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FAILURE TO JOIN A NECESSARY PARTY JUSTIFIED DISMISSAL AFTER THE STATUTE OF LIMITATIONS HAS RUN (FIRST DEPT).

The First Department determined dismissal of the Article 78 proceeding, rather than joinder of the condominium board as a necessary party, was the proper remedy. The New York City Department of Environmental Protection had denied petitioner’s request to order removal of backflow prevention devices installed in the condominium unit:

Petitioner’s failure to join as a party the condominium board, which installed the backflow prevention device in dispute, constitutes a failure to join a necessary party (see Matter of Ferrando v New York City Bd. of Stds. & Appeals, 12 AD3d 287, 288 [1st Dept 2004]). Since the applicable statutory period has expired and the condominium board can no longer be joined, and proceeding in its absence would potentially be highly prejudicial to it, the proper remedy is dismissal of the proceeding rather than joinder of the condominium board (id.; see also CPLR 1001, 1003). Matter of Stephen & Mark 53 Assoc. LLC v New York City Dept. of Envtl. Protection, 2019 NY Slip Op 00072 [168 AD3d 440], First Dept 1-8-19

 

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BANK’S POSSESSION OF THE NOTES CONSOLIDATED BY A CONSOLIDATION, EXTENSION AND MODIFICATION AGREEMENT (CEMA) CONFERRED STANDING TO BRING THE FORECLOSURE ACTION, POSSESSION OF THE ORIGINAL NOTES WAS NOT REQUIRED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Tom, over a two-justice dissent. determined that defendants’ excuse for their default and their argument plaintiff bank (Wells Fargo) did not have standing were properly rejected by Supreme Court. The two dissenting justices agreed with defendants’ arguments. Defendants alleged in their motion to vacate the default that their attorney received the summary judgment motion, filed for bankruptcy and never responded to the motion. On the standing issue defendants argued that possession of the original 2005 and 2008 notes issued by a nonparty, not the subsequent Consolidation, Extension and Modification Agreement (CEMA) note, which consolidated the 2005 and 2008 notes, was required to confer standing:

… [T]he CEMA makes clear that the consolidated note superseded the original notes and is the operative document in this case. As did the plaintiff in Weiss v Phillips (157 AD3d 1 [1st Dept 2017]), Wells Fargo seeks foreclosure based on the CEMA and consolidated note. As we held the plaintiff did in Weiss, Wells Fargo established its entitlement to relief by submitting the CEMA, consolidated note, unchallenged evidence that it is the holder of the consolidated note, and nonpayment of the loan by the borrowers. As we also held in Weiss, “In this case, because of the CEMA, standing is not an issue” and any absence of the underlying notes in this action is likewise accounted for by the CEMA … . In other words, “there is no legitimate question that [Wells Fargo] is the party entitled to enforce under the [consolidated] note, as evinced by . . . the CEMA” … . Wells Fargo Bank N.A. v Ho-Shing, 2019 NY Slip Op 00080, First Dept 1-8-19

 

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LEGAL MALPRACTICE ACTION BROUGHT BY A NEW JERSEY RESIDENT IS UNTIMELY PURSUANT TO NEW YORK’S BORROWING STATUTE, NEW YORK’S SHORTER STATUTE O

The First Department determined Supreme Court properly applied New York’s borrowing statute (CPLR 202) and chose the shorter of the statutes of limitations for a legal malpractice action. New York’s statute is three years and New Jersey’s is six years. Plaintiff was a New Jersey resident:

The court correctly found the complaint time-barred under CPLR 202, New York’s “borrowing statute,” which requires a claim to be timely under both the New York limitations period and that of the jurisdiction where the claim is alleged to have arisen (Kat House Prods., LLC v Paul, Hastings, Janofsky & Walker, LLP, 71 AD3d 580[1st Dept 2010]).

Plaintiff, a New Jersey resident, alleged legal malpractice in connection with defendants’ representation of him for numerous real estate transactions, a cause of action which has a three year statute of limitations in New York (CPLR 214 [6]), and a six year limitations period in New Jersey (NJ Stat Ann § 2A:14-1). The latest that the alleged malpractice could have occurred was February 7, 2013, the date set for closing on the last of the real estate matters. Because plaintiff commenced the action on October 28, 2016, more than three years later, it was correctly dismissed as untimely. Soloway v Kane Kessler, PC, 2019 NY Slip Op 00026 [168 AD3d 407], First Dept 1-3-19

 

