Van Nostrand v. Froehlich

44 A.D.3d 54, 844 N.Y.S.2d 293

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: July 17, 2007
• Status: Published

Opinions

OPINION OF THE COURT

Dillon, J.

This appeal presents the issue of when prejudgment interest is to be computed under CPLR 5002 in an automobile-related personal injury action where the serious injury threshold is an issue. We have not previously discussed at the appellate level the interplay between a plaintiffs entitlement to prejudgment interest under CPLR 5002 and the threshold injury requirements of Insurance Law § 5102 (d). For reasons set forth below, we find that prejudgment interest is to be calculated from the date common-law liability attaches in favor of the plaintiff, either by default, summary judgment, or bifurcated liability trial, even though the plaintiff has yet to establish the existence of a serious injury under the Comprehensive Motor Vehicle Insurance Reparations Act (Insurance Law art 51 [hereinafter the No-Fault Law]).

Relevant Facts and Prior Proceedings

The vehicle driven by the plaintiff, Karen L. Van Nostrand, was rear-ended on September 2, 1999, while stopped at a red light on the eastbound portion of Hempstead Turnpike in East Meadow, Long Island. The offending vehicle was operated at the time of the collision by the defendant Rosario Froehlich. The Supreme Court issued an order dated March 8, 2002, granting the plaintiff summary judgment on the issue of common-law liability, and directed that there be a trial on the issue of damages. The order was served on counsel for the Froehlichs with notice of entry on April 17, 2002.

At the trial on the issue of damages, a jury awarded Van Nostrand $150,000 for past pain and suffering and $400,000 for future pain and suffering, as reflected by a judgment entered by the clerk of the Supreme Court, Nassau County, on January 17, 2004. On appeal, this Court, inter alia, ordered a new trial on the issue of damages unless Van Nostrand filed a stipulation agreeing to reduce the damages to the sums of $100,000 for past pain and suffering and $200,000 for future pain and suffering (see Van Nostrand v Froehlich, 18 AD3d 539 [2005]). Van Nostrand agreed to the reduction in damages by stipulation executed June 8, 2005, and submitted a proposed amended judgment with notice of settlement in accordance with this Court’s decision and order. The interest on the verdict, as reduced by this Court, computed at 9% from April 17, 2002, totaled $7,150. The amended judgment was entered June 21, 2005.

By order to show cause dated July 19, 2005, the Froehlichs moved to modify the amended judgment. The Froehlichs argued that prejudgment interest had been improperly computed from the common-law liability finding of April 17, 2002, and that in automobile actions such as this, interest should instead be computed from the date that Van Nostrand established both liability and the existence of a serious injury.¹

The Supreme Court granted the Froehlichs’ motion to correct the interest contained in the amended judgment. A second amended judgment was entered December 23, 2005, reflecting interest measured from the date of Van Nostrand’s damages verdict. The difference in the interest award was $3,500.

Van Nostrand appeals. We reverse the second amended judgment entered December 23, 2005, deny the motion, and reinstate the amended judgment entered June 21, 2005.

CPLR 5002 and Its Interpretive Case Law

The statute that entitles plaintiffs to prejudgment interest in civil proceedings is CPLR 5002. It is not to be confused with CPLR 5001, which speaks to preverdict interest for breach of contract measured from the date of breach (see De Long Corp. v Morrison-Knudsen Co., 14 NY2d 346, 348 [1964]; 155 Henry Owners Corp. v Lovlyn Realty Co., 231 AD2d 559, 560 [1996]) and CPLR 5003, which speaks to postjudgment interest measured, of course, from when a monetary claim is reduced to judgment (see Pay v State of New York, 87 NY2d 1011, 1013 [1996]; Matter of Matra Bldg. Corp. v Kucker, 19 AD3d 496 [2005]).

