WHITE v. NEW YORK CITY HOUSING AUTHORITY (2007)

Defendant moves for an order vacating the judgment entered against it on April 23, 2007 on the grounds that said judgment was obtained through misrepresentation or other misconduct of plaintiff, pursuant to CPLR § 5015(a)(3), and awarding attorney's fees to the defendant for the cost of preparing and submitting the within motion.

This action arises out of a slip and fall accident that occurred while plaintiff, an employee of United Home Care Services, Inc., was exiting defendant's building after visiting one of her patients.   Plaintiff applied for and received Worker's Compensation benefits in the amount of $76,322.78.   After numerous settlement conferences, on October 13, 2006, this action was settled before trial for the sum of $135,000.00.   As of the date of the settlement, the New York State Insurance Fund (hereinafter “the lienholder”) had a lien for Worker's Compensation benefits paid to the plaintiff in the amount of $76,322.78, pursuant to Section 29 of the Worker's Compensation Law.   By letter dated October 17, 2006, the lienholder consented to the settlement and agreed to accept $49,757.66 in full satisfaction of its lien.   However, there now appears to be a dispute as to the terms of the settlement.

Defendant maintains that it was made clear to plaintiff's attorney during settlement negotiations that a material condition of the settlement was that the Worker's Compensation lien would be satisfied out of the settlement proceeds and that defendant would issue a check directly to the lienholder to ensure the lien was satisfied.   Although this was vehemently denied during oral argument, it should be noted that plaintiff's attorney in his affirmation in opposition to the motion never disputes defendant's attorney's repeated representations that resolution of the lien was specifically discussed during settlement negotiations and was a material condition of the settlement.   However, on November 3, 2006, plaintiff sent defendant a demand for payment, a general release, a stipulation discontinuing the action and an affidavit from plaintiff, in accordance with CPLR § 5003-a (b).  The affidavit acknowledged the Worker's Compensation lien and stated that “I dispute the total amount of the lien asserted of $49,757.66 under the Kelly formula but have authorized my attorneys to hold $49,757.66 in escrow pending a judicial determination of same.”   The letter further stated that if payment is not received within ninety days, plaintiff would seek to enter a judgment for the agreed upon amount together with interest, costs and disbursements.   Defendant's counsel alleges that upon receipt of said documents, he immediately contacted plaintiff's counsel by telephone and indicated that the documents were unsatisfactory and did not comply with the terms of the settlement.   Defendant's counsel claims that plaintiff's counsel assured him that he would contact the lienholder and attempt to resolve the dispute.   Plaintiff's counsel denies that conversation ever took place.   By letter dated March 1, 2007, plaintiff again indicated that he would proceed to obtain a judgment if he did not receive payment.   Defendant's counsel alleges that he promptly responded by letter dated March 6, 2007, wherein he stated that upon receipt of the proper documents, defendant would remit payment.

Plaintiff's counsel denies ever receiving the March 6th letter.   On April 10, 2007, after ninety days had elapsed and payment was not received, plaintiff served defendant with a Notice of Settlement of Judgment.   See CPLR § 5003-a (b).  On April 20, 2007, a judgment was entered in the amount of $141,837.75, representing the settlement amount plus interest, costs and disbursements.   Defendant now moves to vacate said judgment.

 CPLR § 5003-a (b) provides that “when an action to recover damages has been settled and the settling defendant is a municipality or any subdivision thereof, or any public corporation that is not indemnified by the state, it shall pay all sums due to any settling plaintiff within ninety days of tender, by the settling plaintiff to it, of duly executed release and a stipulation discontinuing action executed on behalf of the settling plaintiff.”  CPLR § 5003-a (e) provides that “in the event that a settling defendant fails to promptly pay all sums as required by subdivisions (a), (b), and (c) of this section, any unpaid plaintiff may enter judgment, without further notice, against such settling defendant who has not paid.”   However, where there is a lien with a right of subrogation to collect the amount of the lien directly from the defendant, the general release and stipulation of settlement must provide for release of said lien or the release is defective.   See Liss v. Brigham Park Cooperative Apartments Sec. No. 3, Inc., 264 A.D.2d 717, 694 N.Y.S.2d 742 (2d Dept. 1999).

 Although plaintiff sent a release and stipulation of discontinuance to defendant, the release did not provide for satisfaction of the lien.   Moreover, the lienholder never agreed to allow plaintiff's attorney to hold the money in escrow or serve as escrow agent.   See Grossman v. Fieland, 107 A.D.2d 659, 483 N.Y.S.2d 735 (2d Dept. 1985);  55 N.Y. Jur.2d Escrows § 3.   Therefore, defendant is subject to an independent lawsuit by the lienholder.   Finally, the release given by plaintiff did not state that defendant would be held harmless or indemnified for all costs and expenses, including attorney's fees, if the lienholder decided to exercise its subrogation rights against defendant.   Therefore, the release was invalid.   See Liss v. Brigham Park Cooperative Apartments Sec. No. 3, Inc., supra.   Consequently, the judgment must be vacated.   Unless and until a motion to vacate the settlement and restore the case to the trial calendar is made, the case will remain deemed settled.   Upon plaintiff's tendering of a valid release, defendant will be required to make payment within the time frame set forth in the CPLR.

In view of the foregoing, defendant's motion is granted to the extent that the judgment is vacated.   Defendant's request for attorney's fees and costs is denied.

The foregoing shall constitute the Decision and Order of the Court.

DONALD SCOTT KURTZ, J.