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PLAINTIFF’S WHISTEBLOWER ACTION AGAINST THE SCHOOL DISTRICT, ALLEGING THE DISTRICT TOOK RETALIATORY ACTION AGAINST PLAINTIFF BECAUSE OF ALLEGATIONS PLAINTIFF MADE AGAINST ANOTHER DISTRICT EMPLOYEE, SHOULD NOT HAVE BEEN DISMISSED (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined that plaintiff’s Civil Service Law 75-b action alleging disciplinary action against him was taken in retaliation for his reporting certain allegations about another school district employee should not have been dismissed. Defendant school district notified plaintiff, the district’s head bus driver, he was charged with a conflict of interest in violation of General Business Law 800 the day after plaintiff had made the allegations against the employee in front of the Board of Education.  Supreme Court should not have dismissed plaintiff’s whistleblower action by finding the General Municipal Law 800 conflict of interest charge, not plaintiff’s allegations against the employee, constituted the basis for the district’s disciplinary action against plaintiff:

Supreme Court … erred in the substantive application of Civil Service Law § 75-b relative to defendants’ contention that an independent basis existed for placing plaintiff on administrative leave. To assert a whistleblower claim under Civil Service Law § 75-b, plaintiff must allege, “(1) an adverse personnel action; (2) disclosure of information to a governmental body (a) regarding a violation of a law, rule, or regulation that endangers public health or safety, or (b) which [the plaintiff] reasonably believes to be true and which [he or] she reasonably believes constitutes an improper governmental action; and (3) a causal connection between the disclosure and the adverse personnel action”… . The element of causation requires “that ‘but for’ the protected activity, the adverse personnel action by the public employer would not have occurred”… . Here, the court found that the purported General Municipal Law violation sufficed as a separate and independent basis for the adverse action and dismissed plaintiff’s claim. However, even assuming that the General Municipal Law violation is ultimately demonstrated, the trial court must make “a separate determination regarding the employer’s motivation” to ensure against pretextual dismissals and “shield employees from being retaliated against by an employer’s selective application of theoretically neutral rules” … . Lilley v Greene Cent. Sch. Dist., 2019 NY Slip Op 00019, Third Dept 1-3-19

 

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ALTHOUGH PETITIONER SLIPPED AND FELL ON ICE STEPPING OFF A BUS SHE WAS CLEANING, THE INCIDENT QUALIFIED AS AN ACCIDENT WITHIN THE MEANING OF THE RETIREMENT AND SOCIAL SECURITY LAW ENTITLING PETITIONER TO ACCIDENTAL DISABILITY RETIREMENT BENEFITS, CLEANING BUSES WAS NOT PETITIONER’S NORMAL FUNCTION AND SHE HAD NEVER BEEN IN THE PARKING AREA WHERE SHE SLIPPED AND FELL (THIRD DEPT).

The Third Department, annulling the Comptroller’s ruling, determined that petitioner was injured in an accident as defined by the Retirement and Social Security Law and was therefore entitled to accidental disability retirement benefits. Petitioner, a school bus attendant, was injured when she slipped and fell on ice exiting a bus she had been asked to clean. Petitioner’s job was to help disabled kids on the bus and was cleaning a bus when she slipped and fell:

The record reveals that petitioner had never been directed to wash buses as part of her duties as a bus attendant. She was normally involved in assisting disabled children get on and off the bus, and ensuring their safety while riding the bus. Notably, her job description made no mention of tasks involving either cleaning or maintaining the buses. Moreover, and significantly, except for the date in question, petitioner had never been to the parking lot where the buses were kept. She was therefore wholly unfamiliar with the surface conditions. According to petitioner, on the date of the incident, it was cold with a few snow flurries and there were a few piles of old snow a couple of bus widths away ,,, . She testified that, as she exited the bus, her view of the ground was obstructed by the final step, which was longer than usual to accommodate disabled children getting on and off the bus. It was then that her foot made contact with the ice beneath the step, and she slipped and fell.

Under the circumstances presented, the incident was clearly sudden, unexpected and not a risk of petitioner’s ordinary job duties … . Matter of Larivey v DiNapoli, 2019 NY Slip Op 00018, Third Dept 1-3-19

 

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PLAINTIFF, WHO IS DEFENDANT’S SON, FELL FROM A LADDER WHEN ATTEMPTING TO INSPECT A DAMAGED CHIMNEY ON DEFENDANT’S RENTAL PROPERTY, QUESTIONS OF FACT ABOUT WHETHER PLAINTIFF WAS AN EMPLOYEE OR A VOLUNTEER, WHETHER THE INSPECTION WAS COVERED BY THE LABOR LAW, AND WHETHER DEFENDANT SUPERVISED PLAINTIFF’S WORK PRECLUDED SUMMARY JUDGMENT ON THE LABOR LAW 240 (1), 241 (6), 200 AND COMMON LAW NEGLIGENCE CAUSES OF ACTION (THIRD DEPT).

