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In the Context of a Pre-Answer Motion to Dismiss, the Statute of Frauds Barred Actions Stemming from Advising Defendants in the Actual Negotiation of a Business Opportunity, But Did Not Bar Actions Stemming from Advising Defendants Whether to Negotiate a Business Opportunity

The Court of Appeals, in a full-fledged opinion by Judge Fahey, determined, in the context of a pre-answer motion to dismiss, the statute of frauds did not bar the causes of action which stemmed from plaintiff’s advising defendants whether to negotiate a business opportunity, as opposed to the causes of action stemming from plaintiff’s advising defendants in the actual negotiation of a business opportunity (which were barred by the statute of frauds).

Here we are specifically concerned with General Obligations Law § 5-701 (a) (10), which “appl[ies] to a contract implied in fact or in law to pay reasonable compensation” and which provides that “[e]very agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking . . . [i]s a contract to pay compensation for services rendered in . . . negotiating the purchase . . . of any real estate or interest therein, or of a business opportunity, business, its good will, inventory, fixtures or an interest therein . . . .” … . * * *

… [T]he allegations with respect [some of the projects] could be construed as seeking recovery for work performed so as to inform defendants whether to partake in certain business opportunities, that is, whether to negotiate. (emphasis added) To the extent the causes of action are based on such allegations, they are not barred by the statute of frauds.  JF Capital Advisors, LLC v Lightstone Group, LLC, 2015 NY Slip Op 05622, CtApp 7-1-15

 

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Pleading Requirements for Unjust Enrichment and Fraud Not Met

The Second Department determined the complaint against defendant bank alleging unjust enrichment and fraud was properly dismissed for failure to state a cause of action. The action stemmed from a foreclosure sale.  After the property had been sold, the judgment of foreclosure and sale was vacated because the bank did not properly serve process on one of the parties. The full amount paid for the property was refunded to the plaintiff.  The plaintiff then sued for unjust enrichment claiming the bank collected banK fees and interest.  Re: unjust enrichment: the complaint failed to allege the bank had been enriched at plaintiff’s expense. And the plaintiff sued for fraud alleging the bank knew it had failed to properly serve one of the parties at the time it prosecuted the foreclosure action.  Re: fraud: the complaint included only conclusory allegations of fraud without out the requisite supporting factual allegations. The Second Department explained:

The elements of a cause of action to recover for unjust enrichment are “(1) the defendant was enriched, (2) at the plaintiff’s expense, and (3) that it is against equity and good conscience to permit the defendant to retain what is sought to be recovered” … . “The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered” … .

Here, the plaintiff merely alleged in the amended complaint that U.S. Bank was “unjustly enriched in that it collected bank fees and interest.” Even accepting these allegations in the amended complaint as true, the amended complaint failed, as a matter of law, to sufficiently allege that U.S. Bank was enriched at the plaintiff’s expense … . * * *

“The elements of a cause of action sounding in fraud are a material misrepresentation of an existing fact, made with knowledge of the falsity, an intent to induce reliance thereon, justifiable reliance upon the misrepresentation, and damages” … . All of the elements of a fraud claim “must be supported by factual allegations containing the details constituting the wrong” in order to satisfy the pleading requirements of CPLR 3016(b)… .

Here, the amended complaint consisted of conclusory allegations regarding U.S. Bank’s knowledge that it had commenced and prosecuted the underlying foreclosure action without properly effecting service on all of the necessary parties. Furthermore, the facts alleged in the amended complaint do not give rise to a reasonable inference that U.S. Bank had knowledge of, or participated in, the alleged fraud … . GFRE, Inc. v U.S. Bank, N.A., 2015 NY Slip Op 05640, 2nd Dept 7-1-15

 

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Police Vehicles Are Excluded from the Meaning of “Motor Vehicle” in the Insurance Law—Passenger-Police-Officer Injured In a Police Vehicle by an Uninsured/Underinsured Driver Is Not Covered Under the Uninsured/Underinsured Motorist Provision of the Police-Officer-Driver’s Personal Policy

The Court of Appeals, in a full-fledged opinion by Judge Abdus-Salaam, over a dissent, determined that a police vehicle is not a motor vehicle within the meaning of the Insurance Law. Therefore a police officer, who was injured in a police vehicle driven by another police officer, could not recover under the police-officer-driver’s uninsured/underinsured motorist coverage in the driver’s personal insurance policy:

