Opinion
1579/08.
Decided March 31, 2009.
These two small claims actions involve the application and interpretation of Civil Court Act § 1812. There does not appear to be any reported cases in reference to this statute. Claimant, Kim Griffin, and claimant, Richard Marks, each commenced a small claims action against the defendant, Crutchfield Associates PLLC (SCR 1579/08 and SCR 1580/08 respectively), seeking treble damages as provided for under CCA § 1812. The defendant defaulted in appearing and answering. Each matter was heard as an inquest before an arbitrator. After the hearing, the arbitrator inquired of the court as to whether or not the small claims part had jurisdiction if the award of treble damages exceeded the $5,000.00 monetary jurisdiction of that part (CCA § 1801).
Claimant Griffin had previously obtained a judgment in Richmond County against Crutchfield Associates in the amount of 1,569.00 (SCR 1149/08). The judgment was docketed on October 2, 2008. Griffin had sued for "breach of contract 1/24/08-8/26/08." Claimant Marks had previously obtained a judgment in Richmond County against Crutchfield Associates in the amount of $5,020.00 (SCR 1150/08). Marks had sued for "breach of contract and failure to return property on 1/24/08." Both judgments include costs and disbursements. In the current actions, each claimant has submitted proof of their respective judgment against Crutchfield Associates as well as proof of a judgment docketed in Kings County (SCK 3985/05) dated December 29, 2005 against Crutchfield Associates in the amount of $734.00. The index of city-wide judgment submitted by the claimants to establish the third judgment shows that the Brooklyn judgment was returned "unsatisfied" on March 20, 2006.
New York City Civil Court Act § 1812 provides:
Enforcement of small claims judgments.
(a) The special procedures set forth in subdivision (b) hereof shall be available only where:
1. there is a recorded judgment of a small claims court; and
2. (i) the aforesaid judgment resulted from a transaction in the course of the trade or business of the judgment debtor, or arose out of a repeated course of dealing or conduct of the judgment debtor, and (ii) there are at least two other unsatisfied recorded judgments of a small claims court arising out of such trade or business or repeated course of dealing or conduct, against that judgment debtor; and
3. The judgment debtor failed to satisfy such judgment within a period of thirty days after receipt of notice of such judgment. Such notice shall be given in the same manner as provided for the service of a summons or by certified mail, return receipt requested, and shall contain a statement that such judgment exists, that at least two other unsatisfied recorded judgments exist, and that failure to pay such judgment may be the basis for an action, for treble the amount of such unsatisfied judgment, pursuant to this section.
(b) Where each of the elements of subdivision (a) of this section are present the judgment creditor shall be entitled to commence an action against said judgment debtor for treble the amount of such unsatisfied judgment, together with reasonable counsel fees, and the costs and disbursements of such action, provided, however, that in any such action it shall be a defense that the judgment debtor did not have resources to satisfy such judgment. The failure to pay a judgment obtained in an action pursuant to this section shall not be the basis for another such action pursuant to this section.
(c) Where the judgment is obtained in an action pursuant to subdivision (b), and arises from a business of the defendant, the court shall, in addition to its responsibilities under this article, advise the attorney general in relation to his authority under subdivision twelve of section sixty-three of the executive law, and if such judgment arises from a certified or licensed business of the defendant, advise the state if local licensing or certifying authority.
Issues Presented:
Because this is a seldom used section of the small claims act, the court is required to analyze the necessary elements of the treble damages cause of action.
1. Has each claimant established that the "judgment resulted from a transaction in the course of trade or business of the judgment debtor, or arose out of a repeated course of dealing or conduct of the judgment debtor" (CCA § 1812 (a)(2)(i))? As a practical matter how is a claimant to establish this?
The pleading issued by the small claims part is called a "Notice of Claim and Summons to Appear." The notice contains "a statement of his cause of action by the claimant . . . to the clerk, who shall reduce the same to a concise, written form. . . ." (CCA § 1803). Is the mere fact that there are several small claims judgments against a defendant sufficient to meet this requirement? The answer must be no. Only judgments which meet the criteria set forth in the statute can be used. Once an action is commenced pursuant to this section, how can the court determine if the judgment resulted from a covered transaction when limited to an examination of the "statement of his cause of action" entered on the "Notice of Claim and Summons to Appear" which is merely a summary of the claimant's allegations and which may have been improperly classified by the clerk completing the form along with litigant. Further, how can this information be gleaned from examination of the judgment role only? There is nothing in the judgment role record from which a court could reasonably conclude that a small claims action brought pursuant to this section arose out of the course or conduct of the defendant's business. Additionally each of the claimant's judgments has the defendant at a Manhattan address, while the Brooklyn judgment refers to a King's County address. Because these are judgments on default taken before an arbitrator pursuant to the small claims procedure, there is not even a record for a court to examine from which to make a determination as to whether the actions arise out of the "trade or business" or from a "course of dealing or conduct" of the judgment debtor-defendant.
