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THE TRUST-ASSET-SUBSTITUTION AGREEMENT, SUBSTITUTING LIFE INSURANCE FOR CERTAIN ASSETS, WAS SUBJECT TO EPTL 11-1.7(a)(1); THEREFORE THE PROVISION OF THE AGREEMENT RELEASING THE TRUSTEE FROM LIABILITY WAS AGAINST PUBLIC POLICY AND THE TRUSTEE IS LIABLE FOR FAILING TO ENSURE THE LIFE INSURANCE PREMIUMS WERE PAID (SECOND DEPT).

The Second Department, reversing Surrogate’s Court, determined the 1992 agreement substituting life insurance for trust assets was covered by Estates, Powers and Trusts Law (EPTL) 11-1.7(a)(1) and the trustee, which owned the policies, was liable in negligence for failing to ensure the premiums were paid (the policies had lapsed). The provision of the trust-asset-substitution agreement exonerating the trustee from liability was invalid as against public policy. The matter was remitted for a determination of damages:

The Surrogate’s Court found that the 1992 agreement created a “new trust agreement” funded in part by the life insurance policies, which was not part of the testamentary trust, and therefore not governed by EPTL 11-1.7(a). The court further found that the agreement released the trustee from any promises relating to “the substitution of property,” which relieved the trustee of any “liability to monitor the investment owed to the trust,” released the trustee and any successor trustee “from any future lawsuit,” and released the trustee of any fiduciary duty to act upon Robert’s default in paying insurance premiums.

Contrary to the conclusion of the Surrogate’s Court, the agreement did not create a new trust. Rather, the agreement provided for the substitution of testamentary trust property with life insurance policies. The petitioner included the life insurance policies in its final account of the testamentary trusts as worthless assets. There is no reference to any separate accounting for the life insurance policies as part of a separate trust. Thus, the duty of the trustee was governed by EPTL 11-1.7(a)(1), which states that the exoneration of a testamentary trustee from liability for failure to exercise reasonable care, diligence, and prudence is contrary to public policy. Matter of Wilkinson, 2020 NY Slip Op 00286, Second Dept 1-15-20

 

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PLAINTIFF WAS ON A LADDER WHEN HE RECEIVED AN ELECTRIC SHOCK; THERE WAS NO SHOWING THE LADDER WAS DEFECTIVE AND PLAINTIFF WAS NOT ENTITLED TO SUMMARY JUDGMENT ON HIS LABOR LAW 240 (1) CAUSE OF ACTION; HOWEVER PLAINTIFF WAS ENTITLED TO SUMMARY JUDGMENT ON HIS LABOR LAW 241 (6) CAUSE OF ACTION AGAINST THE DEFENDANT RESPONSIBLE FOR TURNING OFF THE ELECTRICITY (FIRST DEPT).

The First Department determined questions of fact precluded summary judgment on his Labor Law 240( 1) cause of action and he was entitled to summary judgment on his Labor Law 241 (6) cause of action. Plaintiff on a ladder when he received an electric shock. There was no showing the ladder was defective. ADCO, the company which was responsible for shutting off the was liable pursuant to Labor Law 241 (6):

Plaintiff seeks damages for personal injuries he sustained in a fall from a ladder while installing duct work on a building renovation project after either he received a shock or an arc fault occurred when he came into contact with a live electrical junction box. Summary judgment in plaintiff’s favor as to liability on his Labor Law § 240(1) claim is precluded by an issue of fact as to whether the ladder, which was properly set up, provided plaintiff with proper protection … ; plaintiff had no problem with the ladder prior to the electric shock and questions of fact exist whether a scaffold could have prevented this accident. Plaintiff is entitled to summary judgment on his Labor Law § 241(6) claim predicated on violations of Industrial Code (12 NYCRR) § 23-1.13(b)(2), (3) and (4) against ADCO, the electrical subcontractor, which failed to warn of and de-energize or “safe off” the junction box so that a worker would not come into contact with it. Because ADCO had been delegated authority to control the electrical work that gave rise to plaintiff’s injury, it was a statutory agent subject to liability under the statute … . Higgins v TST 375 Hudson, L.L.C., 2020 NY Slip Op 00358, First Dept 1-14-20

 

