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Adverse Interest Exception to In Pari Delicto Defense May Apply—The Two Concepts Are Briefly Explained

In an accounting malpractice action, the Second Department determined the defendants’ motion to dismiss based upon the defense of in pari delicto defense was properly denied because the adverse interest exception may apply.  The court explained the two concepts:

The defendants contend that [the accounting malpractice] cause of action is barred by the doctrine of in pari delicto, “which mandates that the courts will not intercede to resolve a dispute between two wrongdoers” … . However, the adverse interest exception to the doctrine of in pari delicto provides that “when an agent is engaged in a scheme to defraud his principal, either for his own benefit or that of a third person, the presumption that knowledge held by the agent was disclosed to the principal fails because he cannot be presumed to have disclosed that which would expose and defeat his fraudulent purpose” … . Here, the documentary evidence submitted by the defendants did not conclusively foreclose the application of the adverse interest exception to the in pari delicto defense … . Schwartz v Leaf Salzman Mangenelli Pfiel, & Tendler LLP, 2014 NY Slip Op 08823, 2nd Dept 12-17-14

 

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THE REFEREE DID NOT COMPLY WITH THE ORDER OF REFERENCE; SUPREME COURT’S RULINGS BASED UPON THE REFEREE’S ORDER WERE THEREFORE INVALID (SECOND DEPT).
DEFENDANT WAS NOT AN OWNER OR A GENERAL CONTRACTOR AND EXERCISED NO SUPERVISORY AUTHORITY OVER THE INJURED PLAINTIFF’S WORK, THEREFORE THE LABOR LAW CAUSES OF ACTION WERE PROPERLY DISMISSED; HOWEVER DEFENDANT MAY HAVE BEEN RESPONSIBLE FOR CREATING THE ALLEGEDLY DANGEROUS CONDITION DURING PRIOR WORK ON THE PROPERTY; THEREFORE THE COMMON-LAW NEGLIGENCE CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMSSED (SECOND DEPT).
PLAINTIFF ALLEGED HE WAS KNOCKED TO THE GROUND BY DEFENDANTS’ DOG; DEFENDANTS DEMONSTRATED THEY WERE NOT AWARE OF AND SHOULD NOT HAVE BEEN AWARE OF THE DOG’S VICIOUS PROPENSITIES AND PLAINTIFF FAILED TO RAISE A QUESTION OF FACT TO THE CONTRARY; DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT).
THE JUDGE SHOULD NOT HAVE, SUA SPONTE, INCREASED A PENALTY TO WHICH THE PARTIES HAD AGREED IN A SO-ORDERED STIPULATION (SECOND DEPT).
BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE PROVISIONS OF RPAPL 1304 AND DID NOT DEMONSTRATE IT HAD STANDING TO BRING THE FORECLOSURE ACTION, BANK’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).
HERE A SINGLE INCIDENT OF ALLEGED EXCESSIVE CORPORAL PUNISHMENT (GRABBING THE CHILD’S ARM AND SQUEEZING TIGHTLY) WAS NOT SUFFICIENT TO SUPPORT THE NEGLECT FINDING; A NEGLECT FINDING CANNOT BE BASED UPON ALLEGATIONS NOT INCLUDED IN THE PETITION (SECOND DEPT).
PLAINTIFF, AFTER FAILING TO ARGUE THAT DEFENDANTS WAIVED THE LACK OF STANDING DEFENSE BEFORE SUPREME COURT, COULD NOT RAISE DEFENDANTS’ WAIVER OF THE DEFENSE FOR THE FIRST TIME ON APPEAL, PLAINTIFF DID NOT DEMONSTRATE STANDING TO COMMENCE THE FORECLOSURE ACTION (SECOND DEPT).
THE PARENT’S INABILITY TO CONTROL THE CHILD’S BROTHER PRECLUDED THE RETURN OF THE CHILD TO THE PARENT’S CUSTODY AFTER TEMPORARY REMOVAL (SECOND DEPT).

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