Commissioners of State Ins. Fund v Kassas

[*1] Commissioners of State Ins. Fund v Kassas 2004 NY Slip Op 51337(U) Decided on July 26, 2004 Civil Court Of The City Of New York, New York County Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 26, 2004
Civil Court of the City of New York, New York County

COMMISSIONERS OF STATE INSURANCE FUND, Plaintiff

against

ELIAS KASSAS d/b/a KASSAS MARKET, Defendant



32020/2001



For Plaintiff

Carol Morokoff Esq.

Maidenbaum & Associates P.L.L.C.

875 6th Avenue, New York, NY 10001

For Defendant

Gerald M. Klein Esq.

Katz & Klein

202 Mamaroneck Road, White Plains, NY 10601

Lucy Billings, J.

Plaintiff Commissioners of the State Insurance Fund (SIF) move for summary judgment on SIF's breach of contract and account stated claims for $2,958.21 in unpaid Workers' Compensation insurance premiums for the policy periods covering June 27, 1999, to July 27, 2000, after an audit of defendant's records. C.P.L.R. § 3212(b). SIF's collection manager attests that this amount includes collection charges, but presents no basis for this claim. See NY State Fin. Law § 18(1)(b) and (5). Nowhere, moreover, does SIF present the insurance contract on which SIF relies. Without the document itself, the collection manager's mere recitation of the document's terms is rank hearsay, is contrary to the best evidence rule, and relegates SIF to its account stated claim. People v. Joseph, 86 NY2d 565, 570 (1995); Schozer v. William Penn Life Ins. Co. of NY, 84 NY2d 639, 643 (1994); NW Liquidating Corp. v. Helmsley-Spear, Inc., 248 AD2d 304, 305 (1st Dep't 1998); Schiffren v. Kramer, 225 AD2d 757, 758 (2d Dep't 1996).

Despite being permitted to raise new issues in reply, multiple appearances with extensive oral argument, and further extensive discussions with defendant's counsel, SIF has yet to explain to defendant, his counsel, or the court how SIF arrived at the $2,424.76 claimed exclusive of collection charges. Consequently, based on a careful parsing of the record presented and defendant's admissions regarding the coverage periods and premium calculations, the court grants SIF's motion for summary judgment, but for substantially less than the amount sought, and grants defendant summary judgment dismissing the remainder of SIF's claim for premiums. C.P.L.R. § 3212(b).

I.THE CLAIM FOR PREMIUMS A.Transmittal of SIF's Invoices and Their Retention by Defendant

A key element of a prima facie account stated claim is evidence that SIF delivered one or [*2]more invoices for the amount claimed to defendant, so that he received them. Merrill/New York Co. v. Celerity Sys., 300 AD2d 206 (1st Dep't 2002); Manhattan Telecom. Corp. v. Best Payphones, 299 AD2d 178 (1st Dep't 2002); Ruskin, Moscou, Evans & Faltischek v. FGH Realty Credit Corp., 228 AD2d 294, 295 (1st Dep't 1996). SIF may meet this standard through evidence that SIF transmitted the bills to defendant in the regular course of business. Budgewood Laundry Serv. v. Dorset Hotel Corp., 249 AD2d 85, 86 (1st Dep't 1998).

Although SIF's collection manager, Jeffrey Epstein, attests that "account statements were sent to the Defendant at the Defendant's last known address," Aff. of Jeffrey Epstein ¶ 9, the documents he attaches as an exhibit appear to be SIF's internal records, not invoices to defendant. Id., Ex. C. The exhibit contains no statement dated November 10, November 27, or December 27, 2000, the dates Epstein attributes to SIF's invoices in his reply affidavit. Aff. in Reply of Jeffrey Epstein ¶ 6. Again, without copies of the invoices transmitted to defendant, any recitation of their contents is hearsay and fails to establish, in admissible form, the critical facts as to the billing party, the billed party, and the breakdown of the charges: what amounts cover what items over what dates. E.g., Schiffren v. Kramer, 225 AD2d at 758; People v. Ebramha, 157 Misc2d 217, 220 (Crim. Ct. NY Co. 1992); People v. Al-Ladkani, 169 Misc2d 720, 724 (Crim. Ct. Kings Co. 1996). Even if SIF's exhibit contains the documents sent to defendant, nothing in them indicates whom these statements are from or who the creditor is, whom the statements are to or who the debtor is, or who is to pay whom.