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DEFENDANT WAS TOLD BY DEFENSE COUNSEL WHEN HE PLED GUILTY IN 2007 THAT IF HE STAYED OUT OF TROUBLE WHILE ON PROBATION HE WOULD NOT BE DEPORTED, HOWEVER DEPORTATION WAS MANDATORY; DEFENDANT WAS ENTITLED TO A HEARING ON HIS MOTION TO VACATE HIS CONVICTION BASED UPON INEFFECTIVE ASSISTANCE OF COUNSEL; CRITERIA FOR DETERMINING WHETHER THERE WAS A REASONABLE PROBABILITY DEFENDANT WOULD HAVE GONE TO TRIAL, INCLUDING HIS UNDISPUTED STRONG DESIRE TO STAY IN THE US, EXPLAINED IN SOME DEPTH (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Renwick, reversing Supreme Court, determined defendant (Martinez) was entitled to a hearing on his CPL 440.10 motion to vacate his 2007 judgment of conviction. At the time defendant pled guilty the court warned him there could be immigration consequences, but defense counsel told him he wouldn’t have to worry about deportation if he stayed out of trouble while on probation. In fact, however, deportation was mandatory. Supreme Court denied the motion based in part on defendant’s motivation for it, i.e., the expansion of his taxi business in Massachusetts. The First Department noted that plaintiff’s current motivation for the motion to vacate is irrelevant. The matter was sent back for a hearing in front of a different judge:

In the context of a guilty plea, the ultimate question of prejudice is whether there was a reasonable probability that a reasonable person in a defendant’s circumstances would have gone to trial if given constitutionally adequate advice … . A defendant must convince the court that a decision to reject the plea bargain would have been rational … . In that regard, appropriate factors to be weighed include, among others, evidence of defendant’s incentive, at the time of his plea, to remain in the United States rather than his native country; his respective family and employment ties at the time of his plea, to the United States, as compared to his country of origin; the strength of the People’s case; and defendant’s sentencing exposure … . In answering the prejudice question, judges should be cognizant that a noncitizen defendant confronts a very different calculus than confronts a United States citizen … . For a noncitizen defendant, “preserving [his] right to remain in the United States may be more important to [him] than any jail sentence”… . Thus, a determination of whether it would be rational for a defendant to reject a plea offer “must take into account the particular circumstances informing the defendant’s desire to remain in the United States” … .

Significantly, on the record before this Court, there is reason to believe that Martinez would have given paramount importance to avoiding deportation, if he had known that it was more than a mere possibility, but was an unavoidable consequence of his plea to an aggravated felony. Indeed, evidence regarding Martinez’s background completely supports his current assertion that his main focus has been always to remain in the United States. This much is undisputed: his long history in the United States, his efforts to become a citizen, his family circumstances, and his gainful employment in Massachusetts, all signal his strong connection to, and desire to remain in, the United States … . People v Martinez, 2020 NY Slip Op 00252, First Dept 1-14-20

 

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BECAUSE THE DEFENDANT EMPLOYER SUFFERED NO DAMAGE AS A RESULT OF PLAINTIFF’S BREACH OF THE CONFIDENTIALITY PROVISION OF THE EMPLOYMENT CONTRACT, DEFENDANT EMPLOYER WAS NOT ENTITLED TO ENFORCEMENT OF THE LIQUIDATED DAMAGES PROVISION IN THE CONTRACT; PLAINTIFF’S BREACH-OF-AN-ORAL-CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED BECAUSE PLAINTIFF SUBMITTED EVIDENCE OF PARTIAL PERFORMANCE BY DEFENDANT AND PLAINTIFF’S RELIANCE ON THE ORAL MODIFICATION (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined that, although the law firm defendants demonstrated plaintiff attorney violated the confidentiality provision of her employment contract, the law firm was not entitled to enforcement of the liquidated damages provision of the contract because the law firm did not demonstrate it suffered any damage as a result of plaintiff’s breach. In addition, plaintiff’s cause of action alleging the law firm defendants violated an oral agreement promising her a five percent bonus related to attorney’s fees paid for cases in which she was involved should not have been dismissed because she presented some evidence she had in fact been paid several such bonuses:

“Liquidated damages constitute the compensation which, the parties have agreed, should be paid in order to satisfy any loss or injury flowing from a breach of their contract” … . “A contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation. If, however, the amount fixed is plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced” … . Although the party challenging the liquidated damages provision has the burden to prove that the liquidated damages are, in fact, an unenforceable penalty … , the party seeking to enforce the provision must necessarily have been damaged in order for the provision to apply … . Here, defendants did not identify to the motion court any damages that they sustained as a result of plaintiff’s breach of the agreement. …

The law firm defendants met their burden on summary judgment by providing plaintiff’s employment agreement which did not include any reference to a 5% nondiscretionary bonus, and which included a general merger clause requiring any modification to be in writing. However, plaintiff raised a triable issue of fact as to this claim. … [T]he Court of Appeals has held that while generally an oral modification may not be enforced in light of a merger clause, an oral modification may be enforced if there is partial performance that is “unequivocally referable to the oral modification” or if one party “induced another’s significant and substantial reliance upon an oral modification.” Rubin v Napoli Bern Ripka Shkolnik, LLP, 2020 NY Slip Op 00250, First Dept 1-14-20

 

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QUESTION OF FACT WHETHER BOARDS OR MASONITE WERE SCATTERED DEBRIS OR DELIBERATELY PLACED AS AN INTEGRAL PART OF THE RENOVATION WORK; PLAINTIFF’S SUMMARY JUDGMENT MOTION ON HIS LABOR 241(6) CAUSE OF SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined there was a question of fact whether boards/Masonite on the floor of a passageway were placed there as an integral part of the renovation project or were scattered debris constituting a tripping hazard in violation of the Industrial Code (12 NYCRR 23-1.7(e)(1) or (e)(2)). The court held there was a question of fact on that issue and plaintiff’s motion for summary judgment on his Labor Law 241(6) cause of action should not have been granted. The court noted that its decision to the contrary in Singh v 1221 Holdings, LLC (127 AD3d 607 [1st Dept 2015]) should no longer be followed:

Plaintiff claims that the boards were a tripping hazard and a violation of Industrial Code § 23-1.7 (e)(1) because defendants failed to provide him with a passageway free of obstructions. Defendants argue, however, that there is no liability because the boards were Masonite, not scattered materials or debris, and because they were purposefully laid out upon the floor each day, this being “integral to” the renovation work being performed.

At the outset, these arguments require us to address whether the “integral-to-the work” defense raised by defendants, but rejected by Supreme Court, equally applies to Industrial Code § 23-1.7(e)(1), as well as § 23-1.7(e)(2). We hold that it does. * * *

[The facts] raise a triable issue of fact regarding whether the boards were a “protective covering [that] had been purposefully installed on the floor as an integral part of the renovation project” … . … [S]ummary judgment in favor of plaintiff was improper because it was based on the mistaken supposition that the “integral-to-work” defense means integral to plaintiff’s specific task. The defense applies to things and conditions that are an integral part of the construction, not just to the specific task a plaintiff may be performing at the time of the accident … . Krzyzanowski v City of New York, 2020 NY Slip Op 00232, First Dept 1-14-20

 

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SANCTIONS IMPOSED FOR A DELAYED RESPONSE TO DISCOVERY DEMANDS WERE TOO SEVERE, EFFECTIVELY PRECLUDING PROOF OF COUNTERCLAIMS CENTRAL TO THE DEFENSE; NEW TRIAL ORDERED (FIRST DEPT).

The First Department, reversing the verdict in favor of plaintiff employees, determined the sanctions imposed upon the employer (appellants) for a delayed response to discovery demands were too severe and ordered a new trial. The plaintiffs alleged appellants breached oral employment contracts. The appellants in their counterclaims alleged plaintiffs breached their fiduciary duty by violating Securities and Exchange Commission (SEC) regulations and destroying and replacing handwritten notes about conversations with one of the appellants. The sanctions effectively prevented the appellants from demonstrating plaintiffs’ violation of SEC violations and destruction of evidence:

Pursuant to CPLR 3126, if a party “refuses to obey an order for disclosure or wilfully fails to disclose information which the court finds ought to have been disclosed . . . , the court may make such orders with regard to the failure or refusal as are just.” Although “[i]t is within the trial court’s discretion to determine the nature and degree of the penalty,” “[t]he sanction should be commensurate with the particular disobedience it is designed to punish, and go no further than that” … . Further, “the drastic remedy of striking a party’s pleading . . . for failure to comply with a discovery order is appropriate only where [it is] conclusively demonstrate[d] that the non-disclosure was willful, contumacious or due to bad faith” … .