CPLR 5002 provides that interest shall accrue “from the date the verdict was rendered ... to the date of entry of final judgment.” The purpose of the statute is not to be punitive as against defendants (see Love v State of New York, 78 NY2d 540, 544 [1991]). Rather, the intent of the statute is to merely indemnify plaintiffs for the cost of the defendants having the use of another person’s money between the time it is determined that compensation is due until judgment (see Love v State of New York, supra; Trimboli v Scarpaci Funeral Home, 37 AD2d 386, 389 [1971], affd 30 NY2d 687 [1972]; Bermeo v Atakent, 241 AD2d 235, 247 [1998]; Malkin v Wright, 64 AD2d 569, 570 [1978]).

The language of CPLR 5002 measures interest from “verdict . . . report or decision” to the date of the entry of a final judgment. The terms “verdict,” “report” or “decision” generally refer to the date that liability is established, even though the damages verdict is reached at a later time (see Rohring v City of Niagara Falls, 84 NY2d 60, 68 [1994]; Love v State of New York, supra at 542). Courts engage, in effect, in a legal fiction that damages are known and become a fixed obligation from the moment liability is resolved (see Rohring v City of Niagara Falls, supra at 68). Indeed, CPLR 5002 contains no language requiring the amount of damages to be ascertained for interest to accrue (see CPLR 5002; Gunnarson v State of New York, 70 NY2d 923, 925 [1987]; Garigen v Morrow, 303 AD2d 956 [2003]). Interest accrues independent of whether either party causes a delay in reaching the damages trial (see Love v State of New York, supra at 544; Sawtelle v Southside Hosp., 305 AD2d 659, 660 [2003]; Siegel, NY Prac § 411 [3d ed]).

The plaintiffs’ entitlement to compensation is determined at three potential times during litigations, triggering interest under CPLR 5002. The first is when the defendant is held liable to the plaintiff as a result of a bifurcated liability trial, subject to the conduct of a damages trial. When trials are bifurcated, prejudgment interest is computed from the date of the liability finding (see Love v State of New York, supra at 544; Gunnarson v State of New York, supra at 924; Trimboli v Scarpaci Funeral Home, supra at 389; Malkin v Wright, supra at 570). The second circumstance is when the defendant is found liable to the plaintiff by means of summary judgment under CPLR 3212 (see Lifshits v Variety Poly Bags, 18 AD3d 622, 624 [2005], lv dismissed 5 NY3d 847 [2005]; Eisenberg v Rockland County, 19 AD3d 536 [2005]; 8B Carmody-Wait 2d § 63:89 [“What constitutes a verdict, report, or decision”]). The third circumstance where interest can accrue under CPLR 5002 is when a judgment is awarded in favor of a plaintiff upon default of the defendant in failing to appear and answer, subject to an inquest to determine damages, or from when a defendant’s answer is stricken (see Abbas v Cole, 44 AD3d 31 [2007] [decided herewith]; Diane v Ricale Taxi, Inc., 26 AD3d 232 [2006] [personal injuries incurred in automobile accident]; Gordon v City of New York, 188 Misc 2d 246, 249 [2001]).

The Serious Injury Threshold—a Question of Liability or Damages?

In Denio v State of New York (7 NY3d 159 [2006]), the plaintiff incurred, as a result of his automobile accident, traumatic brain injury and multiple fractures of the jaw, face, pelvis, and ankles. There could never be any question that the plaintiff in Denio sustained injuries meeting the serious injury threshold of Insurance Law § 5102 (d). The trial was bifurcated, and interest under CPLR 5002 was to be computed, according to the Court of Appeals, from the date of the liability verdict. No consideration was given by the Court of Appeals to whether the interest computation should be delayed to the finding of the trier of fact that a serious injury had been incurred. However, the existence of a “serious injury” under the Insurance Law is not always as clear as it was in Denio, as there is no shortage of automobile cases where the issue of serious injury falls into an arguably gray area.

