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DEFENDANTS’ REPEATED FAILURES TO COMPLY WITH DISCOVERY DEMANDS WARRANTED STRIKING THE ANSWER AND COUNTERCLAIMS; SUPREME COURT HAD IMPOSED LESS SEVERE SANCTIONS, BUT THE APPELLATE COURT REVERSED AND IMPOSED THE ULTIMATE SANCTION–A RARE EXAMPLE OF CONDUCT DEEMED “WILLFUL AND CONTUMACIOUS” (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants-landlords’ answer and counterclaims in this lease-related dispute with the plaintiff-tenant. should have been struck as a sanction for defendants’ repeated failures to comply with discovery demands:

Before imposing the “drastic” remedy of striking a pleading, there must be a clear showing that a party’s failure to comply with discovery is willful and contumacious … .. “Willful and contumacious conduct may be inferred from a party’s repeated failure to comply with court-ordered discovery, coupled with inadequate explanations for the failures to comply, or a failure to comply with court-ordered discovery over an extended period of time” ,,, ,

Here, contrary to the Supreme Court’s assessment, the defendants’ behavior was willful and contumacious. The tenant demonstrated that the defendants “repeated[ly] fail[ed] to comply with court-ordered discovery” over “an extended period of time[,]” and the court itself found that the defendants offered “inadequate explanations for their failures to comply” … . Under the circumstances presented here, we find that the court should have granted that branch of the tenant’s motion which was pursuant to CPLR 3126 to strike the defendants’ answer and counterclaims in its entirety … . 255 Butler Assoc., LLC v 255 Butler, LLC, 2022 NY Slip Op 05067, Second Dept 8-31-22

Practice Point: This is a rare case where Supreme Court’s sanctions for defendants’ failures to comply with discovery demands were deemed inadequate. The appellate court stuck defendants’ answer and counterclaims finding defendants’ conduct “willful and contumacious.”

 

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DEFENDANT DID NOT OFFER A REASONABLE EXCUSE FOR FAILING TO TIMELY ANSWER THE COMPLAINT; DEFENDANT’S MOTION TO VACATE THE DEFAULT JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined defendant’s motion to vacate the default judgment should not have been granted because defendant did not offer a reasonable excuse for the failure to timely answer:

Supreme Court should have denied the defendant’s cross motion, in effect, to vacate its default in answering the complaint and to compel the plaintiff to accept its late answer … . “A defendant who has failed to timely answer a complaint and who seeks leave to file a late answer must provide a reasonable excuse for the delay and demonstrate a potentially meritorious defense to the action” … .  Here, the defendant failed to proffer any excuse, let alone a reasonable excuse, for failing to serve an answer prior to the tolling period created by the executive orders issued by former Governor Andrew Cuomo as a result of the COVID-19 pandemic …  as well as its failure to serve an answer or move to compel acceptance of its late answer for months after the expiration of the executive orders. Since the defendant failed to demonstrate a reasonable excuse, it is unnecessary to consider whether it sufficiently demonstrated the existence of a potentially meritorious defense … . 195-197 Hewes, LLC v Citimortgage, Inc., 2022 NY Slip Op 05065, Second Dept 8-31-22

Practice Point: Here defendant’s failure to offer a reasonable excuse for failing to timely answer the complaint required denial of defendant’s motion to vacate the default judgment. Apparently the COVID toll of time limits did not suffice.