Although the court here did not strike a pleading, its ruling could fairly be viewed as having done so, since the precluded evidence was critical to the fiduciary duty claims. Moreover, the court’s drastic sanctions were disproportionate to the alleged discovery malfeasance. It is unclear why a short continuance to give plaintiffs time to review the newly-produced documents would not have been a viable option, or why further curative instructions would not have sufficed. The record as a whole does not support a finding of willfulness or bad faith so as to justify the severe sanctions imposed … . No basis exists to indicate that this was anything other than a disagreement over the scope of discovery. Indeed, the court at trial stated that the alleged discovery omissions “appear[] not to have been in bad faith.” Beach v Touradji Capital Mgt., LP, 2020 NY Slip Op 00230, First Dept 1-14-20

 

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DEFENDANTS’ ATTORNEYS HAD APPARENT AUTHORITY TO BIND DEFENDANTS TO THE OPEN-COURT STIPULATED SETTLEMENT OF $8,875,000; IN ADDITION, DEFENDANTS RATIFIED THE STIPULATION BY FAILING TO TIMELY OBJECT TO IT (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Acosta, determined that defendants (the Infiniti defendants) were bound by an open-court stipulated settlement of $8,875,000 in this personal injury case. The attorneys had apparent authority to bind the defendants. And the defendants ratified the stipulation by failing to timely object to it:

I write to highlight the fundamental principle that parties are bound by stipulations signed in open court by their attorneys. The issue arose in the context of a negligence case, where plaintiff was seriously injured when she was struck by a motor vehicle while standing on a sidewalk median in Brooklyn. The vehicle was owned by defendant Infiniti of Manhattan, Inc. and driven by defendant Massamba Seck (the Infiniti defendants). Plaintiff suffered serious injuries and required extensive hospitalization and multiple surgeries. At issue in this case is whether the Infiniti defendants are bound by a settlement agreement entered into by their attorneys. We find that the Infiniti defendants are bound, because their attorneys had apparent authority to bind them to the $8,875,000 judgment. Significantly, there is no affidavit or testimony by Infiniti stating that Infiniti, or any of its employees, was unaware of the settlement or that Infiniti did not authorize the settlement. The only ones making this claim are the lawyers from the firm that was hired by the insurance companies to defend the Infiniti defendants. The fact that one of the insurers is now unable to pay its intended $5 million portion does not inure to the Infiniti defendants’ benefit. Rather, the Infiniti defendants are responsible for the portion of the agreed-upon amounts that the insurers do not pay. To accept their position would alter the way litigation is conducted in New York State. Courts would have to conduct colloquies in every case to make sure that the parties, notwithstanding their attorneys’ actions in appearing for them on numerous occasions and signing stipulations, acquiesced in the terms of the stipulations. That is unacceptable, especially here, where the Infiniti defendants never objected to the stipulation until the filing of the instant order to show cause more than a year and six months after the stipulation was signed in open court. Pruss v Infiniti of Manhattan, Inc., 2020 NY Slip Op 00229, First Dept 1-9-20

 

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WASTEWATER TREATMENT COMPANY’S CONTRACT WITH THE MUNICIPALITY WAS NOT VOID; THE CONTRACT WAS IN THE PUBLIC INTEREST AND THERE WAS NO PROOF THE BID SPECIFICATIONS WERE IMPROPERLY DEVELOPED WITH THE COMPANY OR DESIGNED TO ENSURE THE COMPANY RECEIVED THE CONTRACT (THIRD DEPT).

The Third Department, over a partial dissent, determined the plaintiff municipality breached its contract with defendant sewage-treatment company. The plaintiff municipality argued that, although there was competitive bidding under General Municipal Law 103 and 120-w, the contract was void because the bid specifications were improperly developed with the defendant and were designed to ensure defendant got the contract, but that argument was rejected by both Supreme Court and the Third Department:

… [P]laintiff provided nothing to contradict the proof that [use of defendant’s technology] served the public interest because it was safer, more reliable and less likely to generate troublesome odors than other technologies.

