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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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Insurer of Lessee Obligated to Defend and Indemnify the Owner/Lessor of the Premises (Named as an Additional Insured) Re: a Slip and Fall on the Sidewalk in Front of the Premises/Use of the Sidewalk Constitutes “Use of the Leased Premises” Within the Meaning of the Policy

The Second Department determined the insurer, Continental, was obligated to defend and indemnify the plaintiff-owner of the premises re: a slip and fall on the sidewalk in front of the premises. The premises was leased to the insured, “White Plains,” and sublet to “Pretty Girl,” a retail store.  The owner/lessor was named as an additional insured in the Continental policy:

The Continental policy contains an endorsement stating that a lessor of premises is an additional insured with respect to liability arising out of the ownership, maintenance, or use of the specific part of the premises leased. The plaintiffs, who are the owners and lessors of the subject premises, established that their potential liability in the underlying action arises out of the ownership, maintenance, or use of the specific part of the premises leased to Continental’s insured, White Plains Sportswear Corp., and sublet to Pretty Girl, Inc.

Inasmuch as New York City Administrative Code § 7-210 imposes liability on owners of commercial property for defective conditions on sidewalks, the plaintiffs’ potential liability arises from their ownership of the leased premises … . The underlying claim arises out of the maintenance or use of the leased premises, as the sidewalk was necessarily used for access in and out of the leased building … . Frank v Continental Cas Co, 2014 NY Slip Op 08808, 2nd Dept 12-17-14

 

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Question of Fact Raised About Whether Contract for the Installation of Marble Staircase Landings Gave Rise to Tort Liability to Third Party (Plaintiff) Stemming from the Collapse of a Landing

The Second Department determined a question of fact had been raised about whether a contract for the installation of marble staircase landings (by defendant Suli) gave rise to tort liability for injury to plaintiff resulting from the collapse of the landing:

Ordinarily, the breach of a contractual obligation is not sufficient in and of itself to impose tort liability upon the promisor to noncontracting parties … . However, a party who enters into a contract to render services may be said to have assumed a duty of care and, thus, would be potentially liable in tort to third persons when the contracting party, in failing to exercise reasonable care in the performance of its duties, launches an instrument of harm or creates or exacerbates a hazardous condition … . Here, Suli demonstrated its prima facie entitlement to judgment as a matter of law by presenting evidence that it properly installed the marble slab, that it never received any complaints about the work prior to the accident, and that no defects in the marble were observed prior to the accident. However, in opposition, the plaintiff and the building defendants raised a triable issue of fact as to whether Suli created the hazardous condition that caused the accident through the affidavit of an experienced marble setter and installer. That expert explained that marble could weaken over time due to stress fractures, and opined that Suli should have supported the marble slab with an additional “angle iron” in the center of the slab, and that Suli’s failure to do so was a substantial contributing factor in the happening of the accident … . Torres v 63 Perry Realty LLC, 2014 NY Slip Op 08830, 2nd Dept 12-17-14

 

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Where Defendant Is Represented on a Pending Charge and Seeks Leniency by Cooperation with Police in the Investigation of An Unrelated Offense, the Police Cannot Question the Defendant About the Unrelated Offense in the Absence of Counsel Unless Defendant Affirmatively Waives His Right to Counsel In Counsel’s Presence

The Court of Appeals, in a full-fledged opinion by Judge Smith, over a dissent, determined that defendant, who was represented by counsel in a pending criminal matter, should not have been questioned in the absence of counsel about another crime.  Defendant, in an attempt to gain leniency, told the police he knew that a friend had committed a stabbing. The police met with the defendant to “wire him up” for a meeting with his friend.  Defendant's attorney, Schwarz, knew defendant was meeting with the police for that purpose.  During the meeting, the defendant was questioned about the stabbing and eventually he admitted he had committed that crime.  He was then read his Miranda rights, which he waived.  The Court of Appeals held that none of the questioning about defendant's involvement with the stabbing should have be done without defendant's affirmative waiver of his right to counsel, in the presence of defendant's attorney:

Defendant relies on the rule, long established in New York, that “[o]nce an attorney enters the proceeding, the police may not question the defendant in the absence of counsel unless there is an affirmative waiver, in the presence of the attorney, of the defendant's right to counsel” … . The People respond that this rule does not apply here because the “proceeding” in which the police questioned defendant on …—their investigation of the supermarket stabbing ——was one that no attorney had entered. Schwarz, in the People's view, represented defendant only in the burglary case, about which he was not questioned.

We do not find this a viable distinction. The stabbing investigation cannot be neatly separated from Schwarz's representation of defendant in the burglary case. Defendant had pinned his hopes for a favorable result in the burglary case on his cooperation with the police investigation of the stabbing. Under these circumstances, Schwarz's duty to his client required him to concern himself with both cases.

