Opinion
2003/01952.
Decided January 10, 2005.
Harris, Beach, LLP, Pittsford, New York, Appearing on behalf of the plaintiffs, By: Peter J. Spinelli, Esq., of Counsel.
Chamberlain, D'Amanda, Oppenheimer Greenfield Rochester, New York, Appearing on behalf of the defendants, By: Matthew J. Fusco, Esq., of Counsel.
This action requests the Court to review and declare plaintiffs' rights with respect to funds (two-percent funds) received by the Brighton Fire District (Fire District) pursuant to Insurance Law §§ 9104 and 9105.
Insurance Law §§ 9104 and 9105 provide that foreign and alien fire insurance companies and mutual fire insurance companies must pay a two-percent tax on the amount of all premiums for insurance against loss or damage by fire, and that the money generated by the tax shall be paid to "either the fiscal officer of the fire department of the municipality, the fiscal officer of the municipality, or in the case where there is a special law designating the entity entitled to receive the premium tax, the entity designated by that special law" ( Watt v. Richardson, 6 AD3d 1117, 1118 [4th Dept, 2004] quoting Town of Mamaroneck Professional Firefighters Association, Inc. Local 898 v. Volunteer and Exempt Firemen's Benevolent Association of the Town of Mamaroneck, NY, 292 AD2d 375, 376 [2nd Dept, 2002]; see, § 9104[a][1]-[3]; § 9105[d][2][B]-[D]). The monies shall then be distributed "to the fire companies constituting the fire department if such fire department is constituted of more than one fire company" ( see, § 9104[a][4]; § 9105[d][2][E]). It has been held that these sections apply to both paid and volunteer firefighters ( see, Renn v. Kimbeck, 51 NY2d 189; Pillig v. Strange, 239 AD2d 568 [2nd Dept, 1997]).
Plaintiffs, individually and on behalf of all paid firefighters of the Brighton Professional Firefighters Association, Local 2223 (Union), and the Brighton Professional Firefighters Mutual Aid Fund (BPFMA Fund), have sued the Fire District, Fire District commissioners, and the individual defendant Lawrence Howk (Howk), for wrongfully and illegally transferring the two-percent funds to the Brighton Volunteer Fire Department, Inc. (Volunteer Department), a New York not-for-profit corporation, for its exclusive use and in violation of Insurance Law §§ 9104 and 9105.
Plaintiffs' complaint alleges five causes of action. The first cause of action alleges that the plaintiffs are entitled to share in the use and participate in deciding the use of the two-percent monies received by the Fire District from the State of New York, and seeks a judgment declaring that the individual plaintiffs are entitled to share in the use and participate in deciding the use of the two-percent monies received by the defendants from the State of New York, and further declaring that the monies received by the defendants are held in trust for all firefighters, including the individual plaintiffs. Plaintiffs also seek an order enjoining the defendants from transferring one hundred percent of the two-percent funds to the Volunteer Department or any other companies thereof. The second cause of action seeks a judgment requiring the defendants to pay over to the plaintiffs one-fourth of all the two-percent funds received between the years 1997 and 2002. The third cause of action requests judgment providing plaintiffs with an accounting of what the defendants have done with the two-percent funds for the years 1997 through the present. The fourth cause of action requests that the plaintiffs receive a judgment against defendant Howk for an alleged breach of his fiduciary duty in the amount of all two-percent funds improperly transferred by him from 1997 through the present, and punitive damages in the amount of $250,000. The fifth cause of action seeks a judgment declaring that defendants must turn over to the BPFMA Fund a proportional share of the two-percent monies received from the State of New York annually.
Plaintiffs filed this action in Monroe County Supreme Court on February 20, 2003. Defendants were served with the summons and complaint in early March, 2003. On March 20, 2003, defendants filed and served plaintiffs with a motion to convert and dismiss the action, raising nine (9) objections in point of law in their notice of motion. They were as follows: (1) the action is properly a proceeding against a body or officer pursuant to Article 78 of the CPLR and must be converted by the court into its proper form pursuant to CPLR § 103(c); (2) failure to file a notice of petition or order to show cause as required by CPLR § 304; (3) statute of limitations; (4) lack of standing or capacity to maintain this proceeding against the defendants; (5) defendant Howk acted within the scope of his employment as Fire District treasurer and is, therefore, entitled to immunity from individual liability as a matter of law; (6) failure to state a cause of action against respondent Howk; (7) failure to state a cause of action for which punitive damages may be granted; (8) failure to serve a notice of claim on the Fire District as required by the General Municipal Law; (9) failure to state any cause of action for which relief may be granted.
The plaintiffs cross-moved for summary judgment on their first, second, third, and fifth causes of action.
