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Allegation Corporation Was Deliberately Rendered Judgment Proof by Parent Corporation Is Sufficient to Support Action in Equity to Pierce the Corporate Veil

The First Department explained the nature of “wrongdoing” which will support a complaint in equity seeking to pierce the corporate veil:

….[T]he allegations that defendant [parent corporation], through its domination of [its subsidiary] PFLLC, misrepresented the value of the assets sold and then caused PFLLC to become judgment proof, are … sufficient to support claims that defendant perpetrated a wrong or injustice against plaintiff, thus warranting intervention by a court of equity … . Wrongdoing in this context does not necessarily require allegations of actual fraud. While fraud certainly satisfies the wrongdoing requirement, other claims of inequity or malfeasance will also suffice … . Allegations that corporate funds were purposefully diverted to make it judgment proof or that a corporation was dissolved without making appropriate reserves for contingent liabilities are sufficient to satisfy the pleading requirement of wrongdoing which is necessary to pierce the corporate veil on an alter-ego theory … . Baby Phat Holding Co LLC v Kellwood Co., 2014 NY Slip Op 05925, 1st Dept 8-21-14

 

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Court Should Have Held a Hearing to Determine Whether Exigent Circumstances Justified Warrantless Forced Entry to an Apartment

The First Department determined that the motion court should have held a hearing to determine whether the forced entry of an apartment was justified by exigent circumstances.  At the time of defendant’s motion for a hearing, the facts surrounding the incident were not available to the defendant and the People’s response to the motion was “conclusory:”

In denying defendant’s application for a hearing, the Court summarily found that exigent circumstances justified the pursuit and warrantless entry, based upon the individuals in the hallway reportedly having smoked marijuana, then racing into the apartment and locking the door, and the need to prevent destruction of evidence. Defendant argues in his brief that at most some individuals were seen smoking marijuana, a class B misdemeanor that would not present exigent circumstances sufficient for a forced entry.

Under the circumstances presented here, where the information proffered by the People to support the forcible entry was conclusory and defendant did not have access to available information, we find that it was incumbent upon the motion court to conduct a hearing to determine whether there were sufficient exigent circumstances to justify the forced warrantless entry… . People v Chamlee, 2014 NY Slip Op 05921, 1st Dept 8-21-14

 

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Defense Counsel Should Have Been Allowed to Cross-Examine Cooperating Accomplice/Witness to Demonstrate Motivation and Bias

The First Department, in a full-fledged opinion by Justice Acosta, determined that the curtailment of cross-examination of a cooperating witness deprived defendant of his right to confront the witnesses against him.  Four were charged in a robbery.  One of the four, referred to as “M,” entered a cooperation agreement and testified against the defendant. Defense counsel was prohibited from asking M a line of questions intended to reveal M’s motivation and bias:

Here, defendant sought … [to question] M. in an attempt to cast doubt on his credibility by revealing his bias and motive to fabricate testimony. Defense counsel’s theory was that M. had implicated defendant in the prior uncharged robberies in order to bolster the value of his cooperation agreement with the People. This was unquestionably an appropriate trial strategy, since “exposure of a witness’ motivation in testifying is a proper and important function of the constitutionally protected right of cross-examination” … . That M. intended to invoke his Fifth Amendment privilege and refuse to answer the questions does not abrogate defendant’s Sixth Amendment right of confrontation. As an accomplice witness, M.’s credibility, bias, and motive to fabricate were not collateral issues … . Therefore, defense counsel should have been permitted to question him on the prior crimes. If he subsequently invoked his Fifth Amendment privilege, the trial court should have gone as far as striking all or some of his direct testimony … . At a minimum, the court should have pursued the “least drastic relief” (typically reserved for “collateral matters or cumulative testimony concerning credibility”) by instructing the jury that it could consider M.’s invocation of the Fifth Amendment in determining his credibility … . People v McLeod, 2014 NY Slip Op 05926, 1st Dept 8-21-14

 

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Police Officer’s Tripping Over a Fire Hose at the Scene of a Fire Was Not a “Service-Related Accident”

The First Department, over a dissent, determined that a police officer who tripped over a fire hose at the scene of a fire was entitled to ordinary (ODR) , as opposed to accidental (ADR), disability retirement benefits:

Not every line of duty injury will result in an award of ADR … . When the denial of ADR benefits to a police officer is the result of a tie vote by the Board of Trustees, this Court is required to uphold the denial unless “it can be determined as a matter of law on the record that the disability was the natural and proximate result of a service-related accident” … . Thus, the issue before us is whether, reviewing the record, it can be said, as a matter of law, that petitioner’s disability was the natural and proximate result of a service-related accident.

In the context of ADR benefits, the Court of Appeals has defined an accident as a ” sudden, fortuitous mischance, unexpected, out of the ordinary, and injurious in impact,'” while ” an injury which occurs without an unexpected event as the result of activity undertaken in the performance of ordinary employment duties, considered in view of the particular employment in question, is not an accidental injury'” … . It is petitioner’s burden to establish that his injuries resulted from an accident as defined in the context of ADR … .