The Third Department determined that questions of fact about (1) whether plaintiff was an employee or a volunteer, (2) whether the inspection work came within the scope of Labor Law coverage, and (3) whether defendant supervised plaintiff’s work giving rise to Labor Law 200 or common-law negligence liability. Plaintiff is defendant’s son and lives with defendant. Defendant owns rental property next door. Defendant set up a ladder for plaintiff at the rental property and asked him to inspect the chimney because pieces of it had fallen to the ground. Plaintiff and the ladder fell when he attempted to inspect the chimney. Plaintiff brought Labor Law 240 (1), 241 (6), 200 and common-law negligence causes of action:

… [D]efendant’s testimony … established that she directed plaintiff on what to do when he inspected the chimney, had previously paid him for repairs and would have paid him if he had carried out the chimney cap repairs. We agree with Supreme Court that this testimony presents a triable issue of fact as to whether plaintiff was a volunteer or an employee within the meaning of the Labor Law and the Industrial Code … . …

As plaintiff and defendant both anticipated that plaintiff would carry out the repair if his inspection revealed that this would be feasible, this record does not permit a determination as a matter of law that the chimney inspection was “a separate phase easily distinguishable from” the actual repair, and thus outside the statutory protection … .

Although defendant asserts that she did not supervise plaintiff’s work and did not tell him how to use the ladder, her own testimony establishes that the ladder belonged to her and that she put it in place — allegedly on uneven ground — without plaintiff’s participation, directed him to use the ladder, and told him what to do in inspecting the chimney. Thus, there is a triable issue of fact as to whether defendant exercised supervisory control over the manner and methods by which plaintiff performed the task of inspecting the chimney … . Doskotch v Pisocki, 2019 NY Slip Op 00017, Third Dept 1-3-19

 

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PLAINTIFF BANK WAS PROPERLY ALLOWED TO RECOMMENCE THE FORECLOSURE ACTION AFTER IT WAS DISMISSED AS ABANDONED PURSUANT TO CPLR 3215, HOWEVER PLAINTIFF DID NOT DEMONSTRATE IT HAD STANDING AND ITS SUMMARY JUDGMENT MOTION SHOULD NOT HAVE BEEN GRANTED (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that plaintiff bank did not demonstrate it had standing to bring this foreclosure action. Therefore plaintiff’s summary judgment motion should not have been granted. The court noted that Supreme Court properly allowed plaintiff an additional six months to commence another action (CPLR 205 (a))  after the first was dismissed as abandoned pursuant to CPLR 3215 (c):

… [P]laintiff failed to demonstrate that it has standing as the assignee of the mortgage from MERS. By its express terms, the initial written assignment from MERS only assigns the mortgage, not the note, and no proof was submitted establishing that MERS was ever conferred with the requisite authority to assign the note… . Moreover, contrary to Supreme Court’s holding, this Court has held that merely attaching the note with a blank indorsement to the complaint is not sufficient for plaintiff to meet its prima facie burden on the issue of standing or to prove plaintiff’s possessory interest in the note; proof of actual possession is required … ….

Plaintiff similarly failed to establish its standing by demonstrating that it had physical possession of the note at the time of the commencement of the action. In support of its motion for summary judgment, plaintiff submitted, among other things, a copy of its complaint, the mortgage, the unpaid note (indorsed in blank), the relevant assignments of the mortgage and proof of defendants’ default. Plaintiff also tendered the affidavit of the authorized officer for Caliber Home Loans, Inc., the mortgage loan servicing agent and attorney-in-fact for plaintiff … . The affidavit of the authorized officer indicates the source of her knowledge to be her “review of the electronic records of Caliber Home Loans, Inc.” regarding defendants’ delinquent account, which includes, among other things, “electronic images of the note and electronic records maintained by Caliber Home Loans, Inc.” Other than alleging that she reviewed these electronic records, the authorized officer’s affidavit fails to provide any indication that she actually examined the original note, nor did it provide any details with regard to whether plaintiff ever obtained possession thereof and, if so, how and when it came into its possession … . Moreover, the complaint is equivocal and alleges in the alternative that plaintiff is “the current owner and holder of the subject mortgage and note, or has been delegated the authority to institute a mortgage foreclosure action by the owner and holder of the subject mortgage and note.” Such language is insufficient to establish that plaintiff had physical possession of the note at the time it commenced this action … . U.S. Bank Trust, N.A. v Moomey-Stevens, 2019 NY Slip Op 00016, Third Dept 1-3-19

 

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GENERAL BUSINESS LAW 349 CAUSE OF ACTION AGAINST A WORKERS’ COMPENSATION LAW TRUST SHOULD NOT HAVE BEEN DISMISSED (THIRD DEPT).