Schwarz was not, of course, retained to defend the stabbing case: before the April 19 meeting, defendant had not been charged with the stabbing, and no such charge seemed likely. But Schwarz's obligation in defending the burglary case included an obligation to be alert to, and to avert if he could, the possibility that defendant's cooperation would hurt rather than help him. No responsible lawyer in Schwarz's situation would concern himself with the burglary case alone, indifferent to the disaster that might strike defendant if he incriminated himself in the stabbing.

We therefore conclude that defendant's right to counsel encompassed his conversations with police about the stabbing, as long as those conversations were part of an effort to obtain leniency in the burglary case in which Schwarz represented him. Thus, unless the right to counsel was waived, the police should not have questioned defendant about the stabbing in his lawyer's absence. People v Johnson, 2014 NY Slip Op 08787, CtApp 12-17-14

 

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Abutting Landowners Are Not Required, Pursuant to the NYC Administrative Code, to Remove Ice and Snow from Pedestrian Ramps—The Ramps Are Not Part of the Sidewalk

In reversing Supreme Court, the Second Department explained that pedestrian ramps are not part of the sidewalk and therefore abutting landowners are not required to remove ice and snow from a pedestrian ramp:

“Administrative Code of the City of New York § 7-210, which became effective September 14, 2003, shifted tort liability for injuries arising from a defective sidewalk from the City of New York to the abutting property owner” … . “However, pedestrian ramps are not part of the sidewalk for the purpose of imposing liability on abutting landowners pursuant to that provision” … . Stanziale v City of New York, 2014 Slip Op 08825, 2nd Dept 12-17-14

 

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Sex Offender Who Has Difficulty Controlling Sexual Urges, As Opposed to a Sex Offender Who Is Unable to Control Sexual Urges, Should Be Placed Under Strict and Intensive Supervision, Not Confined

The Court of Appeals, in a full-fledged opinion by Judge Pigott, determined that respondent sex offender should not be confined in a mental health facility after serving his prison sentence, but rather should be placed under “strict and intensive supervision.”  After finding the “least restrictive alternative doctrine” does not apply to Article 10 (Mental Hygiene Law) proceedings, the Court of Appeals determined the evidence did not support the conclusion respondent was a “dangerous sex offender requiring confinement.”  The evidence demonstrated respondent had, with difficultly, been able to control his sexual urges, but did not demonstrate that he was unable to control them (the requirement for confinement):

The Mental Hygiene Law defines “mental abnormality” as “a congenital or acquired condition, disease or disorder that affects the emotional, cognitive, or volitional capacity of a person in a manner that predisposes him or her to the commission of conduct constituting a sex offense and that results in that person having serious difficulty in controlling such conduct” (MHL § 10.03 [i] [emphasis added]). By contrast, a “dangerous sex offender requiring confinement” is defined in the Mental Hygiene Law as “a person who is a detained sex offender suffering from a mental abnormality involving such a strong predisposition to commit sex offenses, and such an inability to control behavior, that the person is likely to be a danger to others and to commit sex offenses if not confined to a secure treatment facility” (MHL § 10.03 [e] [emphasis added]). The statute — which goes on to describe a “sex offender requiring strict and intensive supervision” as a “detained sex offender who suffers from a mental abnormality but is not a dangerous sex offender requiring confinement” (MHL § 10.03 [r]) — clearly envisages a distinction between sex offenders who have difficulty controlling their sexual conduct and those who are unable to control it. The former are to be supervised and treated as “outpatients” and only the latter may be confined. Matter of State of New York v Michael M, 2014 NY Slip Op 08789, CtApp 12-17-14

 

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Condition Precedent to Arbitration Re: a Hit-and-Run Accident Involving an Unidentified Vehicle Is Physical Contact with Unidentified Vehicle—Lack of Proof of Physical Contact Justified Permanent Stay of Arbitration

The Second Department noted that a condition precedent to an arbitration based upon a hit-and-run accident involving an unidentified vehicle is physical contact.  Here there was insufficient evidence of physical contact with the unidentified vehicle:

The appellant sought uninsured motorist benefits under a policy of insurance issued by the petitioner for physical injuries allegedly sustained by him in a hit-and-run accident. The petitioner commenced this proceeding pursuant to CPLR article 75 to permanently stay arbitration of the claim.

Physical contact is a condition precedent to an arbitration based upon a hit-and-run accident involving an unidentified vehicle (see Insurance Law § 5217…). “The insured has the burden of establishing that the loss sustained was caused by an uninsured vehicle, namely, that physical contact occurred, that the identity of the owner and operator of the offending vehicle could not be ascertained, and that the insured’s efforts to ascertain such identity were reasonable” … . Matter of Progressive Northwestern Ins Co v Scott, 2014 NY Slip Op 08847, 2nd Dept 12-17-14

 

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Privatization of a Mitchell-Lama Cooperative Housing Corporation Is Not a Taxable Conveyance Subject to the Real Property Transfer Tax