 

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EVIDENCE OF COMPLIANCE WITH THE NOTICE-OF-FORECLOSURE MAILING REQUIREMENTS OF RPAPL 1304 FIRST SUBMITTED IN REPLY SHOULD NOT HAVE BEEN CONSIDERED; THE EVIDENCE THE BANK HAD STANDING TO BRING THE FORECLOSURE ACTION WAS INSUFFICIENT (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined plaintiff’s proof of mailing of the foreclosure notice first submitted in reply should not have been considered, and plaintiff did not demonstrate it had standing to bring the foreclosure action:

… [T]he affidavits that the plaintiff appended to its moving papers failed to establish that the RPAPL 1304 notices were mailed by first-class mail in accordance with RPAPL 1304. While the plaintiff submitted an additional affidavit in reply, with proof of first-class mailing attached, this evidence should not have been considered in the determination of whether the plaintiff met its prima facie burden, as the issue which the new evidence was intended to address was not an issue raised for the first time in the defendants’ opposition, and the defendants were not afforded an opportunity to submit a surreply in response to the plaintiff’s newly submitted evidence in reply … . …

[Re; standing:] …[T]he plaintiff attached to the complaint copies of the 2003 note and 2004 note, which together constituted the consolidated note, and each note was accompanied by an undated purported allonge endorsed to the plaintiff. However, the plaintiff failed to demonstrate that the purported allonges, each of which was on a piece of paper completely separate from the corresponding note, was “so firmly affixed” to the corresponding note “as to become a part thereof,” as required by UCC 3-202(2) … . Wells Fargo Bank, N.A. v Murray, 2022 NY Slip Op 05110, Second Dept 8-31-22

Practice Point: Evidence of compliance with the notice-of-foreclosure mailing requirements of RPAPL 1304 first submitted in reply should not have been considered.

Practice Point: The bank did not demonstrate standing to bring the foreclosure action.

 

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ONCE PLAINTIFF’S FORECLOSURE ACTION WAS DISCONTINUED BY STIPULATION, THE FORECLOSURE COMPLAINT COULD BE AMENDED TO SEEK RECOVERY ON THE NOTE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff, after its foreclosure action was discontinued, could amend the foreclosure complaint to seek recovery on the note:

“‘RPAPL 1301(3) . . . prohibits a party from commencing an action at law to recover any part of the mortgage debt while the foreclosure proceeding is pending or has not reached final judgment, without leave of the court in which the foreclosure action was brought'” ( … see RPAPL 1301[3]). Conversely, “‘where a foreclosure action is no longer pending and did not result in a judgment in the plaintiff’s favor, the plaintiff is not precluded from commencing a separate action without leave of the court'” … .

Here, pursuant to the so-ordered stipulation and the plaintiff’s release of the mortgage, the cause of action to foreclose the mortgage was, in effect, discontinued, without the entry of any judgment in the plaintiff’s favor … . Since the cause of action to foreclose the mortgage was no longer pending, the plaintiff was not precluded from seeking to recover on the note by RPAPL 1301(3), “‘a statute which must be strictly construed'” … .

Furthermore, “there is no reason the plaintiff could not seek such relief by seeking leave to amend its complaint, rather than by commencing a new action” … . Stewart Tit. Ins. Co. v Zaltsman, 2022 NY Slip Op 05107, Second Dept 8-31-22

Practice Point: Here the foreclosure action was discontinued and plaintiff was allowed to amend the foreclosure complaint to seek recovery on the note.

 

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PLAINTIFF’S EXPERT’S AFFIDAVIT DID NOT RAISE A QUESTION OF FACT WHETHER THE DEFENDANT PROPERTY OWNERS HAD CONSTRUCTIVE KNOWLEDGE OF THE DETERIORATION OF A TREE LIMB WHICH FELL ON PLANTIFF’S CAR (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined defendant property owners (Monacos) did not have constructive notice of the deteriorated condition of a tree limb which fell on plaintiff’s car:

In cases involving fallen trees, a property owner will only be held liable for a tree that falls outside of his or her premises and injures another if he or she knew or should have known of the defective condition of the tree … . Constructive notice may be based upon signs of decay or other defects that are readily observable by someone on the ground or that a reasonable inspection would have revealed … . “At least as to adjoining landowners, the concept of constructive notice with respect to liability for falling trees is that there is no duty to consistently and constantly check all trees for nonvisible decay. Rather, the manifestation of said decay must be readily observable in order to require a landowner to take reasonable steps to prevent harm” … . * * *