… Insurance Law §§ 3420 (e) and 3420 (f) (1) do not directly define “motor vehicle” in so many words, but Insurance Law § 3420 (e) does refer to “a motor vehicle or a vehicle as defined in [VTL 388 (2)].” VTL 388 is the sole provision of VTL article 11, which governs civil liability for negligence in the operation of vehicles. VTL 388 (2) states, “As used in this section, ‘vehicle’ means a ‘motor vehicle’, as defined in [VTL 125], except fire and police vehicles,” and certain other vehicles not relevant here (see VTL 388 [2]).  * * *

… [B]ecause the liability insurance provision of Insurance Law § 3420 (e) had traditionally dovetailed with the coverage of VTL 388 and its predecessors, Insurance Law § 3420 (e) employed the phrase “of a motor vehicle or of a vehicle as defined in [VTL 388]” as an imprecise way of incorporating the limitations of VTL 388 into Insurance Law § 3420 (e). In other words, Insurance Law § 3420 (e) used VTL 388 (2) to redefine “motor vehicle” as exempting police vehicles from the automobile insurance sections of Insurance Law § 3420. Given that the uninsured motorist and SUM coverage sections of Insurance Law § 3420 had originated as outgrowths designed to simply fill the uninsured or underinsured motorist “gaps” in the compulsory insurance statute and Insurance Law § 3420 (e), rather than to expand the class of covered vehicles, the Court rightly decided that Insurance Law §§ (f) (1) and (f) (2) logically applied to the limited category of “motor vehicles” referenced in Insurance Law § 3420 (e), thus also excluding police vehicles. Since SUM coverage under Insurance Law § 3420 (f) (2) was just a variant of uninsured coverage under subsection (f) (1) of the same statute, the Court appropriately found that SUM coverage was likewise limited to non-police vehicles. Matter of State Farm Mut. Auto. Ins. Co. v Fitzgerald, 2015 NY Slip Op 05626, CtApp 7-1-15

 

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Question of Fact Whether Out-of-Possession Landlord Relinquished Control of the Premises to the Extent that Its Duty to Maintain the Premises in a Reasonably Safe Condition Was Extinguished—Lease Allowed Landlord to Reenter to Inspect and Make Repairs and Improvements

The Second Department determined there were questions of fact whether an out-of-possession landlord (Marphil Realty) was liable for a dangerous condition (resulting in a fire). The lease gave the landlord the right to reenter during usual business hours in order to inspect the premises and to make repairs and improvements. Therefore there was a question of fact whether the landlord had relinquished complete control over the property such that its duty to maintain the property in a reasonably safe condition was extinguished:

“Generally, a landowner owes a duty of care to maintain his or her property in a reasonably safe condition” … . “That duty is premised on the landowner’s exercise of control over the property, as the person in possession and control of property is best able to identify and prevent any harm to others'” … . Accordingly, “a landowner who has transferred possession and control is generally not liable for injuries caused by dangerous conditions on the property” … . However, an out-of-possession landlord may be liable for injuries occurring on the premises if “it has retained control of the premises, is contractually obligated to perform maintenance and repairs, or is obligated by statute to perform such maintenance and repairs” … . Yehia v Marphil Realty Corp., 2015 NY Slip Op 05670, 2nd Dept 7-1-15

 

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Parents of Children in Public Schools Had Standing to Seek Court Review of the SUNY Trustees’ Authorization of Charter Schools—The Authorization Was Not Arbitrary or Capricious or an Abuse of Discretion

The Second Department determined parents of children in public schools had standing to bring an Article 78 petition for a review of the SUNY Trustee’s authorization for charter schools. The court determined the authorization was not arbitrary or capricious or an abuse of discretion, noting that there was no requirement of majority community support:

The petitioners, a group of parents of children in public schools in Community School District 14 and an organization they founded to oppose the subject charter schools, commenced this proceeding pursuant to CPLR article 78 to review the SUNY Trustees’ determination authorizing the charters. The amended petition alleged that the SUNY Trustees authorized the charters in violation of Education Law §§ 2851(2)(q), 2852(9-a)(b)(ii), and 2852(2)(a), in that [the charter school organization] failed to demonstrate adequate community support, outreach, or input, and therefore, the charters should be voided. * * *