The Court of Appeals, in a full-fledged opinion by Judge Abdus-Salaam, determined that the reconstitution of a cooperative housing corporation [Trump Village], changing from a Mitchell-Lama corporation pursuant to the Private Housing Finance Law [PHFL] to a corporation pursuant to the Business Corporation Law, was not a conveyance of real property subject to the Real Property Transfer Tax [RPTT]. The NYC Department of Finance characterized the change as a taxable conveyance and was seeking over $21,000,000 in tax and penalties.  The Court of Appeals held that the amendment to the certificate of incorporation did not create a new corporation and that the amended certificate did not constitute a deed:

In support of their position that the privatization of Trump Village is a taxable event, defendants argue that an amendment to a certificate of incorporation is a “deed.” Defendants also assert that Trump Village is a new corporation and that there was actually a conveyance of real property to a different corporation, with Trump Village being both the grantor and grantee. However, defendants’ construction of the RPTT cannot be reconciled with the plain language of the statute. Furthermore, even if there were any ambiguities regarding the application of the RPTT to this situation, “doubts concerning [a taxing statute’s] scope and application are to be resolved in favor of the taxpayer”… . Thus, we reject defendants’ strained interpretation of section 11-2102(a) of the Administrative Code of the City of New York. …

Trump Village …, is the same corporation that was named in the original certificate of incorporation. The Business Corporation Law distinguishes between amending a certificate of incorporation (§ 801 et seq.) and formation of a corporation (§ 401 et seq.). Section 801 (14) provides that a certificate of incorporation may be amended “to strike out, change or add any provision . . . relating to the business of the corporation, its affairs, its right or powers . . . .”…

The PHFL provides that a Mitchell-Lama corporation “may be voluntarily dissolved” and “[t]hat upon dissolution, title to the project may be conveyed in fee to the owner or owners of its capital stock or to any corporation designated by it or them for that purpose, or the company may be reconstituted pursuant to appropriate laws relating to the formation and conduct of corporations”(PHFL § 35 [3][emphasis added]). Accordingly, there are two options for the process of privatization, and plaintiff chose the second option – – reconstitution through amendment of its certificate of incorporation [FN1]. Defendants posit that the legislature intended the word “reconstitute” to mean the same thing as “reincorporate.” However, as long ago as 1857, it was recognized that reincorporation “cannot be deemed the formation of a new corporation, but should be regarded as the continuation of the existing one”… . Trump Vil Section 3 v City of New York, 2014 NY Slip Op 08788, CtApp 12-17-14

 

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Elevator Company Which Agrees to Keep Elevator in a Safe Operating Condition May Be Liable to Injured Passenger

The Second Department reversed Supreme Court finding an elevator company which agreed to maintain an elevator in a safe condition may be liable to an injured passenger:

“An elevator company which agrees to maintain an elevator in safe operating condition may be liable to a passenger for failure to correct conditions of which it has knowledge or failure to use reasonable care to discover and correct a condition which it ought to have found” … . Here, the defendant submitted maintenance records for the subject elevator, including work tickets for a period of approximately one year preceding the plaintiff’s accident and a “callout report,” which indicated that approximately six months before the accident, the defendant was called to repair the alarm bell. The defendant also submitted the plaintiff’s deposition transcript, wherein he testified that, prior to his accident, there were times when the alarm bell and strobe light did not activate and that two other individuals had been struck on the head by the gate prior to his accident. Thus, the defendant’s submissions failed to establish, prima facie, that it did not have actual or constructive notice concerning the defective operation of the elevator’s gate, alarm bell, and strobe light … . Since the defendant failed to establish its prima facie entitlement to judgment as a matter of law, its motion should have been denied regardless of the sufficiency of the plaintiff’s opposition papers … . Papapietro v Knoe Inc, 2014 NY Slip Op 08817, 2nd Dept 12-17-14

 

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Motion for a Change of Venue Made in the Wrong County–Statutory Procedure Explained

The Second Department determined that, given plaintiff’s response to the demand to change venue, defendants’ motion for a change of venue should have been made in the county where action was pending.  The court explained the applicable law:

“CPLR 511(b) provides a mechanism pursuant to which a defendant may serve a demand to change the place of a trial upon the ground of improper venue to a county the defendant specifies as being proper” … . If the plaintiff does not consent to the change, “the defendant may move to change the place of trial within fifteen days after service of the demand” (CPLR 511[b]). The defendant may notice such motion to be heard as if the action were pending in the county he or she specified, unless the plaintiff, within five days after service of the demand, serves an affidavit showing either that the county specified by the defendant is not proper or that the county designated by the plaintiff is proper (see id.).

Here, in response to the defendants’ demand to change venue, the plaintiff timely served an affidavit of her attorney containing factual averments that were prima facie sufficient to show that the county designated by her was proper (see CPLR 503[a]; 511[b]…). Accordingly, the defendants’ motion pursuant to CPLR 510(1) should have been made in the Supreme Court, Kings County, where the action was pending, and the Supreme Court, Nassau County, erred in granting the motion … .  King v CSC Holdings LLC, 2014 NY Slip OP 08813, 2nd Dept 12-17-14

 

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