The plaintiff’s expert’s affidavit failed to raise a triable issue of fact as to whether any visible defect or decay would have been readily observable by the Monacos prior to the fall of the limb … . Although the plaintiff’s expert concluded that there was visible decay at the top of the branch where it had been attached to the trunk, approximately 12 feet above grade, and that such decay caused the branch to fall, his conclusions were based upon close observation, and therefore, failed to raise a triable issue of fact as to whether the Monacos should have realized that a potentially defective condition existed … . Sasso v Village of Bronxville, 2022 NY Slip Op 05105, Second Dept 8-31-22

Practice Point: Here a tree limb fell on plaintiff’s car. Plaintiff’s expert concluded the tree limb was deteriorated, but only after close inspection of the limb. The expert evidence did not raise a question of fact about whether the property owner’s had constructive knowledge of the condition of the limb.

 

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THE RULING THAT PETITIONER-CORRECTION-OFFICER’S DISABLING CONDITION WAS NOT CAUSED BY AN ALTERCATION WITH AN INMATE WAS SUPPORTED BY “SUBSTANTIAL EVIDENCE;” “SUBSTANTIAL EVIDENCE” IN THIS CONTEXT IS DEFINED (SECOND DEPT).

The Second Department, reversing Supreme Court, over a dissent, determined that substantial evidence supported the ruling by the Board of Trustees of the New York City Employees’ Retirement System (hereinafter the Board of Trustees) that petitioner-correction-officer’s disabling condition was not related to an altercation with an inmate. Therefore petitioner was not entitled to disability benefits. The dissent would have ordered a new hearing because of the possibility untrue information in the record (i.e., that petitioner altered an MRI report) affected the ruling:

Ordinarily, the decision of the board of trustees as to the cause of an officer’s disability will not be disturbed unless its factual findings are not supported by substantial evidence or its final determination and ruling is arbitrary and capricious” … . Substantial evidence has been construed in disability cases, as requiring some credible evidence … . Credible evidence has been described as evidence that proceeds from a credible source, which reasonably tends to support the proposition for which it is offered … . * * *

Contrary to the petitioner’s contention and the position of our dissenting colleague, the record does not demonstrate that the Board of Trustees was misled by reports prepared by the Medical Board that contained a statement that the petitioner altered an MRI report or by statements that he returned to “full duty” after the incident and continued to work for “several years.” With regard to the MRI report, … the Chair of the Medical Board informed the Board of Trustees that the discrepancy between the MRI reports submitted on two different days was resolved by the inspector general’s office and that the addendum was written by a doctor. With regard to the issue of whether the petitioner returned to full duty and continued to work for several years, when he worked for approximately one year and seven months after the incident, the petitioner had multiple opportunities to testify and to present evidence of these facts, which the Board of Trustees considered. Matter of Singleton v New York City Employees’ Retirement Sys., 2022 NY Slip Op 05089, Second Dept 8-31-22

Practice Point: In the context of a Retirement and Social Security Law disability-benefits hearing to determine whether a correction officer’s disabling condition was caused by an altercation with an inmate, the denial of disability benefits must be supported by “substantial evidence” which requires “some credible evidence,” meaning evidence from a “credible source.” Here the denial of benefits was upheld.

