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All Ambiguities Re: Letters of Credit Resolved Against the Issuer—“Independence Principle” Applied—Beneficiaries of Letters of Credit Entitled to Payment

In a full-fledged opinion by Justice Andrias, the First Department reversed Supreme Court and determined plaintiffs were entitled to payment as beneficiaires of irrevocable standby letters of credit.  The opinion is detailed and meticulously resolved all ambiguities in the relevant documents against the issuer of the letters of credit.  The opinion includes an extended discussion of the “independence principle” in this context.  With respect to the basic analytical principles to be applied, the court wrote:

Under New York law, in order to recover on its claim that the issuer wrongfully refused to honor its request to draw down on a letter of credit, the beneficiary must prove that it strictly complied with the terms of the letter of credit … . “The corollary to the rule of strict compliance is that the requirements in letters of credit must be explicit, and that all ambiguities are construed against the [issuer]” … . The reasoning is that “[s]ince the beneficiary must comply strictly with the requirements of the letter, it must know precisely and unequivocally what those requirements are” … . “Where a letter of credit is fairly susceptible of two constructions, one of which makes it fair, customary and one which prudent men would naturally enter into, while the other makes it inequitable, the former interpretation must be preferred to the latter, and a construction rendering the contract possible of performance will be preferred to one which renders its performance impossible or meaningless” … . * * *

In November 2000, the independence principle was codified in a general revision of article 5 of the UCC. UCC 5—103(d) now provides that:

“[r]ights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.”

The doctrine of independent contracts, as codified in UCC article 5, allows the letter of credit to provide ” a quick, economic and trustworthy means of financing transactions for parties not willing to deal on open accounts'”… . “Only staunch recognition of this principle by the issuers and the courts will give letters of credit the continuing vitality that arises from the certainty and speed of payment under letters of credit” … .BasicNet SpA v CFP Servs Ltd, 2014 NY Slip Op 04585, 1st Dept 6-19-14

 

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Accelerated Relief Pursuant to CPLR 3213 (Judgment In Lieu of Complaint) Should Not Have Been Granted—the Document at Issue Did Not Include a Promise to Pay On Demand or at a Definite Time

The Second Department determined Supreme Court should not have granted accelerated relief pursuant to CPLR 3213 because the document describing the loan did not include a provision requiring payment on demand or at a definite time:

Pursuant to CPLR 3213, a party may obtain accelerated relief by moving for summary judgment in lieu of complaint, provided that the action is “based upon an instrument for the payment of money only or upon any judgment” (CPLR 3213…). “A promissory note is an instrument for the payment of money only, provided that it contains an unconditional promise by the borrower to pay the lender over a stated period of time” … . An instrument does not qualify for accelerated relief under CPLR 3213 “if outside proof is needed, other than simple proof of nonpayment or a similar de minimis deviation from the face of the document” … .

Therefore, a plaintiff makes a prima facie showing of entitlement to judgment as a matter of law pursuant to CPLR 3213 by showing that the defendant executed the subject instrument, the instrument contains an unconditional promise to repay the plaintiff upon demand or at a definite time, and the defendant failed to pay in accordance with the instrument’s terms … .

Here, the record does not support the Supreme Court’s determination that the Document reflects the defendant’s unconditional promise to repay the borrowed sum upon demand or at definite time … . Von Fricken v Schaefer, 2014 NY Slip Op 04479, 2nd Dept 6-18-14

 

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Constructive Trust Cause of Action Sufficiently Pled/Dismissal “With Prejudice” Not Allowed—Doctrine of Res Judicata Does Not Apply—a Dismissal for Failure to State a Cause of Action Is Not On the Merits

The Second Department determined Supreme Court should not have dismissed the constructive trust cause of action.  The court further determined that the conversion, constructive fraud and breach of contract causes of action were properly dismissed for failure to state a cause of action, but should not have been dismissed “with prejudice.”  With respect to the constructive trust and the dismissal with prejudice, the court wrote:

The equitable remedy of a constructive trust may be imposed ” [w]hen 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 cause of action to impose a constructive trust are (1) the existence of a confidential or fiduciary relationship, (2) a promise, (3) a transfer in reliance thereon, and (4) unjust enrichment” … . “To achieve equity and avoid unjust enrichment, the courts apply these factors flexibly rather than rigidly” … .