The evidence that SIF transmitted invoices to defendant, moreover, is weak and conclusory. Epstein's original affidavit attests merely that "account statements were sent to the Defendant at the Defendant's last known address and were retained by the Defendant without protest," indirectly referring to the Exhibit C with all its attendant omissions outlined above. Epstein Aff. ¶ 9. Just as critically, Epstein fails to indicate when the statements were sent, even whether before SIF commenced this action. His reply attests that invoices "were sent to the defendant on November 10, 2000; November 27, 2000; and December 27, 2000, Epstein Aff. in Reply ¶ 6, but these documents are nowhere in the record. Nor does Epstein indicate defendant ever received these invoices.

An account stated claim requires a showing that defendant retained the stated account without objecting within a reasonable time. Herrick, Feinstein v. Stamm, 297 AD2d 477, 478 (1st Dep't 2002); Morrison Cohen Singer & Weinstein v. Ackerman, 280 AD2d 355, 356 (1st Dep't 2001). Fundamental to this requisite showing is admissible evidence of when the statement was delivered to defendant. Commencing an action on an account stated claim before or shortly after defendant received the statement on which the action is based precludes a showing that defendant retained the statement for a reasonable time. E.g., Arrow Empl. Agency v. David Rosen Bakery Supplies, 2 AD3d 762 (2d Dep't 2003). Absent admissible evidence of what invoices SIF transmitted when, its prima facie showing of an account stated fails. Id. at 763.

Furthermore, SIF presents no evidence of who transmitted the statements or invoices referred to or how: whether by mail, facsimile, or delivery to defendant or another on his behalf, for example. See 8112-24 18th Ave. Realty Corp. v. Aetna Cas. & Sur. Co., 240 AD2d 287, 288 (1st Dep't 1997); Residential Holding Corp. v. Scottsdale Ins. Co., 286 AD2d 679, 680 (2d Dep't 2001); A & S Med., P.C. v. Allstate Ins. Co., 2002 NY Slip Op 50121, 2002 WL 576078 at *1 (App. Term 1st Dep't Apr. 3, 2002); Amaze Med. Supply v. Allstate Ins. Co., 2004 NY Slip Op 50447, 2004 WL 1197345 at *1 (App. Term 2d Dep't May 20, 2004). Nothing indicates personal knowledge of the invoices' transmittal: that Epstein personally transmitted them, that anyone under his supervision did so, or that his office has a regular procedure for mailing or otherwise transmitting bills to insured employers, which office personnel followed for the bills to defendant. Badio v. Liberty Mut. Fire Ins. Co., ___ AD3d ___, 773 NYS2d 369, 370 (1st Dep't 2004); Residential Holding Corp. v. Scottsdale Ins. Co., 286 AD2d at 680; Comprehensive Mental v. Lumbermens Mutual Ins. Co., 2004 NY Slip Op 50745, 2004 WL 1574698 at *1 (App. Term 2d Dep't July 1, 2004). An inadequate showing of the invoices' transmittal compels denial of summary judgment. Molinaro v. Bedke, 292 AD2d 285 (1st Dep't 2002); Abbott, Duncan & [*3]Weiner v. Ragusa, 214 AD2d 412, 413 (1st Dep't 1995); Yannelli, Zevin & Civardi v. Sakol, 298 AD2d 579, 581 (2d Dep't 2002); PPG Indus. v. AGP Sys., 235 AD2d 979, 980 (3d Dep't 1997).

