Spandau v. U.S.

• Decision Date: 04 March 1988
• Parties: James I. SPANDAU, Respondent-Appellant, v. UNITED STATES of America, et al., Defendants, and State of New York Department of Taxation and Finance, Appellant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 265

526 N.Y.S.2d 265

138 A.D.2d 922

James I. SPANDAU, Respondent-Appellant, v. UNITED STATES of America, et al., Defendants and State of New York Department of Taxation and Finance Appellant-Respondent.

Supreme Court, Appellate Division Fourth Department.

March 4, 1988.

Robert Abrams, Atty. Gen., Albany, by Paul McCarthy, Buffalo, for appellant-respondent.

James I. Spandau, pro se.

Before DILLON, P.J., and DOERR, BOOMER, BALIO and LAWTON, JJ.

MEMORANDUM:

Plaintiff, an attorney, commenced this interpleader action seeking a determination by the court of the conflicting claims of defendants United States, the State of New York, and Surfside Pizzeria, Inc., to monies he held in escrow as a result of a transfer in bulk from Surfside Pizzeria, Inc., to his clients (see, Tax Law § 1141[c] ).

In his demand for relief plaintiff requested not only a determination of the rights of the interpleaded defendants to the monies held in escrow, but also an injunction restraining the State from bringing any action against his clients, who were denominated defendants in the action, and from levying upon any of their property because of sales taxes owed by the transferor, Surfside Pizzeria, Inc.

On the cross motion of plaintiff, Special Term granted summary judgment directing that the monies held in escrow be distributed to the claimants, State Department of Labor and State Department of Taxation and Finance, and also that plaintiff's clients be discharged from any liability for taxes owed by the transferor, Surfside Pizzeria, Inc.

On appeal, the State Department of Taxation and Finance contends that the court erred in discharging plaintiff's clients from any further liability for taxes owed by the transferor, Surfside. It contends that the court had no authority in this interpleader action to define the rights of the claimants other than their rights in the "stake," here the monies held in escrow (see, Watts v. Swiss Bank Corp., 30 A.D.2d 791, 292 N.Y.S.2d 205); that the proper proceeding for such relief was an action for a declaratory judgment.

We disagree. A civil proceeding shall not be dismissed solely because it is not brought in the proper form (CPLR 103[c] ). At any stage of the action, the court may disregard a mistake or irregularity if a substantial right of the party is not prejudiced (CPLR 2001). Here Special Term properly disregarded the form of the action because no substantial right of defendant, State Department of Taxation and...