In authorizing the issuance of charters to the subject schools, the SUNY Trustees were required to find that the proposed schools met all requirements of the Charter School Act (see Education Law § 2852[2][a]). Given the representations and support therefor contained in [the] applications, the SUNY Trustees’ determination that [the charter school organization] met the statutory requirements with regard to evidence “of adequate community support for and interest in the charter school sufficient to allow the school to reach its anticipated enrollment” (Education Law § 2851[2][q]), and public outreach to solicit community input and address comments received from the impacted community concerning the educational and programmatic needs of students (see Education Law § 2852[9-a][b][ii]…), was, insofar as relevant here, not arbitrary and capricious. As the SUNY Trustees and the charter schools correctly contend, majority community support is not required by the Charter Schools Act (see Education Law § 2851[2][q]). Matter of Williamsburg & Greenpoint Parents: Our Pub. Schools! v Board of Trustees, State Univ. of N.Y., 2015 NY Slip Op 05690, 2nd Dept 7-1-15

 

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Company Which Contracted with County to Maintain Traffic Signals Did Not Owe a Duty to Plaintiff—Plaintiff Alleged a Malfunctioning Traffic Signal Caused an Accident in Which She Was Injured

Plaintiff alleged a traffic accident was the result of a malfunctioning traffic signal.  The defendant county had entered a traffic-signal maintenance contract with defendant Welsbach.  The Second Department determined that the contract between the county and Welsbach did not give rise to tort liability re: defendant Welsbach in favor of the plaintiff because the contract was not such that it displaced the county’s duty to maintain the traffic signal. The court explained the analytical criteria:

“[A] contractual obligation, standing alone, will generally not give rise to tort liability in favor of a third party” … . Exceptions to this general rule exist “(1) where the contracting party, in failing to exercise reasonable care in the performance of [its] duties, launche[s] a force or instrument of harm; (2) where the plaintiff detrimentally relies on the continued performance of the contracting party’s duties[;] and (3) where the contracting party has entirely displaced the other party’s duty to maintain the premises safely” … . Welsbach established, prima facie, that it did not owe the plaintiff a duty of care, since its limited maintenance contract with the County did not displace the County’s duty to maintain the traffic signal at the subject intersection in a reasonably safe condition and it did not launch an instrument of harm … . Watt v County of Nassau, 2015 NY Slip Op 05668, 2nd Dept 7-1-15

 

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Non-Resident Shareholders In an S Corporation Who Sold their Stock and Treated the Transaction as a “Deemed Asset Sale” Were Properly Assessed New York Income Tax on the New York-Source Aspects of the Sale

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined non-resident plaintiffs, shareholders in an S corporation who sold their stock and treated the transaction as a “deemed asset sale,” were properly assessed New York income taxes on the New York-source aspects of the sale pursuant to Tax Law 632. The court rejected the argument that the tax assessment violated Article 16 section 3 of the New York Constitution:

Based on the results of [an] audit, defendant New York State Department of Taxation and Finance assessed $167,000 in state income taxes on plaintiffs’ … transaction gains, relying on Tax Law § 632 (a) (2), which was amended in 2010 to provide, in relevant part, that “any gain recognized on [a] deemed asset sale for federal income tax purposes will be treated as New York source income.” Plaintiffs paid the taxes and thereafter demanded refunds, claiming that their corporate-derived income was obtained from the sale of … stock, which is considered intangible personal property and nontaxable.

After defendant rejected the refund demands, plaintiffs filed the instant declaratory judgment action against defendant and the Commissioner of the New York State Department of Taxation and Finance, challenging the tax as unconstitutional … . * * *

…. [T]here is no question that New York State’s Tax Law, including Tax Law § 632 (a) (2), as amended in 2010, contemplates the taxes that defendants assessed on the New York-source portion of plaintiffs’ deemed asset sale gains. * * *

Nothing changes the fact that plaintiffs sold something of value and reaped the benefits from that sale. Article 16, § 3 in no way supports plaintiffs’ attempts to avoid paying state taxes on those gains. Burton v New York State Dept. of Taxation & Fin., 2015 NY Slip Op 05624, CtApp 7-1-15

 

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Property Was Not Transferred Until Escrow Conditions Were Met—Appellant Did Not Own the Building Where Plaintiff Slipped and Fell Because the Escrow Conditions Were Not Met and the Deed Was Not Released from Escrow Until the Day After the Slip and Fall

Reversing Supreme Court, the Second Department determined appellant did not own the property on the day plaintiff slipped and fell. The “preclosing” on the sale of the property to appellant took place on the day of the accident. But the deed was held in escrow until the escrow conditions were met on the day following the accident. Therefore the property was not transferred to the appellant until the day after the accident:

“When a deed is delivered to be held in escrow, the actual transfer of the property does not occur until the condition of the escrow is satisfied and the deed is subsequently delivered to the grantee by the escrow agent”… . Here, the appellant established its prima facie entitlement to judgment as a matter of law by submitting proof that the actual transfer of the property to the appellant did not occur until the conditions of the escrow were satisfied and the deed was thereafter released by the escrow agent on [the day after the accident]. As a result, the appellant demonstrated that it did not own or otherwise control the subject property on the date of the plaintiff’s alleged accident … . Camac v 550 Realty Hgts., LLC, 2015 NY Slip Op 05631, 2nd Dept 7-1-15

 

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Motion to Intervene by Members of a De-Certified Class Should Have Been Granted—Class Members Allowed to Sue In Their Individual Capacities

The Second Department determined the motion to intervene by plaintiffs and 167 residents in a de-certified class action alleging environmental damage resulting from emissions from defendant’s (BNL’s) lab should have been granted. The action began as a class action suit which was dismissed without prejudice. Then, in accordance with CPLR 1013, the individuals in the class brought a motion to intervene accompanied by a complaint which was denied by Supreme Court.  The Second Department held the motion to intervene should have been granted and further held that the statute of limitations had been tolled from the time the class action proceedings were commenced:

… [T]he plaintiffs, along with 167 members of the proposed classes, moved together for leave to allow those 167 proposed class members to intervene in the action as plaintiffs pursuant to CPLR 1013, on the ground that “when a class action is de-certified, putative members of the de-certified class are given the opportunity to intervene into the case because of their allegations of common questions of law and fact.” The plaintiffs and the proposed intervenors (hereinafter collectively the appellants) alleged that the proposed intervenors owned property in the vicinity of BNL in 1996 and after, and presented common questions of law and fact with respect to loss of property values, and the cost of using municipal water instead of well water. They submitted a third amended complaint in support of their motion. * * *

… [T]he causes of action of the proposed intervenors are all based upon common theories of liability and, thus, satisfy the requirement of CPLR 1013 that their causes of action involve common questions of law or fact. Contrary to the Supreme Court’s conclusion, BNL would not be faced with a “plethora of new claims.” Moreover, BNL did not demonstrate that intervention would substantially prejudice any party, or cause undue delay … .

To the extent BNL argues, as an alternate ground for affirmance , that the claims of the proposed intervenors are time-barred, this contention is without merit. The statute of limitations applicable to this toxic tort action is the three-year statute of limitations pursuant to CPLR 214-c, which runs from the date of discovery or the date when the injury should have been discovered through the exercise of due diligence … . In American Pipe & Constr. Co. v Utah (414 US 538, 553), the United States Supreme Court held that, under the federal class action rule, commencement of a class action suit tolls the running of the statute of limitations for all purported members of the class who make timely motions to intervene after the court has found the suit inappropriate for class action status. New York courts have adopted this rule … . Osarczuk v Associated Univs., Inc., 2015 NY Slip Op 05653, 2nd Dept 7-1-15

 

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“Conclusory” Allegation Rear-End Collision Was Caused by the Sudden Stop of the Lead Vehicle Is Not Enough to Defeat Plaintiffs’ Summary Judgment Motion

Reversing Supreme Court, the Second Department determined plaintiffs, who were struck from the rear in a vehicle collision, were entitled to summary judgment. A “conclusory” allegation by the defendant that plaintiffs’ vehicle caused the accident by stopping suddenly was not enough to defeat the motion.  The court explained the relevant law:

“When the driver of an automobile approaches another automobile from the rear, he or she is bound to maintain a reasonably safe rate of speed and control over his vehicle, and to exercise reasonable care to avoid colliding with the other vehicle” … .

“A rear-end collision with a stopped or stopping vehicle creates a prima facie case of negligence against the operator of the rear vehicle, thereby requiring that operator to rebut the inference of negligence by providing a nonnegligent explanation for the collision”‘ … .

A nonnegligent explanation for a rear-end collision may include evidence of a sudden stop of the lead vehicle … . However, “vehicle stops which are foreseeable under the prevailing traffic conditions, even if sudden and frequent, must be anticipated by the driver who follows, since he or she is under a duty to maintain a safe distance between his or her car and the car ahead”… . Moreover, “[a] conclusory assertion by the operator of the following vehicle that the sudden stop of the vehicle caused the accident is insufficient, in and of itself, to provide a nonnegligent explanation” … . Brothers v Bartling, 2015 NY Slip Op 05630, 2nd Dept 7-1-15

 

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