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A Misrepresentation Which Is the Subject of a Provision in a Contract May Be the Basis for a Distinct Fraud Cause of Action Which Is Not Duplicative of the Breach of Contract Cause of Action

The First Department, over a dissent, determined that misrepresentations supported both a claim for breach of contract and a claim for fraud in the inducement. The facts of the case are laid out in the dissent and are not summarized here. The misrepresentations involved the alleged failure to disclose an audit prior to the sale of a company which, plaintiff alleged, induced plaintiff to pay more than the company was worth. The majority offered a clear explanation of the legal requirements for a distinct fraud (tort) cause of action which is not duplicative of the related breach of contract cause of action:

It is axiomatic that in order to state a claim for fraudulent inducement, “there must be a knowing misrepresentation of material present fact, which is intended to deceive another party and induce that party to act on it, resulting in injury” … . In the context of a contract case, the pleadings must allege misrepresentations of present fact, not merely misrepresentations of future intent to perform under the contract, in order to present a viable claim that is not duplicative of a breach of contract claim … . Moreover, these misrepresentations of present fact must be “collateral to the contract and [must have] induced the allegedly defrauded party to enter into the contract … . Therefore, “[a]s a general rule, to recover damages for tort in a contract matter, it is necessary that the plaintiff plead and prove a breach of duty distinct from, or in addition to, the breach of contract” … . * * *

… [The] representations were … warranted to be accurate at the time the contract was entered into and made for the purposes of inducing the plaintiffs to purchase those loans. They were designed to be relied on to arrive at an accurate value of the loans, and the value of the company being purchased here. These misrepresentations did not merely evince “an insincere promise of future performance [but were] instead . . . misrepresentation[s] of then present facts that were collateral to the contract, and thus plaintiff sufficiently alleged a cause of action sounding in fraud” … .Wyle Inc. v ITT Corp., 2015 NY Slip Op 05877, 1st Dept 7-7-15

 

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Questions of Fact About Defendant’s Actual or Constructive Notice of Liquid on Floor—Question of Fact Whether Contract Food Service Launched and Instrument of Harm Such that the Food Service Contract Gave Rise to Tort Liability to Plaintiff

The First Department determined summary judgment should not have been granted to the defendants in a slip and fall case. The complaint alleged that there was liquid on the floor of a women’s homeless shelter operated by defendant Camba.  The complaint further alleged that plaintiff frequently observed liquid on the floor after defendant food service, Whitson’s, delivered prepared food. Plaintiff also alleged she had complained about the condition to Camba’s maintenance staff. The First Department found the affidavit of Camba’s employee did not demonstrate the absence of actual or constructive notice (no evidence of the cleaning schedule was presented).  The First Department also found there was a question of fact whether Whitson’s launched an instrument of harm, which would support tort liability for plaintiff’s fall arising from Whitson’s food service contract with Camba:

Camba failed to make a prima facie showing that it lacked constructive notice of the liquid on the floor. Although Camba’s employee testified that she completed her inspection of the building about an hour before the accident, and that it was her usual custom and practice to pass by the area where plaintiff claims she fell, she could not recall whether she inspected the accident location itself that afternoon when she made her rounds … . Her affidavit stating that she did not observe a slippery substance or liquid on the hallway floor during her daily rounds did not satisfy Camba’s burden of showing it had no actual or constructive notice of the dangerous condition alleged and that it did not exist for a sufficient length of time prior to the accident to permit Camba employees to discover and remedy it … . Camba also failed to present evidence regarding the shelter’s cleaning schedule, and Camba’s employee lacked personal knowledge regarding the shelter’s maintenance … .

Even if Camba had met its initial burden, the record shows that there exists a question of fact as to whether it had notice of a recurring condition. Plaintiff’s testimony that she frequently would see liquid leaking from Whitson’s Food’s delivery crates at the accident location, and that she complained to Camba’s maintenance staff about the liquid, is sufficient to raise a triable issue of fact as to a recurring condition … .