The leading authority on when prejudgment interest is to be computed under CPLR 5002 is Love v State of New York (supra). In Love, the Court of Appeals held that prejudgment interest is to run from the point in a litigation “when the plaintiffs right to be compensated for the damages he or she sustained becomes fixed in law” (Love v State of New York, supra at 544). The Court of Appeals then explained that the right to compensation becomes fixed “[i]n a bifurcated trial . . . when the verdict holding the defendant liable is rendered,” with the “only remaining question [being] the precise amount that is due” (Love v State of New York, supra at 544).

The essence of whether prejudgment interest should be computed from a finding of common-law liability in favor of the plaintiff, or from a finding of serious injury, is therefore inescapably dependent upon whether proof of serious injury is considered by law to be “liability” or “damages.” If a question of liability, the running of prejudgment interest would need to abide the plaintiffs proof that a serious injury was incurred. If the serious injury threshold is a question of damages, prejudgment interest would compute from the establishment of bifurcated liability, because the Court of Appeals has expressly said so (see Love v State of New York, supra at 544; accord Demo v State of New York, supra at 163).

There has been a lack of unanimity among the four departments of the Appellate Division as to whether serious injury is a matter of liability or damages, which necessarily implicates CPLR 5002. The differences between the departments on this issue are not found in decisions addressing CPLR interest awards. Instead, the split between the departments is exposed in the automobile cases dealing with whether or not plaintiffs who have been granted summary judgment on liability are required to nonetheless establish serious injury at their damages trials. The Second and Third Departments took one position on this issue, while the First and Fourth Departments took a different position, although more recently the First Department appears to have switched sides and has left the Fourth Department standing alone.

This Court has determined that the serious injury threshold is decidedly an issue of damages, not liability. The seminal cases are Perez v State of New York (215 AD2d 740 [1995]) and Zecca v Riccardelli (293 AD2d 31 [2002]). In Perez, the trial court dismissed the plaintiffs complaint at the conclusion of the plaintiffs evidence at a bifurcated liability trial on the ground that the plaintiff failed to prove that he had sustained a serious injury under Insurance Law § 5102. This Court reversed, holding that “the liability phase of a bifurcated trial is not the proper juncture at which to adjudicate issues regarding the severity of . . . injuries” (Perez v State of New York, supra at 741). The Court noted that pursuant to PJI 1:35A (Supp), juries in liability trials are routinely instructed to apportion fault among parties and to determine proximate cause without regard to injuries or medical treatment (id.). This Court specifically held that the extent of plaintiffs’ injuries, and whether such injuries qualify as serious under the Insurance Law, “should generally be left for the damages phase of the trial” (id. at 742).

Seven years later, in Zecca v Riccardelli (supra), this Court held that when a finding is rendered in favor of a plaintiff on liability by means of summary judgment, even upon default of the defendant in opposing the motion, the plaintiff is nevertheless required to establish the existence of a serious injury at the

trial on damages. The Court presented a more detailed analysis of its reasoning in Zecca than it did in Perez. In Zecca, this Court noted that an overriding purpose of the No-Fault Law was to eliminate from courts common-law tort actions involving minor personal injuries that fall beneath a defined threshold (see e.g. Licari v Elliott, 57 NY2d 230, 236 [1982] [minor, mild or slight limitations of use of body functions or systems are insignificant]). The courts were responsible for vetting serious injury automobile cases by application of basic summary judgment principles to avoid unnecessary jury trials where the injury is clearly minor (see Zecca v Riccardelli, supra at 33-34, citing Licari v Elliott, supra at 237). Viewed in this context, this Court held that if summary judgment in favor of plaintiffs on default automatically satisfied the requirements of the serious injury threshold, courts would be abdicating their responsibility under the No-Fault Law by allowing recoveries for minor injuries (see Zecca v Riccardelli, supra at 34-35). As a result, the only logical conclusion under the No-Fault Law is to treat serious injury as quintessentially an issue of damages (see also e.g. Abbas v Cole, supra; Sheehan v Marshall, 9 AD3d 403, 404 [2004]; Taylor v Dell Coffee Servs., 306 AD2d 460, 460-461; Canfield v Beach, 305 AD2d 440, 442 [2003]; Coumbes v Taylor, 298 AD2d 351, 352 [2002]).²