On January 7, 2004, this Court issued a written decision finding that the plaintiffs had sufficient interest in the case to maintain the action and that plaintiffs' complaint alleged a justiciable controversy. The Court also concluded that the four-month statute of limitations for an Article 78 proceeding applied to plaintiffs' claims and that plaintiffs had filed the action timely. However, the Court dismissed all of plaintiffs' claims regarding the period 1997 through 2001 as time barred. The Court dismissed with prejudice plaintiffs' claim for punitive damages against defendant Howk. Additionally, the Court dismissed without prejudice and as premature (1) defendants' motion for summary judgment regarding the plaintiffs' fourth cause of action against defendant Howk for breach of fiduciary duty; and (2) plaintiffs' cross motion for summary judgment on their first, second, third, and fifth causes of action.
After the decision was filed, defendants served plaintiffs with the present motion seeking summary judgment on the following grounds: (1) the claim must be dismissed against defendant Howk in his individual capacity because with respect to the allegations in plaintiffs' complaint, defendant Howk acted within the scope of his employment as Fire District treasurer and is, therefore, entitled to immunity from individual liability; (2) plaintiffs have failed to state a cause of action for which relief may be granted because defendants have not violated §§ 9104 and 9105 of the New York State Insurance Law; and (3) the relief sought by plaintiffs is not permitted by the Insurance Law. Accordingly, defendants request a declaration in their favor stating that they have met their obligations with respect to the two-percent funds received from the State of New York.
Plaintiffs oppose defendants' motion for summary judgment and renew their cross-motion for summary judgment on their first, second, third, and fifth causes of action as limited by this Court's previous decision.
BACKGROUND AND ORGANIZATION OF THE BRIGHTON FIRE DISTRICT
The Brighton Fire District (Fire District) is a municipal corporation formed in 1925 pursuant to Article 11 of the Town Law. It provides fire protection service and emergency medical response service within the Towns of Brighton and Pittsford, New York, through the use of both volunteer and paid firefighters. The Fire District is governed by a Board of Fire Commissioners (the Board). The Brighton Volunteer Fire Department, Inc. (Volunteer Department) is a New York not-for-profit member corporation. There are approximately 80 volunteer firefighters who are members of the Volunteer Department. The Fire District employs approximately 34 paid firefighters who are represented by the Brighton Professional Firefighters Association, Local 2223 (the Union).
The Fire Commissioners are elected for five year terms. All five members of the Board are volunteer firefighters and members of the Volunteer Department. The Chairman of the Board is Richard Garrett.
The paid firefighters work out of the three station houses and drive Fire District equipment from the station to an alarm. They are responsible for the upkeep of the station houses, maintaining fire equipment, responding to alarms, and managing fire personnel on scene. The volunteer firefighters use their own vehicles when responding to an alarm. Usually, the volunteer firefighters do not work out of the station houses, but may be assigned to respond to alarms for a specific station when the paid firefighters from that station are dispatched.
THE TWO-PERCENT FUNDS
On or about July 1 of each year, the New York State Insurance Department pays the Fire District its share of the two-percent funds collected pursuant to Insurance Law §§ 9104 and 9105. The Fire District receives approximately $40,000 per year in two-percent funds. The funds are paid to the "Treasurer of the Fire Department of the Brighton Fire District," which is Howk. Howk is the appointed treasurer of the Fire District. He is a part-time employee and has held this position since 1973.
According to defendants, the "Brighton Fire Department" is part of and under the control of the Fire District. Further, that the Brighton Fire Department consists of all personnel, both paid and volunteer, who provide fire protection services. Defendants assert that the Brighton Fire Department does not have a separate treasurer as such and, therefore, Howk is the appropriate recipient of the two-percent monies received from the State of New York. Howk states that since 1992 and upon instructions from the New York State Department of Audit and Control, he has deposited the two-percent monies into a trust and agency fund of the Fire District and thereafter disbursed these funds for lawful purposes of all members, both paid and volunteer. The two-percent monies received in 2002 was $42,922.73.
The defendants argue that the 2002 Annual Report, prepared by the Volunteer Department, shows that the Volunteer Department spent all of the two-percent funds which were received by the Fire District in 2002 on Volunteer Department functions, including an installation banquet, social functions, lunches, and public relations and related activities. They assert the paid firefighters had no opportunity to direct the use of the two-percent funds in 2002 and did not receive the benefit of these funds.