Whitson’s Food, which had a contract with Camba to provide cooked meals for the shelter, failed to make a prima facie showing that it did not launch a force or instrument of harm by dropping liquid on the floor when it delivered food to the shelter on the day of the accident … . The deposition testimony from an employee of Whitson’s Food was insufficient to show that Whitson’s Food did not cause or create the liquid condition, since he lacked personal knowledge as to whether the floor was clean after Whitson’s Food delivered the food … . Jackson v Whitson’s Food Corp., 2015 NY Slip Op 05889, 1st Dept 7-7-15

 

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People Could Not Show Good Cause for the Nearly Five-Year Pre-Indictment Delay—Indictment Dismissed

The Third Department, over a dissent, determined, in a child pornography case, the nearly five-year delay between when defendant’s computer was seized and defendant questioned (2009) and the indictment (2013) required dismissal of the indictment. The case was not complex and no additional information beyond that gathered in 2009 was needed to indict. The People therefore did not demonstrate good cause for the extensive delay:

The parties agree that there has been a protracted preindictment delay that places the burden on the People to establish good cause for that delay … . The People state in their brief that there are no issues of fact regarding the issue before this Court and the record on appeal provides an adequate basis to determine whether the protracted delay was justified.

In determining whether there is an undue delay, the trial court must consider “(1) the extent of the delay; (2) the reason for the delay; (3) the nature of the underlying charge; (4) whether or not there has been an extended period of pretrial incarceration; and (5) whether or not there is any indication that the defense has been impaired by reason of the delay” … . Here, although defendant was not incarcerated during the period of delay and the nature of the charges are serious, the extent of the delay was clearly extensive. The People attribute the delay to the fact that the matter was initially referred to the office of the United States Attorney for the Northern District of New York for prosecution, and point to vague references of personnel changes within that office, as well as that office’s decision, at some point, not to prosecute.

This was not a complex legal matter and the record establishes that no further evidence was needed in order to charge defendant beyond that gathered in the 2009 … .  People v Montague, 2015 NY Slip Op 05721, 3rd Dept 7-2-15

 

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Under the Public Trust Doctrine, Only the Uses of the Dedicated Parkland Which Were Contemplated by the Relevant Provisions of the NYC Administrative Code Are Allowed—The Code Provisions Authorized Construction of Facilities Directly Related to Shea Stadium (Now Demolished)—Under Standard Rules of Statutory Construction, the Meaning of the Code Provisions Cannot Be Stretched to Allow the Construction of a Shopping Mall

The First Department, in a full-fledged opinion by Justice Mazzarelli, determined that provisions of the NYC Administrative Code could not be interpreted to allow the construction of a shopping mall in the area where Shea Stadium once stood. Rather the code provisions allowed only construction which was relevant to the stadium. Under the public trust doctrine only the uses of the dedicated parkland contemplated by the code provisions were authorized

This dispute turns on whether the plain language of Administrative Code § 18-118 compels a narrow use of the parkland in question such that any additional construction on it must be directly related to a stadium, or whether any such construction on the parkland must only be related to one of the purposes delineated in § 18-118(b). The proper interpretation of the statute is critical in this case, because, under the public trust doctrine, dedicated park areas in New York are impressed with a public trust for the benefit of the people of the State, and their “use for other than park purposes, either for a period of years or permanently, requires the direct and specific approval of the State Legislature, plainly conferred” … . Stated differently, parkland may be alienated or leased for non-park purposes as long as authorized by the legislature …, and the “legislative authority required to enable a municipality to sell its public parks must be plain” … . * * *

… [T]he public trust doctrine is clear that any alienation of parkland must be explicitly authorized by the legislature. No reasonable reading of Administrative Code section 18-118 allows for the conclusion that the legislature in 1961 contemplated, much less gave permission for, a shopping mall, unrelated to the anticipated stadium, to be constructed in the Park. Further, it is simply not in our power to set the doctrine aside, no matter how worthy a proposed use of parkland may be. Here, while there is a legislative mandate for the use of the Park, that mandate does not encompass the use proposed by respondents. Matter of Avella v City of New York, 2015 NY Slip Op 05790, 1st Dept 7-2-15