 

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AFTER THE INCAPACITATED PERSON’S DEATH, THE GUARDIAN OF THE PROPERTY IS ALLOWED TO PAY ADMINISTRATIVE EXPENSES, BUT NOT CLAIMS UNRELATED TO ADMINISTRATIVE EXPENSES, FROM THE GUARDIANSHIP ESTATE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the guardian (Mock) of the incapacitated person’s (Lillian’s) property should not have been ordered to pay a claim out of the guardianship estate after Lillian’s death. Only administrative expenses can be paid out of the guardianship estate:

Mock’s authority as the guardian of Lillian’s property expired with Lillian’s death (see Mental Hygiene Law § 81.36[a][3] …), “and the property in the guardianship account that remained after the fees of the guardianship were paid would normally have passed to her estate” (… see SCPA 103[19]). Mental Hygiene Law § 81.44(e) allows a guardian to retain, “pending the settlement of the guardian’s final account, guardianship property equal in value to the claim for administrative costs, liens and debts.” The legislature intended to allow guardians “a reserve to cover reasonably anticipated administrative expenses,” but did not intend to allow guardians “to retain funds following the death of an incapacitated person for the purpose of paying a claim” … . Inasmuch as the $255,000 sought by the petitioner is unrelated to the administration of Lillian’s guardianship, Mock lacked the authority to make payment to the petitioner from the guardianship estate … . Accordingly, the Supreme Court erred in granting the petitioner’s cross motion and in directing Mock to pay the petitioner the sum of $255,000 from the guardianship estate. Matter of Lillian G. (Steven G.–Gary G.), 2022 NY Slip Op 05087, Second Dept 8-31-22

Practice Point: A guardian of an incapacitated person’s property may only pay administrative expenses from the guardianship estate after the incapacitated person’s death. Here the court should not have ordered payment of a claim unrelated to administrative expenses from the guardianship estate.

 

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PETITIONER’S APPLICATION FOR A PISTOL PERMIT SHOULD HAVE BEEN GRANTED; NEW YORK’S “PROPER CAUSE” STANDARD IS NO LONGER APPLICABLE PURSUANT THE US SUPREME COURT’S RULING IN “NEW YORK STATE RIFLE & PISTOL ASSN V BRUEN” (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined the recent US Supreme Court decision New York State Rifle & Pistol Assn., Inc. v Bruen (597 US _, 142 S Ct 2111 [2022] required that petitioner’s application for a pistol permit be granted. New York’s “proper cause” standard is no longer applicable:

Petitioner commenced this CPLR article 78 proceeding challenging the determination by the New York City Police Department denying an application to renew a business carry handgun license. Supreme Court denied and dismissed the petition on the ground that the Police Department had a rational basis to deny the renewal of a business carry license where petitioner’s application did not establish “proper cause” within the meaning of Penal Law § 400.00 (see 38 RCNY 5-03). Supreme Court also found petitioner’s constitutional rights were not violated.

We are constrained by the recent United States Supreme Court decision in New York State Rifle & Pistol Assn., Inc. v Bruen (597 US _, 142 S Ct 2111 [2022]) which mandates the grant of this CPLR article 78 petition. Specifically, in Bruen , the United States Supreme Court held that denial of a license applications for failing to satisfy New York’s “proper cause” standard, under which the applicants had to demonstrate a special need for self-protection distinguishable from that of the general community, was unconstitutional as violative of the Second Amendment to the United States Constitution, which protects an individual’s fundamental right to keep a firearm, and the Fourteenth Amendment to the United States Constitution, which makes this right equally applicable throughout the states.  Matter of Callahan v City of New York, 2022 NY Slip Op 05057, First Dept 8-30-22

Practice Point: Pursuant to the US Supreme Court’s ruling in New York State Rifle & Pistol Assn., Inc. v Bruen (597 US _, 142 S Ct 2111 [2022] the “proper cause” standard for issuing a pistol permit no longer applies. Petitioner’s application should have been granted.