Defendant does not dispute that he received at least one "demand for payment" after he canceled the policy, effective July 27, 2000. Aff. of Elias Kassas ¶ 9. He attests that he protested that statement, however, via a letter August 28, 2001, insisting he had paid all but one month's payment, which he had attempted to pay, and requesting SIF to "clear" his account. Id. Although defendant does not present that final demand he received, the date of SIF's complaint, June 29, 2001, suggests that the demand to which defendant refers may have been the complaint commencing this action. Defendant also fails to present his responsive letter, but even an oral objection would rebut an account stated, Diamond & Golomb v. D'Arc, 140 AD2d 183 (1st Dep't 1988), and he does specify when and how he objected to SIF and the substance of the objections. Marcus Borg Rosenberg & Diamond v. Gilbert Segall & Young, 248 AD2d 279, 280 (1st Dep't 1998); Collier, Cohen, Crystal & Bock v. MacNamara, 237 AD2d 152 (1st Dep't 1997); Shea & Gould v. Burr, 194 AD2d 369, 371 (1st Dep't 1993). On an account stated claim, defendant's objections themselves, whether ultimately meritorious or not, defeat summary judgment. Marcus Borg Rosenberg & Diamond v. Gilbert, Segall and Young, 248 AD2d at 280; Kaye, Scholer, Fierman, Hays & Handler v. Russell Chems., 246 AD2d 479, 480 (1st Dep't 1998). B.The Amount Owed

In arriving at the balance claimed to be outstanding in statements specifying that balance or yielding that balance after crediting subsequent payments, SIF concedes defendant paid $3,677.56 toward SIF's original bill for the premium covering June 27, 1999, to June 27, 2000. Epstein explains in reply that this amount was an estimated premium based on defendant's anticipated payroll for that period. An additional premium billed for a subsequent policy covering June 27, 2000, to June 27, 2001, which defendant canceled after one month, as of July 27, 2000, was a similar estimate based on anticipated payroll. After July 27, 2000, SIF conducted an audit to determine the accurate payroll and premiums for June 27, 1999, to June 27, 2000, and June 27 to July 27, 2000. NY Workers' Comp. Law § 92(3).

The results of these audits that Epstein recounts, however, are also hearsay. The payroll information, $33,800.00 for the 12 month period, and $2,640.00 for the subsequent one month, upon which SIF determined the premiums, was gathered from defendant's accountant. Even assuming the accountant was authorized to speak for defendant regarding these admissions of financial information, an auditor, not Epstein, gathered the information from the accountant. Tyrell v. Wal-Mart Stores, 97 NY2d 650, 652 (2001); Candela v. City of New York, ___ AD3d ___, 778 NYS2d 31, 34 (1st Dep't 2004); Navedo v. Willis Ave. Supermarket, 290 AD2d 246, 247 (1st Dep't 2002); Cohn v. Mayfair Supermarkets, 305 AD2d 528, 529 (2d Dep't 2003). Although Epstein attaches the auditor's worksheets as an exhibit, Epstein Aff. in Reply, Ex. C, which include the accountant's name, they do not bear the accountant's signature. The handwritten name appears to be in the same handwriting as the auditor's handwritten name and separate signature. Even if the handwritten name of defendant's accountant is a signature, it is not authenticated. Acevedo v. Audubon Mgt., 280 AD2d 91, 95 (1st Dep't 2001); Fields v. S & W Realty Assoc., 301 AD2d 625 (2d Dep't 2003). Nor does Epstein authenticate the auditor's signature or lay a foundation for the admissibility of these documents' second layer of hearsay, as business records or as another exception to the rule against hearsay. E.g., C.P.L.R. § 4518(a); Matter of Leon RR, 48 NY2d 117, 123 (1979); Holliday v. Hudson Armored Car & Courier Serv., 301 AD2d 392, 396 (1st Dep't 2003). See Republic W. Ins. Co. v. RCR Bldrs., 268 AD2d 574, 575 (2d Dep't 2000).

