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Statute of Limitations for Breach of Fiduciary Duty Tolled Until Fiduciary’s Roles Terminated

In an action against a fiduciary stemming from the distribution of an estate, Supreme Court determined the six-year statute of limitations applied to the breach of fiduciary duty cause of action and precluded any evidence from prior to 2007.  The Third Department agreed that the six-year statute was the correct one, but held that the statute never started running because the fiduciary’s roles were never terminated. Therefore pre-2007 evidence was not precluded:

Although “New York law does not provide a single statute of limitations for breach of fiduciary duty claims [and] the choice of the applicable limitations period depends on the substantive remedy that the plaintiff seeks” …, the parties do not dispute that a six-year period applies to these two remaining causes of action. However, the statute of limitations for a claim alleging a breach of fiduciary duty is tolled until there has been an open repudiation by the fiduciary or the relationship has otherwise been clearly terminated … .

There is nothing in this record indicating that respondents’ relevant fiduciary roles have terminated. Although many of the actions about which petitioners complain were done openly, petitioners also allege that they were repeatedly assured that such actions were ultimately in their best interests. The amended petition alleges that respondents have not to date repudiated their positions as fiduciaries. That allegation is not denied in this pre-answer motion, which was supported only by an attorney’s affirmation and memorandum of law. Matter of Therm, Inc., 2015 NY Slip Op 07732, 3rd Dept 10-22-15

 

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Multi-million Dollar Legal Malpractice Action Stemming from Commercial Mortgage-Backed Securities Dismissed

The Court of Appeals, in an extensive opinion by Judge Rivera, determined a multi-million dollar malpractice action should have been dismissed. The law firm, Cadwalader, was hired by the plaintiff, Nomura, in connection with Nomura’s commercial mortgage-backed securities investments. Cadwalader’s role was to advise and confirm that Nomura’s securitized commercial mortgage loans qualified as real estate mortgage investment conduit (REMIC) trusts. When a hospital which had been deemed REMIC-qualified by Cadwalader went bankrupt and defaulted on its loan, Nomura settled with the trustee for $67.5 million. Nomura then sued Cadwalader. The opinion is fact-specific and cannot be fairly summarized here. Based upon the facts and the evidence, the Court of Appeals determined Cadwalader demonstrated it had done what it was hired to do, and had exercised due diligence in fulfilling its limited obligations. Nomura failed to raise a question of fact to the contrary. Nomura, the court found, was seeking to impose duties upon Cadwalader which it had expressly reserved to itself. Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP, 2015 NY Slip Op 07693, CtApp 10-22-15

 

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Securities Did Not Pass Outside the Estate, Requirements of Transfer on Death Security Registration Act (TODSRA) Not Me

The First Department, in a full-fledged opinion by Justice Gische, over a concurring opinion arguing the matter had already been determined by Surrogate’s Court, determined a letter sent by decedent to Merrill Lynch did not meet the requirements of the Transfer on Death Security Registration Act (TODSRA) such that the securities account passed to the beneficiary outside the estate:

In order to take advantage of New York’s [TODSRA] law, certain categories of owners may request that a security be registered in beneficiary form (EPTL 13-4.2). The institution holding the securities account, however, is not required to either offer or accept a request to register a security in beneficiary form (EPTL 13-4.8). It is only if the owner requests that a security be held in beneficiary form and the entity holding the security accepts the designation, that an enforceable contractual relationship is created between the owner and that registering entity, requiring the registering entity to act in accordance with the designation (EPTL 13-4.9). Under TODSRA, the registering entity has the sole right to establish the terms and conditions under which it will receive and implement requests to register securities in beneficiary form (EPTL 13-4.10), and TODSRA statutorily mandates that the registering entity have certain protections in the process (EPTL 13-4.8).

A registering entity is not the owner of the security, but rather the person or entity that originates or transfers title to a security by registration, which includes a broker such as defendant (EPTL 13-4.1[i]). Thus, under the statute, it is perfectly clear that a unilateral action by an owner of a securities account to designate a beneficiary in the event of death is not by itself sufficient. Arroyo-Graulau v Merrill Lynch Pierce, Fenner & Smith, Inc., 2015 NY Slip Op 07774, 1st Dept 10-22-15

 

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Police Did Have Sufficient Suspicion to Justify Telling Defendant to Drop a Bag He Was Holding—Suppression Should Have Been Granted

The First Department determined the police did not have a founded suspicion criminal activity was afoot when they directed defendant to drop a bag he was holding. Therefore defendant’s suppression motion should have been granted:

The police officers’ initial approach and their intrusion upon defendant’s freedom by directing that he drop the bag were unsupported by a founded suspicion that criminality was afoot necessary to the exercise of the common-law right to inquire … . The officers approached defendant based solely on their observation of him carrying a shopping bag or gift bag that seemed rigid. While one officer testified that, based on his experience, he thought it might be a “booster bag” used for shoplifting, he essentially described an ordinary shopping bag. Further, it was conceded that defendant was not free to leave at the time he was ordered to drop the bag and its use as a booster bag became apparent. Defendant’s innocuous behavior in walking in and out of a store with the bag and his ensuing behavior did not justify further interference to obtain explanatory information … . People v Ties, 2015 NY Slip Op 07753, 1st Dept 10-22-15

 

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Zoning Board Applied an Incorrect Definition of a Term in a Zoning Ordinance—Court Has the Power to Impose Its Own Interpretation as a Matter of Law

The Third Department determined that the town’s zoning board of appeals did not apply the correct definition of a “neighborhood place of worship” when it denied petitioner’s application to convert a day spa to a “mikvah” in an area zoned for “neighborhood places of worship.” Submitted papers demonstrated that immersion in the waters of a mikvah is a basic religious ritual for Orthodox Jews and involves the recitation of blessings or prayers. Because the matter necessitated the interpretation of the terms of a zoning ordinance, the court need not defer to the zoning board’s interpretation:

The parties agree that the term “neighborhood place of worship” is neither defined in the Town’s zoning law, nor does it appear elsewhere in the Town’s ordinances. The zoning law does provide, however, that “[w]ords not specifically defined shall have their ordinary dictionary meanings” (Town of Mamakating Zoning Code § 199-6 [A]). Thus, the pertinent inquiry distills to whether petitioner’s proposed mikvah comports with the dictionary definition of a neighborhood place of worship. Although courts will ordinarily defer to a zoning board’s interpretation of a local ordinance, when “the issue presented is one of pure legal interpretation of the underlying zoning law or ordinance, deference is not required” … . The issue posed is susceptible to resolution as a matter of law by interpretation of the ordinance terms. Matter of Winterton Props., LLC v Town of Mamakating Zoning Bd. of Appeals, 2015 NY Slip Op 07734, 3rd Dept 10-221-5

 

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Hearsay Alone Will Not Support Revocation of Probation/Failure to Pay Restitution Will Not Support Revocation of Probation If Due to an Inability to Pay

In reversing the judgment revoking defendant’s probation, the Third Department noted that hearsay alone cannot be the basis for revocation and failure to pay restitution will only support revocation if defendant has the ability to pay:

It is settled that, “in revocation proceedings for failure to pay a fine or restitution, a sentencing court must inquire into the reasons for the failure to pay” … . “If the probationer willfully refused to pay or failed to make sufficient bona fide efforts legally to acquire the resources to pay, the court may revoke probation and sentence the defendant to imprisonment within the authorized range of its sentencing authority” … . If, on the other hand, “the probationer could not pay despite sufficient bona fide efforts to acquire the resources to do so, the court must consider alternate measures of punishment other than imprisonment” … .

Here, there was neither an adequate inquiry into defendant’s ability to pay nor a determination that his failure to pay was willful … . Accordingly, the matter must be remitted for further proceedings to determine whether defendant’s failure to make the required monthly restitution payments was willful and, if so, whether such failure, standing alone, serves as a valid basis for revocation of his probation and the imposition of a sentence of incarceration … . People v Songa, 2015 NY Slip Op 07704, 3rd Dept 10-22-15

 

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Broken Sentence Promise Required Vacatur of the Guilty Plea

The Third Department determined defendant’s guilty plea was induced by County Court’s promise to impose a sentence of shock incarceration. At sentencing, County Court refused to order shock incarceration. Because the plea was induced by the broken promise, the plea was not knowing and voluntary. The fact that neither the People nor County Court could guarantee defendant’s participation in the shock incarceration program was deemed irrelevant:

We start with the principle that a trial court always “retains discretion in fixing an appropriate sentence up until the time of sentencing” … . However, when the court wishes to depart from a promised sentence, it must either honor the promise or give the defendant the opportunity to withdraw the guilty plea … . Accordingly, “[a] guilty plea induced by an unfulfilled promise either must be vacated or the promise honored” … .

Here, prior to defendant’s guilty plea, County Court indicated its belief that defendant was eligible for shock incarceration and then unequivocally promised that it “would order him into it.” When defendant specifically asked if shock incarceration was guaranteed, the court stated that it “would order it absolutely” and that a failure on the part of prison authorities to admit him would “defy an order of the [c]ourt.” Furthermore, defense counsel stated that he was recommending that defendant accept the plea agreement “especially with a shock commitment.” Thus, regardless of the fact that “neither County Court nor the People possessed the authority to guarantee [defendant’s] participation” in the shock incarceration program … , the record reflects that defendant, in accepting the plea, relied upon County Court’s promise to do exactly that. Consequently, we find that defendant’s plea was not knowing, voluntary and intelligent, and that, because County Court’s promise to defendant cannot be honored as a matter of law, he is entitled to vacatur of his guilty plea … . People v Muhammad, 2015 NY Slip Op 07702, 3rd Dept 10-22-15