 

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Defendants Ordered to Dismantle and Remove Boathouses Built Without Permits/Immediate Neighbors Had Standing to Bring an Action to Enjoin the Zoning Violations

The Third Department, in a full-fledged opinion by Justice Egan, determined that boathouses constructed without permits (required by the New York State Uniform Fire Prevention and Building Code [SBC] and the Village of Lake Placid/Town of North Elba Land Use Code [LUC]) must be completely dismantled and removed.  The defendants were aware from the start that proceeding with the building of the boathouses without permits would be at their own risk. The permits were ultimately denied. The opinion is extensive and much of it is devoted to explaining the litigation/appeal history and refuting defendants’ arguments (not addressed here).  With respect to the finding that the neighbors had standing to bring an action to enjoin the asserted zoning violations re: one of the parcels (referred to as the “children’s parcel”), the court wrote:

As a threshold matter, Supreme Court correctly concluded that the neighbors have standing to challenge the asserted zoning violations and to seek injunctive relief against the children. Although municipal officials indeed are tasked with enforcing zoning ordinances within their boundaries (see Town Law § 268 [2]), this “does not prevent . . . private property owner[s] who suffer[] special damages from maintaining an action seeking to enjoin the continuance of the violation and obtain damages to vindicate [their] discrete, separate identifiable interest[s]” … . To establish standing to maintain a private common-law action to enjoin zoning violations, a private plaintiff must establish that, due to the defendant’s activities, he or she will sustain special damages that are “different in kind and degree from the community generally” and that the asserted interests fall “within the zone of interest to be protected” by the statute or ordinance at issue … .

To that end, the neighbors both alleged and submitted proof that they own land (improved with single-family homes) on either side of the children’s parcel and that the children’s boathouse was built without the permits required by the LUC and SBC. The neighbors also demonstrated that the children’s boathouse violates various provisions of the LUC, including those governing set-backs and prohibiting accessory structures on land that lacks a principal building (see Joint Village of Lake Placid/Town of North Elba Land Use Code part IV, art III, § 4; art V, appendix F [II]). Where, as here, the offending premises are immediately adjacent to the neighbors’ property, “a loss of value may be presumed from the depreciation of the character of the immediate neighborhood, and the [neighbors] need not allege specific injury” … . We find that the neighbors’ specific allegations of close proximity give rise to an inference of damage and injury, thereby permitting them to maintain action No. 2. Moreover, the neighbors have demonstrated that their interests fall within the “zone of interest” protected by the LUC, in that violations thereof adversely affect their privacy and property values … . Indeed, we recognized as much in our prior decision permitting the neighbors to intervene, concluding that they “have an interest in the litigation by virtue of their status as owners of adjoining premises” … . Town of N. Elba v Grimditch, 2015 NY Slip Op 05740, 3rd Dept 7-2-15

 

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Retroactive Application of Tax Law 632 Amendments, Which Clarified that Installment Payments Re: a Deemed Asset Sale Will Be Treated as New York-Source Income, Did Not Violate Plaintiffs’ Due Process Rights

The Court of Appeals, in a full-fledged opinion by Judge Stein, in an action raising many of the same income-tax-law issues raised in Burton v New York State Dept. of Taxation & Fin., 2015 NY Slip Op 05624, CtApp 7-1-15 (summarized directly above), determined plaintiffs’ due process rights were not violated by the retroactive application of Tax Law 632. The case concerned the taxation of installment payments re: a deemed asset sale of stock in an S corporation. The 2010 amendments of Tax Law 632 clarified that the installments will be treated as New York-source income and made the amendments retroactive for 3 1/2 years. The Court of Appeals determined: (1) plaintiffs’ interpretation of the prior law was not reasonable and therefore plaintiffs did not establish reliance on the prior law; (2) the length of the retroactive period was not excessive; and (3),  the amendment (correcting an error and preventing revenue loss) served a valid public purpose. The court explained the nature of the amendments and the analytical criteria for determining the validity of retroactive application:

Prior to its amendment, Tax Law § 632 mandated only that, as relevant here:

“In determining New York source income of a nonresident shareholder of an S corporation . . . there shall be included only the portion derived from or connected with New York sources of such shareholder’s pro rata share of items of S corporation income, loss and deduction entering into his federal adjusted gross income . . .”

