Creditor Loses Bid to Sue State for Clerk Error

, New York Law Journal

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A judgment creditor that lost a judgment lien on real property because of a county clerk's docketing error cannot sue the State of New York for negligence, a unanimous Appellate Division, Second Department panel has ruled.

In an opinion handed down Thursday in Flagstar Bank v. State of New York, 2012-01859, Justice Daniel Angiolillo (See Profile) held that the provisions on the Civil Practice Laws and Rules on docketing judgments are intended not only to protect judgment creditors, but also innocent third-party buyers of a judgment debtor's property. For that reason, he said, they do not create a private right of action for creditors in the event of a docketing error.

Angiolillo was joined by Justices Thomas Dickerson (See Profile), Leonard Austin (See Profile) and Sylvia Hinds-Radix (See Profile). The decision affirmed a January 2012 ruling by Court of Claims Judge Melvin Schweitzer.

The claimant, Flagstar Bank, FSB, obtained a $2.1 million judgment against Caribbean Mortgage Corp. and its president, Udit Meeto, as part of a settlement in federal court in 2006. Flagstar submitted an abstract of the judgment and a copy of the judgment to the Queens county clerk.

In docketing the judgment, the clerk's office incorrectly identified Meeto as a corporation rather than a person. As a result of this error, Meeto was able to sell two pieces of real property free and clear of Flagstar's judgment lien. Soon after selling the property, Meeto stopped making payments on the judgment, with a principal of more than $938,000 still unpaid.

Flagstar then filed actions in Queens Supreme Court to set aside the property transfers. It won a default judgment against one of the buyers, but the other buyer contested the action and Flagstar lost. Flagstar then sued the state over the docketing error, claiming negligence.

The state claimed that it was protected by governmental function immunity. It also said that the judgment abstract submitted by Flagstar did not make clear whether Meeto was a corporation or person, and that the clerk had no duty to look beyond the abstract.

Schweitzer ruled in favor of the state, and Flagstar appealed.

In support of its case, Flagstar cited the First Department's 1989 decision in National Westminster Bank v. State of New York, 155 AD2d 261, which held the state liable for the failure of the Bronx county clerk to timely docket a judgment. That decision was affirmed by the Court of Appeals.

Angiolillo said in Thursday's opinion that the National Westminster decision alone did not control the case. The Court of Appeals, he said, had provided more recent authority in 2009 in McLean v. City of New York, 12 NY3d 194, 203, ruling that the state can only be liable for negligent ministerial actions if it owes a special duty of care to the claimant.

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