Defendant, however, does not dispute the payroll of $33,800.00 for June 1999 to June 2000 and $2,640.00 for June to July 2000 or the formula SIF applied to those amounts to determine the final premiums due. To the $2,640.00 payroll for the one month, SIF applied an 8.59% "manual rate," which yielded a $226.78 "manual premium." Epstein Aff., Ex. C at 5. SIF added a $297.08 "short rate premium," a penalty for defendant's termination of the policy during the one year policy period, for a $523.86 sum; a $30.40 "expense constant" and $52.39 "state [*4]fund differential," 10% of the manual and short rate premiums, for a $606.65 sum; and a $78.37 assessment, 13.6% of the manual and short rate premiums and 10% state fund differential: a $685.02 total premium and assessment. Id.

Applying the same formula to the $33,800.00 payroll for the prior year, the 8.59% manual rate yields a $2,903.42 manual premium. The short rate premium penalty for terminating the policy during the policy period does not apply to this full year's premium. Adding the $30.40 expense constant and a $290.34 state fund differential, 10% of the manual rate premium, for a $3,224.16 sum, and a $434.35 assessment, 13.6% of the manual rate premium and 10% state fund differential, produces a $3,658.51 total premium and assessment.

Thus the final premiums due for June 27, 1999, to June 27, 2000, and for June 27 to July 27, 2000, total $4,343.53. Subtracting defendant's undisputed payments of $3,677.56 for these periods, and based on the further undisputed documents showing defendant owes $0 for prior periods, he currently owes

$665.97. C.Conclusion

Since defendant agrees with the payroll for June 1999 to June 2000 and June to July 2000 and the formula SIF applied to his payroll to determine the insurance premiums due and agrees he obtained insurance from SIF for those periods, SIF is entitled to the premium balance of $665.97. See Martin H. Bauman Assocs. v. H & M Intl. Transp., 171 AD2d 479, 485 (1st Dep't 1991). SIF is not entitled to summary judgment on the remainder of SIF's claim. Healthcare Capital Mgt. v. Abrahams, 300 AD2d 108 (1st Dep't 2002); CIT Group/Bus. Credit v. Renee Int'l., 265 AD2d 251, 252 (1st Dep't 1999); Addeco N. Am. v. G.O.D., 306 AD2d 297 (2d Dep't 2003). As detailed above, SIF has not laid the foundation for the admissibility of any of the documents presented, as business records or otherwise, except for SIF's internal records of its account with defendant. SIF has not presented anything akin to an invoice. Even had SIF done so, it has presented no admissible evidence of an invoice's transmittal to or receipt by defendant a reasonable time before commencing this action. The documents presented are devoid not only of transmitted statements of account or invoices, but also of any insurance contract or application establishing an amount contractually due or any audit worksheets admissible as business records or otherwise. Commissioners of State Ins. Fund v. Country Carting Corp., 265 AD2d 158 (1st Dep't 1999); Commissioners of State Ins. Fund v. Allou Distribs., 220 AD2d 217 (1st Dep't 1995).

Were SIF's internal records in fact transmitted bills, SIF has never explained how they reflect its audit of defendant's payroll. An account stated does not create an assent to pay an unearned premium amount or a balance not found to be due, CIT Group/Bus. Credit v. Renee Int'l., 265 AD2d 251; Bernstein v. Tisch, 102 AD2d 778, 779 (1st Dep't 1984); Maines Paper & Food Serv. v. Restaurant Mgt. by D.C. Corp., 229 AD2d 748, 750 (3d Dep't 1996), or create an obligation where no transaction provides the basis for an account stated. Gurney, Becker & Bourne v. Benderson Dev. Co., 47 NY2d 995, 996 (1979); Martin H. Bauman Assocs. v. H & M Intl. Transp., 171 AD2d at 485; M. Paladino, Inc. v. Lucchese & Son Contr. Corp., 247 AD2d 515, 516 (2d Dep't 1998); Harbor Seafood v. Quality Fish Co., 194 AD2d 713 (2d Dep't 1993).

Based on SIF's documents, which explain how SIF calculated defendant's premiums from the audit, and the entire record, accepting SIF's evidence as true, and construing it in SIF's favor, the very affidavits and exhibits demonstrating SIF's entitlement to $665.97 conclusively establish defendant's nonliability for any additional premium. C.P.L.R. § 3212(b); Dunham v. Hilco Constr. Co., 89 NY2d 425, 429 (1996); Wolfson v. Milillo, 262 AD2d 636, 637 (2d Dep't 1999).