 

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IN THIS BICYCLE-PEDESTRIAN COLLISION CASE WHERE THERE WAS A VIDEO OF THE INCIDENT, DEFENDANT’S EXPERT DEMONSTRATED, USING FACTS IN THE RECORD, THAT DEFENDANT BICYCLIST HAD THE RIGHT OF WAY, WAS TRAVELLING AT A REASONABLE SPEED, AND WAS NOT ABLE TO AVOID THE COLLISION WHEN PLAINTIFF STEPPED OFF THE CURB; PLANTIFF’S EXPERT’S OPINION TO THE CONTRARY WAS NOT SUPPORTED BY FACTS IN THE RECORD; DEFENDANT’S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (FIRST DEPT). ​

The Frist Department, reversing Supreme Court, over a dissent, determined defendant bicyclist’s motion for summary judgment in this bicycle-pedestrian collision case should have been granted. Thee was a video of the incident. Defendant had the green light when plaintiff stepped off the curb into the bike lane. Defendant’s expert presented evidence defendant was travelling at a reasonable speed and could not have avoided striking the plaintiff without striking an obstruction or entering a traffic lane. Plaintiff’s expert’s opinions that defendant was travelling at an excessive speed and could have stopped before striking plaintiff were not based upon facts in the record:

… [P]laintiff failed to raise an issue of fact. There is no evidence that defendant operated his bicycle at an excessive rate of speed, in a negligent manner, or without due care to avoid colliding with any pedestrian, in violation of Vehicle and Traffic Law §§ 1180(a), 1146. Plaintiff attempts to raise an issue of fact through her expert, who opines, without any factual basis in the record, and in a conclusory and speculative manner, that defendant operated his bicycle at an excessive speed when compared to the speed of the three other bicyclists, and that in the three seconds (at most) that defendant had to react from the moment he is seen entering the screen, he could have slowed down, stopped, or maneuvered his bicycle to go around plaintiff to avoid the collision, or to make the impact substantially less severe.

Opinion evidence must be based on facts in the record. An expert cannot speculate, guess, or reach their conclusion by assuming material facts not supported by the evidence …  The opinion must be supported either by facts disclosed by the evidence or by facts known to the expert personally. It is essential that the facts upon which the opinion is based be established, or fairly inferable, from the evidence … . Min Zhong v Matranga, 2022 NY Slip Op 05063, First Dept 8-30-22

Practice Point: Expert opinion which is not supported by facts in the record will not raise a question of fact sufficient to preclude summary judgment.

 

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PLAINTIFFS ALLEGED THE RESIDENTIAL-MORTGAGE-BACKED-SECURITIES ISSUED BY THE DEFENDANT TRUSTEES WERE WORTHLESS BECAUSE OF DEFENDANTS’ BREACHES OF CONTRACTUAL, FIDUCIARY AND STATUTORY DUTIES; MOST (BUT NOT ALL) OF DEFENDANTS’ MOTIONS TO DISMISS WERE DENIED BASED UPON CONTRACT-INTERPRETATION PRINCIPLES (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court in this residential-mortgage-backed-securities case, over an extensive two-justice partial dissent, determined certain post-Event of Default breach of contract and breach of fiduciary duty claims should have been dismissed, and the pre-Event of Default document defect repurchase enforcement claims should not have been dismissed. “Plaintiffs purchased residential mortgage-backed securities (RMBS) certificates issued by RMBS trusts for which defendants served as the trustees. In six separate actions brought in May 2016, plaintiffs allege that their investments are almost worthless as a result of defendants’ breaches of their contractual, fiduciary, and statutory duties.” The majority decision focuses on refuting the arguments in the partial dissent, resulting in a comprehensive overview of contract-interpretation-law which is worth reading but cannot be fairly summarized here. Generally, Supreme Court’s denial of most of the defendants’ motions to dismiss was affirmed. IKB Intl., S.A. v Wells Fargo Bank, N.A., 2022 NY Slip Op 05058, First Dept 8-30-22

Practice Point: The plaintiffs in this residential-mortgage-backed-securities action alleged the certificates issued by the defendant trustees were almost worthless as a result of the defendants’ breach of contract and fiduciary and statutory duties. Most of the plaintiffs’ causes of action survived defendants’ motions to dismiss. The decision includes a comprehensive discussion of the law of contract-interpretation which is worth consulting.

 

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