The 2010 amendments clarified, among other things, that if the S corporation distributed an installment obligation under 26 USC § 453 (h) (1) (A) or made a deemed asset sale election under 26 USC § 338 (h) (10), “any gain recognized on the receipt of payments from the installment obligation . . . [or] on the deemed asset sale for federal income tax purposes will be treated as New York source income” (L 2010, ch 57, Part C § 2). The amendments were made retroactive to all taxable years beginning on or after January 1, 2007 — which represent those years for which the statute of limitations for seeking a refund or assessing additional tax was still open (L 2010, ch 57, Part C, § 4, amended L 2010, ch 312, Part B, § 1) — thus, effectively creating a 3½ year period of retroactivity. * * *

While “retroactive legislation does have to meet a burden not faced by legislation that has only future effects[,] . . . that burden is met simply by showing that the retroactive application of the legislation is itself justified by a rational legislative purpose” … . In analyzing whether a statute is harsh and oppressive — and, thus, arbitrary and irrational — this Court uses a balancing-of-equities test … :

“The important factors in determining whether a retroactive tax transgresses the constitutional limitation are (1) ‘the taxpayer’s forewarning of a change in the legislation and the reasonableness of . . . reliance on the old law,’ (2) ‘the length of the retroactive period,’ and (3) ‘the public purpose for retroactive application'” … . Caprio v New York State Dept. of Taxation & Fin., 2015 NY Slip Op 05625, CtApp 7-1-15

 

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The Defendants, Lessees of the Property Abutting the Sidewalk, Demonstrated in their Summary Judgment Motion that there Was No Statute or Ordinance Imposing Liability on Lessees for Failure to Clear Snow and Ice from the Sidewalk, But the Defendants Did Not Affirmatively Demonstrate They Did Not Make the Condition More Hazardous by their Snow Removal Efforts—Therefore the Summary Judgment Motion Must Be Denied Without Reference to the Answering Papers

The Second Department determined defendants, who leased the premises abutting a sidewalk in Brooklyn, were not entitled to summary judgment dismissing a “snow and ice” slip and fall complaint. The defendants demonstrated that there was no statute or ordinance imposing tort liability. However the defendants failed to affirmatively demonstrate that their snow removal efforts did not make conditions more hazardous (another example of the need for a defendant bringing a summary judgment motion to address every possible theory of liability):

” The owner or lessee of property abutting a public sidewalk is under no duty to remove ice and snow that naturally accumulates upon the sidewalk unless a statute or ordinance specifically imposes tort liability for failing to do so'” … . “In the absence of a statute or ordinance imposing tort liability on the lessee, it can be held liable only if it, or someone on its behalf, undertook snow and ice removal efforts which made the naturally-occurring conditions more hazardous” … .

Here, the … defendants, as lessees of the property, established that no statute or ordinance imposed tort liability on them (cf. Administrative Code of City of NY 7-210 [applicable to owners of real property]). However, they failed to make a prima facie showing that there were no efforts to clear the sidewalk on the date of the injured plaintiff’s accident or that any snow and ice removal efforts undertaken by them or by persons on their behalf did not exacerbate the hazardous condition which allegedly caused the injured plaintiff to fall … . Forlenza v Miglio, 2015 NY Slip Op 05639, 2nd Dept 7-1-15

 

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Question of Fact Re: Whether Dog Had Exhibited Vicious Propensities Prior to Plaintiff’s Injury Precluded Summary Judgment

The Second Department determined questions of fact about whether the dog exhibited vicious propensities prior to plaintiff’s injury precluded summary judgment in a dog bite case.  The court explained the relevant law, noting that no negligence cause of action for a dog bite exists in New York:

Aside from the limited exception …, regarding a farm animal that strays from the place where it is kept …, which is not at issue here, “New York does not recognize a common-law negligence cause of action to recover damages for injuries caused by a domestic animal” … . Thus, “[t]o recover upon a theory of strict liability in tort for a dog bite or attack, a plaintiff must prove that the dog had vicious propensities and that the owner of the dog . . . knew or should have known of such propensities” … . Vicious propensities include the propensity to do any act that might endanger the safety of the persons and property of others … . “Evidence tending to prove that a dog has vicious propensities includes a prior attack, the dog’s tendency to growl, snap, or bare its teeth, the manner in which the dog was restrained, and a proclivity to act in a way that puts others at risk of harm” … .

Here, the plaintiff failed to establish her prima facie entitlement to judgment as a matter of law on the issue of the defendant’s liability. In support of her motion, the plaintiff submitted her deposition testimony that, although the dog had barked “aggressively” at her prior to the incident, she had never observed the dog attack any person or another pet prior to this incident. The plaintiff also submitted the deposition testimony of a neighbor who, on two separate occasions prior to the instant attack, observed the dog growl, bark, bare its teeth, and jump at a person. Significantly, the neighbor testified that the defendant was present during both of the prior incidents. However, in support of her motion, the plaintiff submitted the deposition testimony of the defendant, who maintained that, prior to the attack on the plaintiff, the dog had never attacked any person or any other dog, and had never acted threateningly toward anyone. The defendant further testified that, although the dog might have barked at times, no one had ever complained to her about the dog or reported to her that they felt threatened by the dog. This evidence demonstrated the existence of triable issues of fact as to whether the dog displayed vicious propensities prior to the plaintiff’s attack, or if it did, whether the defendant was aware of such propensities … . Ostrovsky v Stern, 2015 NY Slip Op 05654, 2nd Dept 7-1-15

 

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Parking Lots Owned by a Federal-Income-Tax-Exempt Charitable Organization Formed to Facilitate Commercial Development Were Not Entitled to a Charitable Exemption from Real Property Taxes—The Parking Lots Were “Used” to Increase Commerce Which Is Not a Charitable Use Under the Real Property Tax Law

The Court of Appeals, in a full-fledged opinion by Judge Pigott, over a two-judge dissent, determined that parking lots owned by “Greater Jamaica” were not entitled to a charitable exemption from real estate taxes.  “Greater Jamaica” is an organization formed for the purpose of facilitating Jamaica’s commercial development.  It is exempt from federal income taxation pursuant to 26 USC 501 (c) (3).  The NYC Department of Finance (DOF) revoked Greater Jamaica’s exemption from real estate taxes which the DOF had previously granted. Supreme Court upheld the revocation. The Appellate Division reversed Supreme Court. And the Court of Appeals reversed the Appellate Division. The Court of Appeals noted that the criteria for a charitable exemption under the IRS code is different from the criteria under Real Property Tax Law (RPTL) 420-a and, although a court may consider the IRS exemption in a RPTL 420-a proceeding, the IRS exemption is not determinative. The Court of Appeals concluded the parking lots were primarily used to facilitate the commercial growth of Jamaica, which was not a charitable purpose under the RPTL:

The City revoked the tax exemption on the ground that it was erroneously awarded in the first instance. It met its burden in this regard by demonstrating that the “use” of the parking facilities was not for “charitable” purposes but rather for economic development, and that the use of the parking facilities were not “incidental to another recognized charitable [*6]purpose.” Specifically, the City’s revocation letter explained that the City reached its determination after reviewing documents submitted to it by Greater Jamaica and case law from this Court. The City also explained why it believed that the status granted Greater Jamaica by the IRS had no bearing on the issue of “charitable use” of the parking facilities under section 420-a. The letter stated that although the parking facilities may have served “an important public purpose and support[ed] development of a community,” those factors did not qualify the facilities for a charitable exemption. Indeed, according to the City’s review of the ownership structure of the lots along with other documentation, it appeared that Jamaica First collected monies that exceeded the carrying, maintenance and depreciation charges attributable to the premises and that Jamaica First utilized those excess proceeds to fund other additional operations, such as the purchase of an additional parking lot. * * *

