| Klee v Americas Best Bottling Co., Inc. |
| 2010 NY Slip Op 06361 [76 AD3d 544] |
| August 10, 2010 |
| Appellate Division, Second Department |
| Lewis Klee, Appellant, v Americas Best Bottling Co., Inc.,et al., Respondents. |
—[*1] Lewis Brisbois Bisgaard & Smith, LLP, New York, N.Y. (Gregory S. Katz and JenniferOxman of counsel), for respondents.
In an action to recover damages for personal injuries, the plaintiff appeals from an order ofthe Supreme Court, Kings County (Kurtz, J.), dated October 27, 2009, which granted thedefendants' motion, inter alia, to vacate a judgment of the same court entered August 11, 2009pursuant to CPLR 5003-a (e).
Ordered that the order is reversed, on the law, with costs, the defendants' motion is denied,and the judgment is reinstated.
The plaintiff was crossing the street within a crosswalk when he was struck by a vehicleowned and operated by the defendants. More than two years after the accident, on July 14, 2009,the plaintiff agreed to settle his personal injury claim for the sum of $400,000. It is undisputedthat the plaintiff's attorney promptly mailed a general release and a stipulation of discontinuanceto the defendants' attorney, and that these settlement documents were received on July 15, 2009.The settlement documents were accompanied by a cover letter in which the plaintiff's attorneydisclosed his taxpayer identification number. However, the defendants also requested, on behalfof their insurance carrier, that the plaintiff's attorney certify that he had provided his correcttaxpayer identification number on an Internal Revenue Service Form W-9 (hereinafter FormW-9). Form W-9 facilitates compliance with the Internal Revenue Code by requiring therecipient of certain types of payments to certify his or her taxpayer identification number to theentity making payment, and to indicate whether he or she is subject to backup withholding. Theplaintiff's attorney did not initially comply with the defendants' request to complete Form W-9.
When the defendants failed to pay the sum due under the settlement agreement within 21days of tender of the release and stipulation of discontinuance, the plaintiff sought to enterjudgment against them in accordance with CPLR 5003-a. On August 11, 2009, a judgment wasentered in favor of the plaintiff in the agreed-upon settlement amount, together with interest,costs, and disbursements. Shortly thereafter, the defendants moved, inter alia, to vacate thejudgment, arguing that the Internal Revenue Code required the plaintiff's attorney to comply withtheir request [*2]for a completed Form W-9, and that the plaintiffhad procured the judgment by misrepresenting that he had provided them with all necessarysettlement documents. While the motion was pending, the plaintiff's attorney completed FormW-9, and the defendants paid the sum of $400,000 required by the settlement agreement. Theplaintiff opposed vacatur of the judgment, contending that the defendants' failure to pay thesettlement proceeds within 21 days after his tender of the release and stipulation ofdiscontinuance entitled him to recover interest, costs, and disbursements pursuant to CPLR5003-a. The plaintiff also noted that his attorney had provided the defendants with his taxpayeridentification number in the cover letter accompanying the settlement documents, and arguedthat an attorney receiving "gross proceeds" had no obligation to certify his or her taxpayeridentification number to the payor on Form W-9. The Supreme Court granted the defendants'motion, relying upon the decision of the Appellate Division, First Department, in Cely v O'Brien & Kreitzberg (45AD3d 368 [2007]) to conclude, in essence, that the plaintiff's attorney was required toprovide the defendants with a completed Form W-9 as a condition precedent to payment of thesettlement proceeds. We disagree.
CPLR 5003-a was enacted in 1992 to encourage prompt payment of settlements (see Cunha v Shapiro, 42 AD3d95, 101 [2007]; Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B,CPLR C5003-a, at 121). To this end, the statute requires any settling defendant, subject tocertain exceptions not applicable here (see CPLR 5003-a [b], [c], [d]), to pay all sumsdue to any settling plaintiff "within twenty-one days of tender, by the settling plaintiff to thesettling defendant[s], of a duly executed release and a stipulation discontinuing [the] actionexecuted on behalf of the settling plaintiff" (CPLR 5003-a [a]). Where, as here, the release andstipulation of discontinuance are tendered by mail, the 21-day period is measured from receipt ofthe documents (see Leipold v ArnotOgden Med. Ctr., 46 AD3d 1299, 1300 [2007]; Cunha v Shapiro, 42 AD3d at101). If the settling defendant fails to pay the sum due under the settlement agreement within 21days of tender of the required documents, the statute authorizes the plaintiff to enter, withoutfurther notice, a judgment in the amount of the settlement, which is to include interest, costs, anddisbursements (see CPLR 5003-a [e]).
Here, the plaintiff fulfilled his obligations under CPLR 5003-a by tendering a duly executedrelease and stipulation of discontinuance to the defendants' attorney. Neither CPLR 5003-a, northe parties' stipulation of settlement, imposed any additional requirement on the plaintiff or hisattorney. Regardless of whether the defendants' request that the plaintiff's attorney completeForm W-9 certifying his tax identification number was reasonable, as they contend, there is nostatutory authority for elevating the completion of this form to a condition precedent for paymentof the sum due in settlement of a personal injury claim (see In re Emergency Beacon Corp.,52 BR 828, 830 [1985]; cf. Liss v Brigham Park Coop. Apts. Sec. No. 3, 264 AD2d717 [1999]).
Although we are aware that the Appellate Division First Department, reached a contraryconclusion in Cely v O'Brien &Kreitzberg (45 AD3d 368 [2007]), we do not find the rationale of that case persuasive.Compensation for personal injuries does not generally constitute gross income (see 26USC § 104 [a] [2]), and the defendants made no showing that the portion of the personalinjury settlement which the plaintiff's attorney may be entitled to retain as a legal fee is actually a"reportable payment" subject to the reporting requirements of the Internal Revenue Code (see26 USC § 3406). Moreover, even assuming that the defendants' insurance carrier ismandated to report payment of the settlement proceeds to the plaintiff's attorney, the defendantshave not demonstrated that the provision of Form W-9 is the sole means by which the carrier cancomply with its reporting obligations. Under these circumstances, we decline to effectivelyamend the terms of the parties' stipulation of settlement by conditioning payment of thesettlement proceeds upon completion of the form. Granting settling defendants the unilateralright to withhold payment in these circumstances would significantly undercut the statutory goalof CPLR 5003-a to ensure the prompt payment of settlement proceeds upon tender of thestatutorily prescribed documents. Accordingly, the defendants' failure to timely pay the sum dueunder the settlement agreement entitled the plaintiff to enter judgment including interest, costs,and disbursements pursuant to CPLR 5003-a (e) (see Leipold v Arnot Ogden Med. Ctr., 46 AD3d 1299 [2007]; Sealey v Jamaica Buses, Inc., 39AD3d 526, 527 [2007]; Hadier v Remington Place Assoc., 302 AD2d 428 [2003]).[*3]
The defendants' contention that this appeal is barred bythe doctrine of accord and satisfaction because the plaintiff cashed the settlement check whiletheir motion to vacate the judgment was pending is without merit (see Merrill LynchRealty/Carll Burr, Inc. v Skinner, 63 NY2d 590, 596 [1984]; Pepe v Tannenbaum,279 AD2d 620 [2001]). Skelos, J.P., Eng, Hall and Lott, JJ., concur.