If anything, this Court’s discussions in Perez and Zecca failed to address an additional conceptual reason that the serious injury threshold is properly categorized as a question of damages, not liability. The well-accepted reasons for the enactment of the No-Fault Law were to promote the prompt resolution of injury claims, limit costs to insurers, and alleviate unnecessary burdens on the courts (see Pommells v Perez, 4 NY3d 566, 570-571 [2005], citing Comprehensive Automobile Insurance Reparations Act, added by L 1973, ch 13; Governor’s Mem approving L 1973, ch 13, 1973 McKinney’s Session Laws of NY, at 2335). To control the pressing volume of automobile litigation within the state, the Legislature divided the universe of claims arising out of the use and operation of motor vehicles into two broad categories objectively defined in Insurance Law § 5102 (d); namely, plaintiffs whose injuries qualify as “serious,” and hence, are compensable, and plaintiffs whose injuries fall short of being “serious” and which are not compensable (see Insurance Law § 5102 [d]; 5104; Licari v Elliott, supra). The determination of whether a particular plaintiff establishes a serious injury, or fails to do so, necessarily involves an examination of the parties’ evidence on damages. Such evidence is independent of the fault-based issues present in a bifurcated liability context such as duty, breach of duty, and proximate causality between acts or omissions on the one hand and an accident on the other. In other words, a plaintiffs injuries meet or fall short of the established threshold regardless of who is at fault behind the wheel.

Decisions of the Third Department also treat the serious injury threshold as an issue of damages (see e.g. Kelley v Balasco, 226 AD2d 880 [1996]; Ives v Correll, 211 AD2d 899 [1995]).

In 2001, the First Department took an opposing view in Porter v SPD Trucking (284 AD2d 181 [2001]) and Maldonado v DePalo (277 AD2d 21, 22 [2000]). Porter held that a default judgment necessarily resolved the question of serious injury in favor of the plaintiff subject to defendants’ right to contest the amount of plaintiffs’ “real damages” at inquest (see Porter v SPD Trucking, supra at 181). Similarly, Maldonado held that summary judgment favoring plaintiffs necessarily decides the serious injury threshold in the plaintiffs’ favor (see Maldonado v DePalo, supra at 22). However, not long after this Court’s determination in Zecca v Riccardelli (supra), the First Department overruled its own holdings in Porter and Maldonado in 2003 with its decision in Reid v Brown (308 AD2d 331 [2003]). By virtue of Reid v Brown, the First Department now. holds that motor vehicle plaintiffs who obtain summary judgment on “fault” liability without opposition from defendants must still separately establish the existence of serious injuries (see Reid v Brown, supra at 332) during the damages phase of the litigation. Presumably, since Reid overruled both Porter and Maldonado, the same reasoning should now apply in the First Department to actions where the plaintiffs obtain judgment by default.

The Fourth Department walks a fine line apart from the other departments. Successful fault-based motions for summary judgment in favor of motor vehicle plaintiffs are considered partial summary judgments on the issue of “negligence,” as distinguished from “liability” which includes both negligence and serious injury (see Ruzycki v Baker, 301 AD2d 48, 51 [2002]). Parties in the Fourth Department who concede “liability” in motor vehicle actions therefore waive the opportunity to contest serious injury issues (see Simone v City of Niagara Falls, 281 AD2d 923 [2001]). Under this rationale, the Fourth Department measures prejudgment interest under CPLR 5002 as running from the plaintiffs establishment of liability, meaning negligence, causation, and serious injury (see Manzano v O’Neil, 298 AD2d 829, 830 [2002];³ DePetres v Kaiser, 244 AD2d 851, 852 [1997]).