By letter dated June 25, 2002, counsel for the plaintiffs sent a proposed Trust Agreement on behalf of the Union (paid firefighters) and the three individual plaintiffs to counsel for the Fire District. The essence of the letter was a demand that paid firefighters receive a proportional share of the two-percent monies. Counsel exchanged numerous correspondence, including an August 29, 2002 letter from plaintiffs' counsel, demanding the monies be turned over by September 6, 2002 or the Union would "proceed to take legal action." The Fire District maintained it was not in violation of any law regarding the disbursement of the two-percent monies. It agreed, however, to seek the advice and counsel of the Office of the State Comptroller with respect to the manner and method for the paid firefighters to participate in the expenditure of the two-percent monies. On October 10, 2002, a conference call was conducted with Michael Kuperman (Kuperman), Assistant Counsel for the Office of the State Comptroller, as well as counsel for the plaintiffs and defendants. Kuperman allegedly suggested a vehicle be created to allow, in a formal manner, the paid career firefighters to participate in and vote on the expenditure of these funds. Thereafter, on December 26, 2002, the Board promulgated a regulation formalizing the participation of the Union representatives in the process for expending the two-percent monies. Plaintiffs did not feel that this new regulation adequately addressed their request and in February, 2003 commenced the instant action.
More specifically, the new regulation calls for a committee of six volunteer firefighters and two paid firefighters to develop a budget proposal and present the proposal to the full membership. Plaintiffs assert that under this new regulation, the Volunteer Department would continue to control the two-percent monies by virtue of its majority representation on the committee and its overwhelming majority among the membership of the Fire District.
THE NEW REGULATION AND THE 2004 BUDGET FOR THE TWO-PERCENT FUNDS
On September 8, 2003, defendant Howk issued a memorandum which was addressed to the Volunteer Department and all paid firefighters of the Fire District describing the Fire District's newly adopted Regulation XIX regarding the two-percent funds. The memorandum called for a meeting of the newly formed two-percent committee, which consisted of six volunteer firefighters and two paid firefighters, to discuss proposals and a budget for the expenditure of the two-percent funds to be received in 2004.
The two-percent committee met on September 25, 2003 and October 21, 2003 to discuss the 2004 budget for the two-percent funds. Ryan D. Kenny (Kenny) and Ronald R. Stolte (Stolte) represented the paid firefighters at these meetings. They requested that the two-percent funds be divided pro rata between the volunteer and paid firefighters, and the paid firefighters' share be distributed to the BPFMA Fund. The committee rejected this and adopted a budget proposal, which was allegedly nearly identical to the budgets used by the Volunteer Department for two-percent funds in prior years.
The two-percent committee passed the proposed budget by a vote of 6 to 0. Kenny and Stolte abstained from the vote. The proposed budget was presented to the Fire District on November 3, 2003 for a vote of the full membership, i.e., both paid and volunteer firefighters, and it passed by a vote of 44 to 37.
According to plaintiffs, the 2004 budget is nearly identical to the 2002 budget. In other words, despite the promulgation of Regulation XIX by the Fire District, there is no meaningful difference between the 2002 budget and the 2004 budget. The Fire District's Regulation XIX, they assert, fails to provide paid firefighters of the Fire District with the proper element of control as required by Insurance Law §§ 9104 and 9105 over the use and the benefit of their pro rata share of the two-percent funds.
Moreover, they maintain that the 2004 budget for the two-percent funds clearly benefits and supports the social activities of the Volunteer Department, including the installation banquet ($19,000), pop, beer, and juice account a/k/a "pbj account" ($3,200), social functions ($7,000), miscellaneous ($1,800), parade expenses ($4,500), related activities ($4,600), athletic activities ($750), public relations/open house ($3,500), Explorer Post No. 513 ($2,500), childrens' party ($1,400), and professional fees ($2,500).
Plaintiffs' assert that based upon the organizational structure and regulations of the Fire Department, Fire District and Volunteer Department, it is clear that the two-percent funds will continue to be used for the exclusive use and benefit of the Volunteer Department to the detriment of the paid firefighters of the Fire District and in violation of Insurance Law §§ 9104 and 9105.
The defendants assert that the Fire District is not a multi-company fire department and, therefore, there is no basis to distribute a pro rata share of the two-percent funds. Moreover, they assert that the Fire District has in place procedures and regulations to ensure that all firefighters have a say in the manner in which the two-percent funds are expended. They also maintain that the two-percent monies have at all times been expended for the benefit of the total membership of the Fire Department and have proportionately benefited both paid and volunteer firefighters.
DISCUSSION
The first issue to be addressed is whether Howk is the proper recipient of the two-percent funds. Since there is no special law dictating an individual or entity to receive the funds, the payment of the two-percent monies is governed by Insurance Law §§ 9104(a)(1) and 9105(d)(2)(B). Accordingly, the Court declares that Howk, as treasurer of the Fire District, is the proper recipient of the two-percent funds from the State.