The court notes that the legislature has not made this section gender neutral.
Claimants herein have attached copies of their respective Notice of Claim and Summons to Appear forms which on their face would seem to meet the criteria of CCA § 1812, however, the third judgment from Brooklyn Civil Court is merely designated as a judgment against this defendant. It is impossible to conclude that this third judgment meets the statutory requirements.
2. Has each claimant established that the judgment debtor failed to satisfy such judgment within a period of thirty days "after receipt of notice of such judgment" (CCA § 1812(a)(3))?
The statute states that the required "notice" shall be made "in the same manner as provided for service of a summons or by certified mail, return receipt requested, . . ." This is an additional notice from the claimant. It is not the notice of judgment issued by the small claims part after the claimant was successful in the underlying action because that "notice of judgment" is served on the defendant by the clerk only by regular mail. It is also unclear as to whether the statute when referring to "service of a summons" means service of the small claims Notice of Claim and Summons or to service of a summons as provided in Article 3 of the CPLR. It must be concluded that the section is not referring to the method of service used to commence a small claims action because that is done by "the sending of a notice of such claim by ordinary first class mail and certified mail with return receipt requested" (CCA § 1803). There does not appear to be any similar liberal method for service of process in either the CPLR, the RPAPL or the CCA. It would seem if the legislature intended that this additional notice was to be served in the same manner as required for commencement of a small claims action, it would have specifically cited the small claims act. What makes this notice requirement strange is that it appears to authorize either CPLR service or service of the notice in a manner which would be insufficient to even commence a small claims action; that is by certified mail return receipt service only. The use of only certified mail return receipt requested for this predicate notice may be approaching Pluto in the due process solar system.
It should be pointed out that the small claims act makes no provision for service of the Notice of Claim and Summons by any alternate means if either mailing authorized by CCA § 1803 is returned as undeliverable. The practice is for the clerk to instruct the claimant to effectuate service pursuant to the CPLR. There is absolutely no statutory authority for this procedure. It would seem that because the small claims part has its own rules of service and procedure, application of the more stringent CCA and CPLR requirements should be specifically referenced in the statute rather than being the presumed default procedure. In order to insure that due process requirements are met the legislature should clarify the procedure to be used when the only method of service set forth in the statute is unsuccessful. This is necessary because the obtaining of a small claims judgment is a valid judgment of record which may affect a person's credit worthiness. In addition it can trigger a treble damages claim and notification of the attorney general and licensing authorities under this section, something apparently not permitted in any other kind of litigation.
If the reference CCA § 1812(a)(3) is to service of a summons as in a non-small claims action, then CCA § 403 permits service to be made in the same manner as in supreme court. None of the methods of service under CPLR Article 3 used for Supreme Court actions permits service of a summons solely by certified mail return receipt requested. There is no provision in CCA § 1812 for an alternative method of service if the certified mailing of the notice of judgment is returned for any reason. Presumably then the claimant would then have to effectuate CPLR service of the notice of judgment, a more restrictive method considering that CPLR service is not needed for service of the underlying small claims complaint.
Further the "notice" must contain a statement that a judgment exists and that there are at least two other unsatisfied recorded judgments, and that the failure to pay such judgment may be the basis for an action seeking treble damages.
In this case, there is no proof that either claimant served the required notice and therefore neither is in compliance with CCA § 1812(a)(3). To prevail each claimant must have served such a notice and establish that the notice sets forth the required information as to the three unsatisfied judgments. In addition, as part of each claimant's prima facie case, proof of service of the notice must be submitted.
3. Does the small claims part have jurisdiction to hear a claim for treble damages brought pursuant to CCA § 1812?
The small claims part has jurisdiction to hear cases where the amount in controversy is $5,000.00 or less. Claimant Griffin has a judgment in the amount of $1,569.00 which in an action for treble damages would total $4,707.00 well within the jurisdiction of the small claims part. Claimant Marks has a judgment for $5,020.00 which in a treble damages action would total in excess of $15,000.00 an amount which far exceeds the monetary jurisdiction of the small claims part. As noted above both judgments include statutory costs.