[D]efendant produced an affidavit from plaintiff’s then-mayor, who stated that the options for sludge treatment had been thoroughly investigated and that the type of equipment offered by defendant would further the public interest by stabilizing plaintiff’s sludge disposal costs, providing an environmentally sensitive means for that disposal and decreasing odors emanating from the WWTF [wastewater treatment facility] that might affect ongoing waterfront development. The then-mayor further averred that the bid documents were prepared by municipal employees and that the specifications included nothing of peculiar benefit to defendant. … Defendant’s president, a mechanical engineer, confirmed that point and averred that “[n]early any sludge drying pelletizing system on the market” could have satisfied the bid specifications. Plaintiff accordingly failed to meet its burden of showing that the 2004 agreement was void, and defendant demonstrated its entitlement to summary judgment on claims relating to that agreement’s validity … . City of Kingston v Aslan Envtl. Servs., LLC, 2020 NY Slip Op 00192, Third Dept 1-9-20

 

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ALTHOUGH A HEAT PUMP SYSTEM DRAWS HEAT FROM SOLAR ENERGY STORED IN THE GROUND, IT IS NOT A QUALIFIED SOLAR ENERGY SYSTEM WITHIN THE MEANING OF THE TAX LAW FOR PURPOSES OF ELIGIBILITY FOR A $5000 TAX CREDIT (THIRD DEPT).

The Third Department determined that a heat pump system, although it draws heat from solar energy stored in the ground, is not a qualified solar energy system within the meaning of Tax Law 606 (g-1). Therefore, as the Tax Tribunal found, petitioners were not entitled to a $5000 tax credit for the heat pump system:

… [S]olar energy system equipment is defined as “an arrangement or combination of components utilizing solar radiation, which, when installed in a residence, produces energy designed to provide heating, cooling, hot water or electricity for use in such residence” … . Here, the Tribunal limited the applicability of the tax credit to those systems that “directly” utilize solar radiation, an interpretation which petitioners assert is too narrow, …

… [W]e do not agree with petitioners’ assertion that the plain language of the statute unambiguously includes ground source heat pump systems simply because they utilize solar energy … . As the record reveals, heat harvested by a ground source heat pump system is not, strictly speaking, “solar radiation” since it is being radiated from the ground after being absorbed by the crust. Thus, although a broad reading of the phrase “utilize[es] solar radiation” could certainly include the system at issue, an interpretation excluding indirect utilization of solar energy is not unreasonable. Further, we find that the fact that the system removes heat from indoor air during the warm summer months and moves it to the ground, thereby not utilizing solar radiation, presents another reason to exclude the system from the purview of the tax credit … . Matter of Suozzi v Tax Appeals Trib. of the State of N.Y., 2020 NY Slip Op 00193, Third Dept 1-9-20

 

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PLAINTIFF ALLEGED DEFENDANT’S EMPLOYEE, A SECURITY GUARD, ATTACKED HER; DEFENDANT’S EMPLOYEE ALLEGED PLAINTIFF ATTACKED HIM AND HE ACTED IN SELF DEFENSE; THE EMPLOYER WOULD NOT BE LIABLE UNDER EITHER SCENARIO; THE EMPLOYER’S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the security guard’s employer’s (SEB’s) motion for summary judgment in this third-party assault case should have been granted. Plaintiff alleged the security guard attacked her without provocation. The security guard alleged he acted in self defense after plaintiff and others attacked him. The employer would not be liable in either scenario:

Plaintiff Gregory testified that SEB’s employee, a security guard who was then working at a movie theater, attacked her with a box cutter and slashed her face and body with it after she tapped him on the shoulder and told him she had enjoyed the movie she had just seen. The security guard gave a different version of events and claimed that he was acting in self defense after plaintiffs and others attacked him with box cutters. However, neither version of events would give rise to liability on the part of SEB. Under plaintiff’s version of events, SEB could not be held liable because SEB’s employee’s unprovoked assault on Gregory with a box cutter was not within the scope of any duties he may have had as a security guard and was not done in furtherance of SEB’s business interests … . Under the security guard’s version of events, even assuming for purposes of this appeal that his actions were within the scope of his duties as a security guard and were done in furtherance of SEB’s business interests, SEB would not be held liable because the security guard’s actions were taken in self-defense after being attacked by patrons of the movie theater. Gregory v National Amusements, Inc., 2020 NY Slip Op 00223, First Dept 1-9-20

 

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