Normal risks in most jobs are not unexpected * * *.

While it is true that petitioner was a police officer, not a firefighter, it cannot be said as a matter of law that his ordinary employment duties did not include responding to a fire emergency. As the Board of Trustees had before it some credible evidence of lack of causation, it did not err as a matter of law in concluding that petitioner’s disability was not the result of an accident within the meaning of Administrative Code § 13-252 … . Finally, contrary to the dissent, we do not regard the charging of fire hoses at the scene of a fire as a sudden, fortuitous, or unexpected event. Matter of Pastalove v Kelly, 2014 NY Slip Op 05922, 1st Dept 8-21-14

 

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Disposing of Key Evidence Warranted Striking of Answer

The Second Department determined Supreme Court properly struck the defendant’s answer and awarded summary judgment to plaintiffs on liability because the defendant disposed of crucial evidence after having been asked to preserve it.  Students were directed to stand on a grate to pose for a class picture.  The grate collapsed and the students fell eleven feet.  The defendant disposed of the grate:

Under the common-law doctrine of spoliation, when a party negligently loses or intentionally destroys key evidence, that party may be sanctioned under CPLR 3126 … . Since the Supreme Court has broad discretion in determining what, if any, sanction should be imposed for spoliation of evidence …, it may, under appropriate circumstances, impose a sanction even if the destruction occurred through negligence rather than wilfulness, and even if the evidence was destroyed before the spoliator became a party, provided the spoliator was on notice that the evidence might be needed for future litigation … .

Here, the Supreme Court providently exercised its discretion in striking the defendant’s answers and thereupon awarding the plaintiffs summary judgment on the issue of liability pursuant to CPLR 3126. The record demonstrates that the defendant disposed of the grate involved in the accident after having received a written demand from one of the infant plaintiff’s attorneys that the grate be preserved for inspection by the plaintiffs and their experts. Moreover, the plaintiffs demonstrated that they were unduly prejudiced by the defendant’s conduct in disposing of the grate. Biniachvili v Yeshivat Shaare Torah Inc, 2014 NY Slip Op 05826, 2nd Dept 8-20-14

 

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Memorialized Telephone Notification About Pothole Does Not Satisfy Written Notice Requirement—Inadequate Repair Is Not Sufficient to Demonstrate Municipality Created the Dangerous Condition

The Second Department determined Supreme Court should have dismissed the complaint against the village because the village did not receive written notice of the pothole which allegedly caused plaintiff’s injury.  The court noted that phone calls to the village about the pothole, even if memorialized in writing, did not meet the written notice requirement.  The court also noted that an inadequate repair of the pothole is not enough to demonstrate the village created the defect:

The plaintiff contends that there is a triable issue of fact as to whether the Village received prior written notice of the defect, because the oral notice provided by residents of the street, including voicemail, could have been reduced to writing by an employee of the Village. However, Hempstead Village Code § 39-1 requires that “written notice of said defect causing the injuries or damages was actually given to the Village Clerk.” There are no provisions permitting other types of notice, such as a written acknowledgment of oral notice … . Therefore, a verbal or telephonic communication which was reduced to writing by the Village would not satisfy the prior written notice requirement … .

In Yarborough v City of New York (10 NY3d 726), the Court of Appeals noted that once the municipality establishes lack of written notice, “the burden shifts to the plaintiff to demonstrate the applicability of one of two recognized exceptions to the rule —that the municipality affirmatively created the defect through an act of negligence or that a special use resulted in a special benefit to the locality.” A negligent repair of the defective condition is insufficient to establish that the municipality affirmatively created the defect … . To fall within the exception, the repair must immediately result in a dangerous condition …, which made the defective condition more dangerous than it was before any efforts were made to repair it … . Wilson v Incorporated Vil of Hempstead, 2014 NY Slip Op 05861, 2nd Dept 8-20-14

 

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Criteria for Granting Leave to Serve a Late Notice of Claim Explained

The Second Department determined Supreme Court had properly granted plaintiff’s motion for leave to serve a late notice of claim. The infant plaintiff was injured at school and there was no doubt the school was aware of the injury, and the background of the injury, at the time it occurred.  The court included a succinct summary of the applicable analytical criteria:

General Municipal Law § 50-e(5) permits a court, in its discretion, to extend the time to serve a notice of claim … . Whether the public corporation acquired timely actual knowledge of the essential facts constituting the claim within 90 days after the claim arose or a reasonable time thereafter is seen as a factor which should be accorded great weight in determining whether or not to grant leave to serve a late notice of claim … . “In order to have actual knowledge of the essential facts constituting the claim, the public corporation must have knowledge of the facts that underlie the legal theory or theories on which liability is predicated in the notice of claim; the public corporation need not have specific notice of the theory or theories themselves” … .