Here, the plaintiff sufficiently alleged the existence of a confidential or fiduciary relationship with the defendants. The parties were related through marriage, and the plaintiff and Atanasio, along with their respective spouses, pooled their resources in order to purchase the residential property and the boat … . Further, the plaintiff sufficiently pleaded the elements of a promise and a transfer in reliance on the promise. He alleged that, before he sold the defendants his interest in the property in November 2005, the defendants promised to reimburse him for the expenditures he made for the property and boat as long as he continued making those payments for one year after the sale of his interest. In reliance on this alleged promise and his confidential relationship with the defendants, he transferred his interest in the property to the defendants, and thereafter continued to make expenditures in connection with the property and boat. Finally, his allegations that he made all expenditures for the property and boat during a period of 7½ years, and that the defendants refused to reimburse him, despite being co-owners of the property and boat and notwithstanding their promise, were sufficient to plead the unjust enrichment element necessary to the imposition of a constructive … .

…Supreme Court, upon dismissing the second, third, and fourth causes of action, improperly did so “with prejudice.” A dismissal for failure to state a cause of action based on the insufficiency of the allegations in the pleading is not a dismissal on the merits, and does not bar the adequate repleading of the claim in a subsequent action… . Canzona v Atanasio, 2014 NY Slip Op 04458, 2nd Dept 6-18-14

In a related case, the Second Department noted that, because a dismissal for failure to state a cause of action is not on the merits, the doctrine of res judicata does not apply.  Canzona v Atanasio, 2014 NY Slip Op 04459, 2nd Dept 6-18-14

 

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Defendant’s Consent to the Substitution of a Juror Was Not Knowingly and Intelligently Given, Reversal Required

The Second Department, in a full-fledged opinion by Justice Chambers, determined the defendant’s consent to the substitution of a juror was not knowingly and intelligently given and reversal was required (despite the absence of an objection).  The defendant was not present when defense counsel consented to the substitution and deliberations resumed.  When the defendant arrived, he consented to the substitution.  In the mean time, however, the jury had reached a verdict.  But the trial judge had not informed the defendant a verdict had been reached at the time the defendant was asked for his consent to the substitution:

“[T]he safeguards afforded by CPL 270.35 are identical to and coextensive with the constitutional requirements for valid waiver of a jury trial” … . The decision to allow an alternate juror to be substituted for a deliberating juror must be knowing, intelligent, and voluntary … . The defendant must be “fully aware of the consequences of the choice he [or she] is making” … . In determining whether a defendant’s decision to consent to the substitution of an alternate juror for a deliberating juror is “made knowingly and understandingly, based on an intelligent, informed judgment” …, a court is required to be ” scrupulous,'” for at stake is the defendant’s “fundamental, constitutional right to a jury of 12” … . Here, the defendant’s election to substitute the alternate juror for the deliberating juror was not based on an intelligent, informed judgment. No matter how well-intentioned the trial court was in not disclosing the fact that the jury had already reached a verdict, due process required the trial court to disclose to the defendant all of the pertinent, material facts. People v Canales, 2014 NY Slip Op 04508, 2nd Dept 6-18-14

 

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Providing a False Name During Booking Did Not Trigger the Need for a Miranda Warning

The Second Department determined the police were not required to give the defendant Miranda warnings when the defendant gave a false name during the booking procedure:

When the defendant gave what a police officer suspected to be a false name, the officer warned him that giving a false name would result in an additional charge, as required by the false personation statute (see Penal Law § 190.23). The defendant then repeated the false name after being given a second warning. The officer’s warnings to the defendant did not require Miranda warnings (see Miranda v Arizona, 384 US 436). There is no basis for suppressing the defendant’s repeated use of a false name. Ascertaining an arrestee’s true name is a necessary part of the normal booking process, even if the response may have inculpatory connotations … . The false personation warnings were required by statute and were not reasonably likely to elicit an incriminating response .. . People v Allen, 2014 NY Slip Op 04503, 2nd Dept 6-18-14

 

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Warrantless Search of a Backpack Dropped During a Struggle with Police Was Not a Valid Search Incident to Arrest

The Second Department determined that the search of defendant’s backpack, which turned up a loaded weapon, was not a valid search incident to arrest.  The backpack had been dropped during a struggle with the arresting officer and the arrest took place some distance away from where the backpack was:

“Under the State Constitution, an individual’s right of privacy in his or her effects dictates that a warrantless search incident to arrest be deemed unreasonable unless justified by the presence of exigent circumstances” … . “When an individual subjected to arrest has a privacy interest in property within his or her immediate control or grabbable area’, [the Court of Appeals] has identified two interests that may justify the warrantless search of that property incident to a lawful arrest: the safety of the public and the arresting officer; and the protection of evidence from destruction or concealment” …

Contrary to the Supreme Court’s determination, the search of the backpack was not justified as a search incident to a lawful arrest. The backpack was not within the defendant’s immediate control or “grabbable area” at the time he was arrested … . Moreover, the People failed to present evidence establishing exigent circumstances at the time of the arrest that would justify the search. The detective did not assert that he searched the backpack out of concern for the safety of himself or the public, and the circumstances did not support a reasonable belief that the backpack contained a weapon … . Likewise, the detective did not assert that he searched the backpack to protect against the destruction of evidence, and the facts do not support such an assertion. People v Thompson, 2014 NY Slip Op 04524, 2nd Dept 6-18-14

 

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Neighborhood Association Had Standing to Contest Planning Board’s Negative Finding (Re: a Construction Project) After a SEQRA Review

The Second Department affirmed Supreme Court’s determination that a neighborhood association had standing to contest the planning board’s finding that a proposed construction project would not adversely affect the environment after a review pursuant to the State Environmental Quality Review Act (SEQRA) (the board issued a “negative finding”):

The Supreme Court properly determined that the Association has standing to contest the Planning Board’s issuance of the negative declaration. An association or organization has standing when “one or more of its members would have standing to sue,” “the interests it asserts are germane to its purposes,” and “neither the asserted claim nor the appropriate relief requires the participation of the individual members” … . Here, as the Planning Board concedes in its reply brief, several Association members have standing to sue, as their properties are adjacent to the proposed project site and they have alleged potential structural harm from construction-related blasting, as well as visual harm … . Moreover, the interests that the Association asserts are germane to its purpose, and the participation of Association members is not necessary in order for the Association to obtain the relief it seeks. Accordingly, the Association satisfied all relevant criteria to establish standing … . Matter of Schlemme v Planning Bd of City of Poughkeepsie, 2014 NY Slip Op 04498, 2nd Dept 6-18-14

 

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Denial of Mother’s Request to Relocate Reversed, Factors Described

The Second Department reversed Family Court and determined the relocation of the child with the mother was in the best interests of the child.  The mother had remarried, her husband and the child got along well, her husband had a good job and a three bedroom house in Georgia, adequate visitation with the child’s father could be arranged, and the child wished to move to Georgia. The court described the analytical factors:

The Family Court erred in denying the mother’s modification petition so as to allow her to relocate to Georgia with the subject child. A parent’s relocation request must be considered on its own merits with due consideration of all the relevant circumstances, and with predominant emphasis being placed on what outcome is most likely to serve the best interests of the child … . Courts are free to consider and give appropriate weight to all of the factors that may be relevant to the determination. These factors include, but are not limited to, each parent’s reasons for seeking or opposing the move, the quality of the relationships between the child and both parents, the impact of the move on the quantity and quality of the child’s future contact with the noncustodial parent, the degree to which the custodial parent’s and child’s life may be enhanced economically, emotionally, and educationally by the move, and the feasibility of preserving the relationship between the noncustodial parent and child through suitable visitation arrangements. It is for the court to determine, based on all of the proof, whether it has been established by a preponderance of the evidence that a proposed relocation would serve the child’s best interests … . In relocation proceedings, this Court’s authority is as broad as that of the hearing court. A relocation determination will not be permitted to stand unless it is supported by a sound and substantial basis in the record … . The Family Court’s determination here was not supported by a sound and substantial basis in the record. Matter of Hall v Hall, 2014 NY Slip Op 04487, 2nd Dept 6-18-14

 

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Juvenile Entitled to Petition for Special Immigrant Juvenile Status—Family Court’s Ruling to the Contrary Reversed

The Second Department reversed Family Court and determined the subject child was eligible to petition for special immigrant juvenile status:

Pursuant to 8 USC § 1101(a)(27)(J) (as amended by the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008, Pub L 110-457, 122 US Stat 5044) and 8 CFR 204.11, a “special immigrant” is an undocumented resident who is, inter alia, under 21 years of age, unmarried, and “declared dependent on a juvenile court located in the United States or whom such a court has legally committed to, or placed under the custody of, an agency or department of a State, or an individual or entity appointed by a State or juvenile court located in the United States” (8 USC § 1101[a][27][J][i]). For the juvenile to qualify for SIJS status, it must be also determined that reunification with “1 or both” of the juvenile’s parents is not viable due to parental abuse, neglect, abandonment, or a similar basis found under State law (id.), and that it would not be in the juvenile’s best interest to be returned to his or her native country or country of last habitual residence (see 8 USC § 1101[a][27][J][ii]).

Based upon our independent factual review, we find that the record, which includes affidavits from Cristal and her mother, fully supports the conclusion that Cristal was abandoned by her father. Cristal never lived with her father; he visited her only once. He never provided any financial support, and failed to communicate with her. Thus, Cristal established that reunification with her father was not viable due to abandonment … . Accordingly, the Family Court should have granted Cristal’s motion. Matter of Cristal MRM, 2014 NY Slip Op 04496, 2nd Dept 6-18-14

 

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Petitioner Was Not Estopped from Denying Paternity—Family Court’s Ruling to the Contrary Reversed

The Second Department reversed Family Court and determined the petitioner was not estopped from denying his paternity of the child. No parental relationship had developed, the child did not know the petitioner and the mother had told the petitioner he was not the child’s father:

“The purpose of equitable estoppel is to prevent someone from enforcing rights that would work injustice on the person against whom enforcement is sought and who, while justifiably relying on the opposing party’s actions, has been misled into a detrimental change of position'” … . Thus, “a man who has held himself out to be the father of a child, so that a parent-child relationship developed between the two, may be estopped from denying paternity,” in light of the child’s justifiable reliance upon such representations, and the resulting harm that the man’s denial of paternity would engender … . “The doctrine in this way protects the status interests of a child in an already recognized and operative parent-child relationship'” … . The doctrine of equitable estoppel will be applied only where its use furthers the best interests of the subject child (see Family Ct Act § 418[a]…).

Here, the Family Court improvidently exercised its discretion in concluding that the petitioner was estopped from denying his paternity of the child (see Family Ct Act § 418[a]). The hearing evidence demonstrated that the petitioner did not have a parent-child relationship since the child was approximately three years old at the time when the petitioner learned from the mother that he was not the child’s father and the parties separated. The mother testified that the child did not know the petitioner as his father and that the two had not seen each other in years. There was no evidence that the child would suffer irreparable loss of status, destruction of her family image, or other harm to her physical or emotional well-being if this proceeding were permitted to go forward … . Matter of Felix M v Leonardo RC, 2014 NY Slip Op 04491, 2nd Dept 6-18-14

 

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