The statute as written does not specify whether this action may be brought in the small claims part if the amount sought as treble damages exceeds $5,000.00. As stated above, there does not appear to be any published cases interpreting this section of the small claims act. The argument for allowing the action in the small claims part is that it is a statutory penalty existing only by virtue of the small claims act. On the other hand, in support of the position that day civil court is the proper forum, there are reported case interpreting Real Property Actions and Procedures Law § 853. This statute permits treble damages if a person has been forcibly or unlawfully put out of real property. In Herbert v Jerome, 14 Misc 3d 141 (A), (2007), the Appellate Term held that seeking compensatory damages of $25,000.00 and treble damages of $75,000.00 under RPAPL § 853 was an action which must be brought in Supreme Court because the treble damages claim is beyond the monetary jurisdiction of the court and the court lacks subject matter jurisdiction (See also, Kiros v St.Stephen's Bible College Realty Management, NYLJ, 9/26/01, p. 18, col. 6). There is a difference between the RPAPL § 853 action and one brought under CCA § 1812. In the RPAPL proceeding there are two causes of action. The first is for damages for the unlawful eviction while the second, for treble damages, only comes into play if the plaintiff would be successful on the unlawful eviction claim. The small claims generated action however exists separately from the underlying initial action and cannot even be commenced unless and until there is a judgment and the claimant finds two other judgments which meet the statutory mandate. You cannot combine the underlying action with the treble damages action pursuant to CCA § 1812, while other statutory treble damages claims are usually part of the underlying action and may be lost if not raised in the primary litigation.
There is another practical problem with permitting this treble damages action. Because small claims litigants almost always do not have counsel, it is not uncommon that when the claimant is paid, no satisfaction of judgment is filed. Thus what appears on the court's record as an unsatisfied judgment, may in fact have been paid, making the new action improper.
The action of Griffin may proceed in the small claims part because the total amount of the treble damages claim is less than the jurisdictional limit of the court of $5,000.00. The action of Marks must be dismissed and recommenced in day civil court because the amount of the treble damages claim exceeds $5,000.00.
4. If either claimant prevails on his or her claim, must the court report the defendant to the attorney general and advise the state or local licensing or certifying authority?
The language of CCA § 1812(c), provides that if the judgment is obtained under this section "the court shall"(emphasis added) advise the attorney general and the licensing authorities. It appears that the defendant in this matter is an attorney at law. Should each claimant prevail the court would be required to notify the appellate division of the existence of these judgments. The reporting requirement really does not make sense if it is triggered only if a claimant prevails on the treble damages claim. Is not the real reason to report the activity the existence of multiple unsatisfied judgments arising from the conduct of the defendant's business and not the claimant's success in the treble damages action? Under this scenario a defendant could have one hundred unsatisfied judgments but if no one brings an action under CCA § 1812, neither the attorney general nor any licensing authority will receive notice of the potentially unlawful conduct. Perhaps another method can be created to achieve this end through the use of a computer search of the judgment records with a reporting to the licensing authorities. Also, who is to determine which licensing authority is to receive notice? Is the claimant to make an allegation in the treble damages complaint listing who is the licensing authority for the defendant to be notified? How is the court to determine this especially if the judgment debtor defaults?
Further complicating this matter is what is meant by "the court" being required to notify the attorney general and the licensing authority in light of the fact that the vast majority of small claims cases are decided by an arbitrator after trial or inquest and not by a judge. Is it the obligation of the individual arbitrator to make the notification or if a judge decided the case-the judge, or is it the clerk? The statute is unclear. In any case as pointed out above, where is that person to get the information as to whom notification is to be given? If it is the clerk's obligation, and the purpose of the statute is to have licensing authorities control unprofessional licensees, then why even bother with this cause of action when the clerk could just report the judgment debtors directly and let the attorney general pursue them.
The legislature should rethink this process.
CONCLUSION:
The claim of each claimant is dismissed without prejudice to renew. Each claimant must serve a proper notice with proof of service. Claimant Marks must bring his action in day civil court and not the small claims part. Claimant Griffin may bring her action either in day civil court or in the small claims part. Both claimants must verify that the Brooklyn judgment is against the same defendant and that the cause of action from which it arose meets the statutory definition.
This constitutes the decision and order of the Court.
Exhibits, if any, will be available at the office of the clerk of the court 30 days after receipt of a copy of this decision.