Although we do not disturb the Appellate Division’s holding that petitioners met the “organized or conducted exclusively for . . . charitable . . . purposes” prong of the tax exemption test, we part company with the Appellate Division relative to its holding that “petitioners demonstrated that the use of their public parking facilities was consistent with their exempt purpose, as expressly noted by the IRS in granting such operation tax exempt status” … . By so holding, the Appellate Division utilized the petitioners’ organizational status’ under Internal Revenue Code (26 USC) § 501 (c) (3) to support its holding that petitioners’ demonstrated that the use of the parking facilities was for an exempt purpose. This was error. …

… [T]he IRS’s definition of what constitutes an exempt “charitable” purpose is exceedingly broad, including, among other things, “the lessening of the burdens of [g]overnment” (26 CFR 1.501 [c] [3]-1 [d] [2]), while the second prong of section 420-a (1) (a) requires a court to review “the actual or physical use of the property when it exempts from taxation property ‘used exclusively for carrying out thereupon one or more’ exempt purposes” … . Thus, our analysis under section 420-a is concerned with the “use” of the parking facilities as a whole, and whether the facilities are “used exclusively for carrying out thereupon one or more of [section 420-a’s] purposes.” * * *

We disagree with petitioners’ assertion that the parking facilities are charitable in and of themselves because they fulfill the primary purpose of economic development. The economic benefit conveyed by below-market rate parking, however, inures to the benefit of private enterprise and cannot be said to further any charitable purpose. It lessens the burden of local businesses, obviating any need for them to make their own parking arrangements for prospective customers. The below-market rates that the facilities charge provide an incentive for the public to patronize those businesses, providing a dual benefit for local business and a benefit to prospective customers of those businesses. While these goals may be laudable, they are not charitable. Matter of Greater Jamaica Dev. Corp. v New York City Tax Commn., 2015 NY Slip Op 05620, CtApp 7-1-15

 

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Constructive Trust Properly Imposed—Sister, Who Was Not Included on the Original Deed Because of Credit Problems, Contributed One-Third of the Downpayment Based Upon a Promise She Would Be Added to the Deed at a Later Time

The Second Department determined a constructive trust was properly imposed on property for which the plaintiff provided one-third of the downpayment.  Plaintiff Reynida Diaz was not included on the original deed with her two sisters because of her credit history. There was an agreement among the sisters that Reynida would be added to the deed at a later time. Defendant sister refused to add Reynida to the deed. The court explained the requirements for a constructive trust:

In general, the imposition of a constructive trust is appropriate in situations when ” property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest'” … . The elements of a constructive trust are (1) a fiduciary or confidential relationship; (2) an express or implied promise; (3) a transfer in reliance on the promise; and (4) unjust enrichment … . A party must establish the elements of a constructive trust by clear and convincing evidence … .

There is no dispute that the first element, a confidential relationship, exists among the sisters …, a fact conceded by the defendant. As to the second element, the testimony of the two plaintiff sisters, the defendant, and a family friend, as well as the documentary evidence, established the existence of an express agreement among the parties at the time the subject property was purchased that Reynida Diaz would be added to the deed at some later date … . The plaintiffs also established the transfer in reliance element in that, at the time of the purchase of the subject property, Reynida Diaz had given the defendant $13,000, the same amount contributed by the defendant and the other plaintiff, in exchange for the promise of being added to the title as a co-owner at a later date … . The fourth element, that the defendant would be unjustly enriched if the constructive trust was not imposed, was also established in that the defendant had received the $13,000 from Reynida Diaz, as well as payments from her toward the monthly mortgage and maintenance of the property equal to the amounts contributed by the defendant and the other plaintiff who was on the deed to the subject property … . Diaz v Diaz, 2015 NY Slip Op 05635, 2nd Dept 7-1-15

 

 

 

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