Other factors a court must consider in determining whether to grant leave to serve a late notice of claim are: (1) whether the claimant was an infant or mentally or physically incapacitated; (2) whether the claimant had a reasonable excuse for the failure to serve a timely notice of claim; and (3) whether the delay would substantially prejudice the public corporation in maintaining its defense (see General Municipal Law § 50-e[5]…). The presence or absence of any one of these factors is not necessarily determinative … .  Kellman v Hauppauge Union Free School Dist, 2014 NY Slip Op 05844, 2nd Dept 8-20-14

 

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Husband, Criminally Responsible for the Death of His Mother-in-Law, Could Not Inherit the Mother-in-Law’s Estate Indirectly After the Death of His Wife

The Second Department, in a full-fledged opinion by Justice Hall, determined the husband, Brandon, who was criminally responsible for the death his mother-in-law, could not inherit the mother-in-law’s estate indirectly after the death of his wife, Deanna:

The principle that a wrongdoer may not profit from his or her wrongdoing is deeply rooted in this State’s common law. In 1889, the Court of Appeals decided the seminal case of Riggs v Palmer (115 NY 506) . In Riggs, a grandson, who had intentionally killed his grandfather in order to ensure his inheritance, was prevented from inheriting under the grandfather’s will. In reaching this determination, the Court of Appeals held that, “[n]o one shall be permitted to profit by his own fraud, or to take advantage of his own wrong, or to found any claim upon his own iniquity, or to acquire property by his own crime” (id. at 511). In short, the Riggs rule “prevents wrongdoers from acquiring a property interest, or otherwise profiting from their own wrongdoing” … . * * *

The issue here is whether the Riggs doctrine may be extended to prevent a wrongdoer from indirectly profiting from his or her own wrongdoing. More specifically, we are asked to determine whether Brandon may inherit assets of the decedent’s estate indirectly through Deanna’s estate. While it is clear that Brandon would not be able to inherit from the decedent’s estate directly, the issue of whether he may do so indirectly through Deanna’s estate is less settled. Indeed, this is an issue of first impression, as there is no appellate precedent from New York addressing whether the Riggs doctrine applies where a killer seeks to inherit assets from his or her victim indirectly through the estate of a person not implicated in the unlawful killing. * * *

Here … there is a clear causal link between the wrongdoing and the benefits sought … . But for Brandon’s killing of the decedent, the estate of Deanna would not likely include any assets from the decedent’s estate. Furthermore, since only a relatively short period of time elapsed between the decedent’s death and the death of Deanna, it is clear that Deanna’s estate would include assets traceable to the decedent. Indeed, according to [the] petition for letters of administration, Deanna’s estate consists only of funds Deanna received as beneficiary of the decedent’s retirement plan, and the expected inheritance from the decedent. Significantly, the decedent’s estate has not yet been distributed to Deanna’s estate, and no commingling of any funds between the two estates has occurred.

Under these circumstances, the Surrogate’s Court appropriately exercised its equitable powers (see SCPA 201[2]) in extending the Riggs doctrine to prevent Brandon from inheriting any portion of the decedent’s estate through the estate of Deanna … . Matter of Dianne Edwards, 2014 NY Slip Op 05873, 2nd Dept 8-20-14

 

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Golfer Assumed the Risk of Tripping on Grate in Golf-Cart Path

The Second Department determined the doctrine of primary assumption of the risk precluded a suit by a golfer who tripped on a grate in a golf-cart path:

Under the doctrine of primary assumption of the risk, “by engaging in a sport or recreational activity, a participant consents to those commonly appreciated risks which are inherent in and arise out of the nature of the sport generally and flow from such participation” … . Those risks include risks associated with the construction of the playing surface and any open and obvious condition on it … . Here, contrary to the plaintiffs’ contention, the defendants established their prima facie entitlement to judgment as a matter of law on the ground that the doctrine of primary assumption of risk applied … . Simon  v Hamlet Windwatch Dev LLC, 2014 NY Slip Op 05855, 2nd Dept 8-20-14

 

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Case Against Non-Debtor Not Entitled to Automatic Stay

The Second Department, in reversing Supreme Court’s granting of a stay, explained the circumstances when cases by and against non-debtors can be stayed under the bankruptcy law (11 USC 362(a)):

“[T]he bankruptcy court can stay actions against any party, even a non-debtor, whenever the objective of the action is to obtain possession or exercise control over the debtor’s property. Unless a case involves unusual circumstances, however, the bankruptcy court cannot halt litigation by non-debtors, even if they are in a similar legal or factual nexus with the debtor.

“The unusual circumstances in which the bankruptcy court can stay cases against non-debtors are rare. They typically arise where there is such identity between the debtor and the third-party defendant that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment or finding against the debtor. In other words, the automatic stay will apply to non-debtors only when a claim against the non-debtor will have an immediate adverse economic consequence for the debtor’s estate” … . Bankdirect Captial Fin v Insurance Co of State of PA, 2014 NY Slip Op 05824, 2nd Dept 8-20-14

 

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