II.RECOVERY OF COLLECTION COSTS

State Finance Law § 18(5) expressly provides that SIF's collection fee is "not to exceed" 22% of the debt and is "to cover the cost" and "not exceed the agency's estimated cost" of collection. Section 18(5) thus does not automatically entitle SIF to collection costs of 22% of the debt, without SIF establishing its reasonable costs. SIF must establish at least an "estimated cost" of the actual collection in this case and may not recover 22% of the debt if that cost is less. [*5]NY State Fin. Law § 18(5). See Commissioners of State Ins. Fund v. Brooklyn Barber Beauty Equip. Co., 191 Misc2d 1, 12 (Civ. Ct. NY Co. 2001).

SIF's recovery of collection costs further depends on defendant's receipt of a bill from SIF. NY State Fin. Law § 18(5); Lawyers' Fund for Client Protection of State of NY v. Gateway State Bank, 239 AD2d 826, 828 (3d Dep't 1998); Commissioners of State Ins. Fund v. Brooklyn Barber Beauty Equip. Co., 191 Misc2d at 12. As thoroughly discussed above, SIF's witness nowhere identifies a bill or statement transmitted to defendant, nor does he admit receipt of any statement before this action was commenced.

Before a collection fee may be awarded, the debt also must be a "liquidated sum due and owing . . . which has accrued . . . through contract," NY State Fin. Law § 18(1)(b), and is "determined to be due." Lawyers' Fund for Client Protection of State of NY v. Gateway State Bank, 239 AD2d at 828; Commissioners of State Ins. Fund v. Brooklyn Barber Beauty Equip. Co., 191 Misc2d at 12-13. See Lawyers' Fund for Client Protection of State of NY v. Bank of Leumi Trust Co. of NY, 256 AD2d 836, 838 (3d Dep't 1998). Again, neither an insurance contract nor any document transmitted between the parties before the documents served in this action fixes a sum to be paid for premiums. Consolidated Rail Corp. v. MASP Equip. Corp, 67 NY2d 35, 40 (1986); Commissioners of State Ins. Fund v. Brooklyn Barber Beauty Equip. Co., 191 Misc2d at 13. According to SIF's own admissions, the insured risks were not fixed when coverage was issued, so the premiums could not be fixed then, but depended on a later audit of defendant's payroll. After the audit defendant disputed the $2,424.76 claimed, and the record now establishes this amount is not due. Given the established discrepancy, as well as the absence of any policy specifying a premium due, SIF has not met its burden in making its motion to establish that the debt owed meets § 18(1)(b)'s definition, so as to recover collection costs as part of the summary judgment now sought. Id. See Employers Ins. of Wassau v. Tri Star Bldg. Corp., 133 AD2d 664 (2d Dep't 1987).

III.CONCLUSION

For the reasons set forth above, the court grants SIF's motion for summary judgment for $665.97 in unpaid Workers' Compensation insurance premiums, with interest from July 27, 2000; denies SIF summary judgment on the remainder of the $2,424.76 claimed premiums; and grants defendant summary judgment dismissing the remainder of the claim for premiums. The court also denies SIF summary judgment on the claim for collection charges. Whatever remaining claim SIF pursues for collection charges, to recover, SIF must show that the charges sought are attributable to collecting the $665.97 and not the bulk of the premiums claim that the court has dismissed. E.g., Farrar v. Hobby, 506 U.S. 103, 114-15 (1992); Nestor v. McDowell, 81 NY2d 410, 416 (1993); Walentas v. Johnes, 257 AD2d 352, 354 (1st Dep't 1999); Sperling v. 145 E. 15th St. Tenants' Corp., 174 AD2d 498, 499 (1st Dep't 1991).

DATED: July 26, 2004

______________________________

LUCY BILLINGS, J.C.C.