The next issue is how these funds should be applied once received by Howk. Under Renn v. Kimbark, 51 NY2d 189 (1980) 115 AD2d 112 (3rd Dept, 1985), lv denied 68 NY2d 663 (1986), all firefighters are to share proportionately in the monies generated under the Insurance Law (emphasis in original) ( see, Pillig v. Strange, 239 AD2d 568; Town of Mamaroneck Professional Firefighters Association, Inc. Local 898 v. Volunteer and Exempt Firemen's Benevolent Association of the Town of Mamaroneck, NY, 292 AD2d 375 [2nd Dept, 2002]; Eisinger v. Stern, 57 Misc 2d 16, 19 [S.Ct. Oneida County, 1968]). Thus, both volunteer and paid firefighters are entitled to a portion of the money paid annually to the Fire Department on a pro rata basis determined from the respective active rosters ( see, Renn v. Kimbark, 115 AD2d 112 [3rd Dept, 1985] lv denied 68 NY2d 663).
The Brighton Fire District, a municipal corporation, has directly under its control the Brighton Fire Department. The Brighton Fire Department has both volunteer and paid firefighters among its ranks. The volunteer firefighters have formed a corporation under the not-for-profit corporation law known as the Brighton Volunteer Fire Department, Inc. The paid firefighters are not formally incorporated but have membership in the Brighton Professional Firefighters Association, Local 2223. The paid firefighters are a part of the Fire Department and Fire District and, while not a separate incorporated entity such as the Volunteer Department, are clearly a district entity.
At issue is the interpretation and application of Insurance Law § 9104(a)(4) which provides:
(4) if such payment is made to the treasurer or other fiscal officer of a fire department or fiscal officer of authorities having jurisdiction and control of such fire department, such treasurer or fiscal officer shall on or before the fifteenth day of March in each year distribute the amount so received to the fire companies constituting the fire department if such fire department is constituted of more than one fire company.
Counsel did not supply any statutory definition of "fire company," nor could the Court find any clarification of this term. Under any reasonable view of the organization of the Fire District, the paid firefighters are a company entitled to their proportionate share of the two-percent monies (Insurance Law §§ 9104[a][4] and 9105[d][2][E]). The functions of the volunteer and paid firefighters are different. The paid firefighters work from the three station houses and drive the fire vehicles to fire scenes in response to an alarm. Usually, the volunteers drive their own vehicles to scenes from their residences and places of business and do not work out of the station houses unless assigned to cover a station while paid firefighters are dispatched. The firefighters are primarily responsible for the upkeep of the station houses, maintaining fire equipment, responding to alarms, and managing fire personnel on the scene.
While the volunteer firefighters have taken action which appears to be directed at including the paid firefighters in the use of the two-percent monies by virtue of Regulation XIX, the practical application is that the mechanism provided under the regulation results in the paid firefighters being excluded from benefiting from the funds as the number of votes of the volunteer firefighters far outweigh that of the paid firefighters. Looking further at the practical aspects of the application of the funds, the expenditure and use of the funds are directed principally toward the interests of the volunteer firefighters and not to items of interest or of benefit to the paid firefighters. Thus, the present framework does not provide for the paid firefighters to meaningful participate in the use or direction of the use of the two-percent funds provided to the district. Such a situation is not in compliance with the direction or spirit of Renn and its progeny. Therefore, plaintiffs' request that defendants be enjoined from distributing all monies to the Volunteer Department is granted.
The plaintiffs, individually and as representatives of all paid firefighters, have formed the BPFMA fund specifically for the purpose of receiving the two-percent funds in accordance with Insurance Law §§ 9104 and 9105 for the benefit of all paid firefighters in the Fire District. The State Comptroller has issued an opinion (Op. St. Compt. 90-20) holding that:
If the membership of the fire department or company reasonably determines that a donation of foreign fire insurance tax moneys to a fireman's association is for the use and benefit of the department or company, the person having custody of those moneys may pay the amount specified to the fireman's association.
The plaintiffs are entitled to summary judgment directing that treasurer Howk turn over to the BPFMA Fund the paid firefighters' pro rata share of the two-percent funds based on the active rosters received annually by the Fire District from the State of New York pursuant to Insurance Law §§ 9104 and 9105 provided that said funds are to be used in a manner determined by vote of the paid firefighters and for permitted purposes.
The Court further finds that the defendants are entitled to summary judgment dismissing the fourth cause of action against treasurer Howk, individually. Howk acted at all times within the scope of his employment as treasurer in dispensing the two-percent funds.
Finally, with regard to the plaintiffs' claim that the two-percent monies for 2002 to the present were used to benefit only the volunteer firefighters, the Court will appoint a referee to hear and determine this issue ( see, Poughkeepsie v. Poughkeepsie Associated Fire Department, 125 AD2d 522 [2nd Dept, 1986]).
Submit order.