the moneys due his client from MVAIC be first used to pay his fee and disbursements and to satisfy the liens of Companion Life Insurance Company, St. Joseph's Hospital and the assignments his client made to Drs. Schwartz and Gershman and the Department of Welfare.

The court referred the entire matter to the Special Referee to hear and report with findings and recommendations. On March 18, 1965 the Special Referee filed his report with the recommendation that 'judgment should be entered directing MVAIC to pay out of the $7,550 judgment obtained against it by Mr. Mailman, to the following persons, the amounts indicated:

                 "1.  Avrum J. Schrager, Esq.                      $3,171.03
                  2.  Companion Life Insurance Co.                    754.00
                  3.  St. Joseph's Hospital of Far Rockaway           840.10
                  4.  Dr. Martin Schwartz                             310.00
                  5.  Dr. Maurice Gershman                            480.00
                  6.  City of New York, Department of Welfare       1,994.87
                                                                   ----------
                             Total...............................  $7,550.00"
                

Neilson Realty Corp. does not dispute the facts as found by the Special Referee. In fact it concedes that Avrum J. Schrager has a valid lien for his legal services and is entitled to be paid before all other claimants. However, it contends that its judgment lien enjoys a right to priority of payment and satisfaction that is superior to all other claims and it opposes the confirmation of the Special Referee's report on the ground that, in finding the liens and assignment superior to its judgment lien, the Referee has erroneously applied the law to the facts.

With this position the court disagrees and, because of the continuing need for clarifying decisional law in this area of litigation, the material portions of the Special Referee's report are herewith set forth in full:

'Article 9 of the Workmen's Compensation Law was designed to provide an injured employee with a substitute for his wages lost during disability. Whatever benefits he receives however, are intended to be repaid out of any recovery he may obtain from the third person who caused the disabling injury. (State Insurance Fund v. Parrilla, 31 Misc.2d 835 .) To secure such repayment the legislature created an unequivocal lien upon the recovery as soon as it comes into being, subordinate, however, to the lien and expenses of the attorney through whose efforts the recovery was obtained. (Workmen's Comp.Law, § 227(1); Osorio v. Incremone, 39 Misc.2d 585 .) Thus, after attorney Schrager has been paid $3,171.03 for his services and expenses as computed above, Companion Life Insurance Company is entitled to reimbursement in the sum of $754 for the disability payments it made to Mr. Mailman. (Cf. Lamonte v. Shapiro, 44 Misc.2d 643, 646 .)

'Next in the order of priority is St. Joseph's Hospital of Far Rockaway. Under section 189(1) of the Lien Law a lien exists in favor of voluntary and municipal hospitals 'against the proceeds of personal injury claims of persons admitted on account of such injuries to the hospital within a week after the injury for which the claim is made.' (Matter of Meyer v. New York Hospital, 7 A.D.2d 60, 64 , app. dis. 5 N.Y.2d 1021 [185 N.Y.S.2d 547, 158 N.E.2d 248].) I find that St. Joseph's Hospital has complied with the requirements of the statute and, therefore, has a hospital lien upon and payable from the proceeds of Mr. Mailman's judgment for damages on account of the personal injuries he sustained on August 5, 1961, to the extent of $840.10, representing reasonable charges for treatment, care and maintenance at the hospital from March 16 to March 31, 1964, the period of his readmission for treatment of the exacerbation of the original injuries.

'It has been held that proceedings pursuant to related sections 5225(b) and 5227 of the CPLR 'are plenary in that the court can adjudicate rights and interests in the debt or fund which is the subject matter of the proceeding.' (Matter of Ruvolo v. The Long Island Rail Road Co., 45 Misc.2d 136, 146, 256 N.Y.S.2d 279, 290.) It follows that the validity of Mr. Mailman's assignments to his two physicians and to the Department of Welfare must be adjudicated in these proceedings. Such adjudication is necessary to determine whether and to what extent petitioner Neilson Realty Corp., by virtue of its judgment for $1,738.64 docketed on March 11, 1964, is entitled to share in the proceeds of the judgment recovered by its judgment debtor remaining after the statutory lienors have been paid in full.

'Mr. Mailman's claim for personal injuries sustained by him on August 5, 1961 did not become a 'debt' within the meaning of CPLR 5201 until the damages were fixed by the arbitration award dated June 5, 1964. An untried personal injury action becomes a debt only when the damages are fixed. (See Wallace v. Ford, 44 Misc.2d 313, 318 .) In Matter of Ruvolo v. The Long Island Rail Road Co., (supra), it was held that a personal injury negligence action become a debt when the plaintiff therein accepted the defendant's offer of settlement in a stated amount by delivering his general release and affidavit agreeing to accept the settlement.

'Thus, when Neilson Const. Co., 269 N.Y. 227, 231 MVAIC on June 29, 1964 a restraining notice (CPLR 5222 [b]) and a subpoena, a debt to Mr. Mailman was already in being by reason of the award in arbitration made on June 5, 1964. By such service, this judgment creditor became a judgment lienor with respect to MVAIC's debt to Mr. Mailman. (Matter of Wickwire Spencer Steel Co. v. Kemkit Scientific Corp., 292 N.Y. 139, 142 [54 N.E.2d 336, 337, 153 A.L.R. 208]; Matter of Goldberg, 43 Misc.2d 1037, 1039 ; Matter of Ruvolo v. The Long Island Rail Road Co., supra.) Its judgment lien, however, attached only to so much of that debt as still belonged to Mr. Mailman. We know that he had already been divested of the total sum of $4,765.13 by reason of the three valid statutory liens. Whether the balance of the judgment amounting to $2,784.87 still belonged to Mr. Mailman at the time petitioner Neilson Realty Corp. became a judgment lienor depends upon the validity of the assignments that Mr. Mailman executed and delivered before the damages in his personal injury action became fixed.

'Section 41 of the Personal Property Law [Now General Obligations Law, § 13-101] provided in pertinent part: '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.' In other words, a cause of action for personal injuries may not be validly assigned. (General Accident, Fire and Life Assur. Corp. v. Zerbe Const. Co., 269 N.y. 227, 231 ; Matter of Walton['s Estate], 20 A.D.2d 386, 389 ; Matter of Ruvolo v. The Long Island Rail Road Co., supra.) As far back as 1882 our Court of Appeals recognized the distinction between an assignment of a cause of action for personal injuries and an assignment of the proceeds of such an action. (Williams v. Ingersoll, 89 N.Y. 508.) This distinction still obtains. As late as November, 1963, the Appellate Division of the Second Department (Grossman v. Schlosser, 19 A.D.2d 893, 894 ) held, by reference to Williams, 'that the assignment of the proceeds' of a personal injury cause of action, 'prior to its settlement or adjudication, was valid and effectual as an equitable assignment against the assignor and his attaching creditor, and that such an assignment was not against public policy'.

'It follows that if the assignments here involved were of the proceeds of Mr. Mailman's personal injury action and otherwise valid, then he had divested himself of all his interest in said monies after the payment of the statutory liens, leaving him with nothing remaining which would be subject to attachment or available on execution. A bong fide common-law assignment of the proceeds of a personal injury action gives precedence to the assignees over judgment creditors whose liens may attach only to such interest as remains in the judgment debtor. (Prospect Coal Co., Inc. v. Commercial Credit Corp., 161 Misc. 780 ; Matter of Aird Island, Inc. v. De Paula, 29 Misc.2d 666, 669 ; Weinberg...