 

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Community College Retaliated Against Union for Its Advocacy

The Third Department upheld Supreme Court’s finding that a community college (petitioner) retaliated against the union (NIEU) in violation of the Civil Service Law by refusing to hire union employees for second jobs (for which union members received overtime pay). The court explained the relevant analytical criteria:

To prove its claim that petitioner [community college] engaged in an improper practice, NIEU was required to establish that it was engaged in activities protected by the Taylor Law (see Civil Service Law § 200 et seq.), that petitioner knew of these activities, and that it took the challenged action because of the activities … . “If the charging party proves a prima facie case of improper motivation, the burden of persuasion shifts to the party charged to establish that its actions were motivated by legitimate business reasons” … . Here, the parties agree that NIEU’s advocacy on the overtime issue was a protected activity and that petitioner was aware of NIEU’s advocacy. Their dispute focuses on whether petitioner’s decision to stop hiring NIEU members for second jobs was improperly motivated. Matter of Hudson Val. Community Coll. v New York State Pub. Empl. Relations Bd., 2015 NY Slip Op 07731, 3rd Dept 10-22-15

 

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Hearsay Supporting Child Abuse Report Seriously Controverted—Report Expunged

The Third Department determined a report maintained by the central register of child abuse and maltreatment should have been amended to state “unfounded” and expunged. Mother brought an Article 78 petition to amend the report, which stated abuse was “indicated.” The Third Department found that the hearsay evidence in support of the report was seriously controverted by the petitioner’s evidence, which included expert evidence about the cause of the child’s broken leg:

“To establish maltreatment, the agency was required to show by a fair preponderance of the evidence that the physical, mental or emotional condition of the child had been impaired or was in imminent danger of becoming impaired because of a failure by petitioner to exercise a minimum degree of care in providing the child with appropriate supervision or guardianship” … . As there is no dispute that the child suffered a broken leg, there can be no question that her physical condition was in fact impaired. Accordingly, our inquiry distills to whether the record supports a finding that such impairment was the result of petitioner’s failure to provide appropriate supervision and guardianship.

In this regard, the evidence against petitioner consisted primarily of the investigation progress notes, which summarized the caseworker’s interviews with, among others, petitioner’s son, the child’s treating orthopedic surgeon and the child’s geneticist. “[T]here is no question that hearsay is admissible in expungement hearings and, if sufficiently relevant and probative, may constitute substantial evidence to support the underlying determination” … . That said, the substantial evidence standard is not satisfied where, as here, the hearsay evidence at issue is “seriously controverted” … . Matter of Gwen Y. v New York State Off. of Children & Family Servs., 2015 NY Slip Op 07710, 3rd Dept 10-22-15

 

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Custody Should Not Have Been Awarded to Nonparent

The Third Department, reversing Family Court, determined custody of mother’s child should not have been awarded to mother’s sister. Mother was being treated for mental illness and had lost her home. The relationship between mother and sister was acrimonious. Mother, however, despite her difficulties, had tried to maintain her relationship with her child and the child was described well-adjusted, doing well in school, and involved in activities. The court explained the heavy burden placed on a nonparent seeking custody:

“A determination of whether extraordinary circumstances exist takes into consideration such factors as the length of time the child has resided with the nonparent, the quality of the child’s relationships with the parent and the nonparent, the prior disruption of the parent’s custody, separation from siblings and any neglect or abdication of responsibilities by the parent” … . Generally, such a finding is rare and exists where the extraordinary circumstances “drastically affect the welfare of the child” … .

In our view, no such finding was warranted here. When this proceeding was commenced, the child had been residing with petitioner in her home — located more than an hour drive from the mother — for only a few days. During her 10-day hospitalization, the mother continued to attempt to maintain contact with the child. When she was released from the hospital, the mother’s attempts to see the child were hindered not only by her health issues, the loss of her home, distance and lack of transportation, but also by the extreme and unfortunate animosity between the mother and petitioner. The mother did not neglect her responsibilities; rather, during the pendency of the hearing, she was obtaining regular mental health treatment, sought help and obtained a suitable apartment and car, and was employed as an adjunct professor. While a health crisis of any sort can be frightening and upsetting to a child, the record does not reflect that the child’s relationship with her mother was any worse than the one she shared with petitioner. Notably, Family Court recognized that the child was “a wonderful young lady[, well-adjusted, very knowledgeable, intelligent, doing well in school [and] involved in activities,” and that the mother “played a significant role and ha[d] done a very good job of raising” the child. Matter of Lina Y. v Audra Z., 2015 NY Slip Op 07708, 3rd Dept 10-22-15

 

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