We hold, consistent with our prior rulings in Perez v State of New York (supra) and Zecca v Riccardelli (supra) that serious injury is quintessential^ an issue of damages, not liability. In the event a plaintiff at a damages trial fails to sustain the burden of establishing serious injury, the plaintiff is not entitled to any recovery despite proof of common-law liability. If the serious injury threshold is established by a plaintiff at a damages trial, the jury will render a monetary award that fairly and justly compensates the plaintiff for all loss (see PJI 2:277; see generally McDougald v Garber, 73 NY2d 246 [1989]). Regardless of whether damages are set at zero or at a liquidated amount, the calculation of interest can be made against the jury’s determination of damages measured from the court’s earlier finding of common-law liability, whether that liability is a product of a default, a stricken pleading, summary judgment or a bifurcated trial.

Our dissenting colleagues argue that proof of serious injury must be presented before the right to compensation becomes fixed at law (see Love v State of New York, supra) so as to trigger interest under CPLR 5002. We disagree with this argument and maintain that interest must be calculated from the date that common-law liability is determined in favor of the plaintiff. Four compelling reasons support our conclusion.

First, as already noted, the Court of Appeals expressly determined in Love v State of New York (supra at 542) that in personal injury actions, interest under CPLR 5002 runs from the date fault liability is established. While Love did not specifically address no-fault insurance implications, the Court of Appeals’ decision in Denio v State of New York (supra) was automobile-related and incidentally measured CPLR 5002 interest from the date that common-law liability was resolved in the plaintiffs favor (see Denio v State of New York, supra at 163). A reading of Love, and to a lesser extent Denio, demonstrates that the Court of Appeals views prejudgment interest as running from the liability determination, with its computation held in abeyance until the amount of damages is later determined (see Love v State of New York, supra at 544). It follows, therefore, that if proof of a threshold injury is an issue of damages as this Court has consistently maintained, then interest is awardable from the finding of common-law liability, even if proof of a plaintiffs serious injury is extant or questionable. The actual computation of interest, retroactive to the liability finding, is not made until and unless the trier of fact determines that the serious injury threshold has, in fact, been affirmatively met at the damages trial.

Second, our dissenting colleagues, in concluding that prejudgment interest in a no-fault action is not triggered until the serious injury threshold is established, admittedly rely upon the Fourth Department’s reasoning in Ruzycki v Baker (supra) and Manzano v O’Neil (supra). Implicitly, our dissenting colleagues depart from the stare decisis of this Department by which they are bound, wherein this Court has held the serious injury threshold to be a matter of damages that is litigated during the damages phase of an action (see e.g., Sheehan v Marshall, 9 AD3d 403, 404 [2004]; Zecca v Riccardelli, supra; Taylor v Dell Coffee Servs., 306 AD2d 460, 460-461 [2003]; Perez v State of New York, supra; see also Uniform Rules for Trial Cts [22 NYCRR] § 202.42 [b]). As damages, threshold injury considerations are placed outside of the bifurcated liability finding which the Court of Appeals fixed in Love as triggering plaintiffs’ right to compensation with prejudgment interest.

Our dissenting colleagues also suggest that the no-fault threshold is “[m]ost telling[ly]” grounded in liability rather than damages since, if an automobile plaintiff’s verdict is overturned on appeal for insufficient proof at trial of serious injury, the remedy is dismissal of the complaint instead of a reduction of damages to $0 (dissenting op at 71). Such an argument raises a distinction without a difference. In any action where plaintiffs’ verdicts on appeal are reversed on the grounds that damages were not established at trial, whether automobile-related or not, the appellate remedy is the dismissal of the plaintiffs’ complaints rather than a reduction of damages to $0 (see e.g. Pattison-Bolson Rug Serv. v Sloane, 45 AD2d 862 [1974] [plaintiffs complaint for breach of contract dismissed on appeal for failure to prove damages]; Gomez v Bicknell, 302 AD2d 107, 115, 117 [2002] [second counterclaim for breach of noncompete agreement dismissed on appeal for lack of proof at trial of damages]; accord Sharratt v Hickey, 20 AD3d 734 [2005] [complaint for defamation dismissed by trial court, affirmed on appeal, for plaintiffs failure to prove damages]). The remedy, therefore, does not support the conclusion of our dissenting colleagues that the division of liability and damages in actions arising out of the use and operation of motor vehicles (see Insurance Law § 5104) is any different from the division of liability and damages in other actions.

Third, there are various defenses to damages within and without the motor vehicle context which affect whether the plaintiffs, with common-law liability in their favor, are entitled to any monetary award or to no award. One such defense is the plaintiffs nonuse of available seatbelts (see Vehicle and Traffic Law § 1229-c [8]), which is strictly limited to the jury’s determination of damages and is not considered in resolving issues of liability (see Spier v Barker, 35 NY2d 444, 450 [1974]; Garcia v Tri-County Ambulette Serv., 282 AD2d 206, 207 [2001]; Dowling v Dowling, 138 AD2d 345 [1988]). Another common defense presented at damages trials concerns allegations that the plaintiffs injuries preexisted the subject accident (see e.g. Califano v Automotive Rentals, 293 AD2d 436, 437 [2002]; Starace v Inner Circle Qonexions, 198 AD2d 493, 494 [1993]) so as to negate proximate cause. Either of these defenses can reduce or even eliminate a plaintiff’s entitlement to damages, yet the practice is to compute prejudgment interest from the liability finding and not to compute the interest award from the damages trial where seatbelt and preexisting injury defenses are litigated (cf. Love v State of New York, supra). There is no persuasive reason to treat threshold injury issues any differently.

Fourth, if prejudgment interest is not awardable in automobile actions until after the serious injury threshold is established, an untenable dichotomy would exist between those plaintiffs and all nonautomobile plaintiffs whose interest computations commence upon receiving a liability finding in their favor either as a result of default, summary judgment, or verdict from a trier of fact. If this Court were to accept the defendants’ interpretation of CPLR 5002, it would be placing motor vehicle personal injury plaintiffs on an unequal footing from all other plaintiffs who seek damages for personal injuries not involving automobile accidents. Indeed, the defendant’s interpretation of CPLR 5002 would create two unequal classes of automobile plaintiffs, where those incurring clearly-defined serious injuries would be entitled to interest earlier in their litigations than other plaintiffs whose injuries are more questionable. The better practice, in our view, is to treat all plaintiffs equally, by measuring prejudgment interest to which they are entitled from the same bright-line event of established liability in their favor, whether upon default of the defendant, summary judgment, or verdict in a bifurcated liability trial.

For all of the foregoing reasons, we conclude that the second amended judgment entered December 23, 2005, which calculated interest from the date of Van Nostrand’s damages verdict, is in error. The earlier amended judgment entered June 21, 2005, which measured prejudgment interest from the order granting Van Nostrand summary judgment on common-law liability, was correct. Accordingly, the second amended judgment entered December 23, 2005, is reversed, on the law, the defendants’ motion to modify the date of accrual of interest is denied, and the amended judgment entered June 21, 2005, is reinstated.

1 . The order to show cause invoked CPLR 5015, which authorizes a court to relieve a party of a judgment on the ground of excusable default, in this case the default being the Froehlichs’ failure to object to the amended judgment prior to its settlement. The order to show cause also invoked CPLR 5019, which authorizes the court to cure mistakes, defects, or irregularities that appear in judgments. While Van Nostrand opposed the order to show cause on the ground, inter alia, that the Froehlichs did not establish an excusable default and merit in the settlement of the amended judgment, these issues are outside the scope of the instant appeal.

2 . One narrow exception recognized by this Court exists when a defendant opposes a default motion and fails to include the serious injury threshold among the meritorious defenses discussed (see Beresford v Waheed, 302 AD2d 342, 343 [2003]). The holding of Beresford is consistent with this Court’s reasoning (id.).

3 . The case of Manzano v O’Neil should be familiar to personal injury practitioners. It was one of the three serious injury actions examined by the Court of Appeals for other legal propositions in the often-cited Toure v Avis Rent A Car Sys. (98 NY2d 345 [2002]).