The Third Department determined that a General Business Law 349 cause of action against a Workers’ Compensation Law trust should not have been dismissed. The trust was taken over by the Workers’ Compensation Board and was found to have a deficit of $220 million. Several lawsuits were brought by members of the trust alleging breach of contract, fraud, breach of a fiduciary duty, etc.:

… [W]ith respect to the General Business Law § 349 cause of action [we] disagree with Supreme Court’s reasoning that the alleged misconduct was not consumer oriented.

“The threshold requirement of consumer-oriented conduct is met by a showing that the acts or practices have a broader impact on consumers at large in that they are directed to consumers or potentially affect similarly situated consumers” … . The amended complaint alleged that “[d]efendants aggressively marketed and advised the [t]rust and self-insurance trusts to the public at large in general as a safe and less expensive alternative to traditional insurance” and that “the information disseminated by [d]efendants was likely to mislead reasonable employers.” The amended complaint further alleged that defendants’ actions “injured and harmed [p]laintiffs, other members of self-insured trusts and the general public” and have “jeopardized the workers’ compensation benefits of New York employers and their employees.” Construing these allegations liberally, as we must, we find that plaintiffs sufficiently alleged that the misconduct at issue was consumer oriented … . Belair Care Ctr., Inc. v Cool Insuring Agency, Inc., 2019 NY Slip Op 00015, Third Dept 1-3-19

 

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FAMILY COURT SHOULD NOT HAVE DENIED INCARCERATED FATHER’S PRO SE PETITION SEEKING VISITATION BASED UPON THE EXISTENCE OF TWO ORDERS OF PROTECTION, THE FAMILY COURT ORDER OF PROTECTION, BY LAW, EXPIRED AFTER ONE YEAR, NOT WITHSTANDING A 2022 EXPIRATION DATE IN THE ORDER, AND THE ORDER OF PROTECTION IN THE CRIMINAL MATTER DID NOT PERTAIN TO THE CHILDREN (THIRD DEPT).

The Third Department, reversing Family Court, determined the incarcerated father’s petition seeking visitation with his children should not have been dismissed based upon two orders of protection. Although the Family Court order of protection, on its face, was to expire in 2022, it could not, under the law, exceed one year. The Family Court order of protection therefore expired in 2016. As for the order of protection issued in a criminal proceeding, it did not specifically pertain to the children and Family Court does not have the authority to change it:

Family Court, among other things, issued an order of protection that prohibited the father from having contact with the children … and such order expires on January 22, 2022. This expiration date, however, was not permissible. In this regard, because of the biological relationship between the father and the children, the duration of this order of protection could not exceed one year from the disposition of the matter, subject to any further extensions … . … We therefore modify the order of protection to reflect an expiration date of March 2, 2016. …

The order of protection issued in connection with petitioner’s criminal matter is likewise inapplicable. We note that Family Court generally does not have the authority to countermand the dictates of a criminal court order of protection … . That said, the order of protection issued against the father in his criminal matter did not specifically pertain to the subject children. Matter of Pedro A. v Gloria A., 2019 NY Slip Op 00010, Third Dept 1-3-19

 

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OIL AND GAS INVESTMENT SCHEME PROPERLY FOUND TO BE AN ABUSIVE TAX AVOIDANCE TRANSACTION (THIRD DEPT).

The Third Department, in a full-fledged opinion by Justice Pritzker, affirmed the Tax Appeals Tribunal’s determination that petitioner’s complex gas and oil drilling investment scheme constituted an abusive tax avoidance transaction. Therefore the notice of deficiency, penalties and interest assessed by the Department of Taxation and Finance were appropriate. The opinion is fact-specific and too complicated to fairly summarize here. The following quotation from the opinion is provided to demonstrate the nature of the issues:

The Tribunal’s determination that the overall financing structure artificially inflated the actual capital contributions of the Belle Isle partners [the petitioner oil and gas drilling company], allowing large tax deductions based upon IDCs [intangible drilling costs] derived through the inflated turnkey contract, is rationally based and supported by substantial evidence … . Beginning with the Belle Isle financing structure, particularly Sznajderman’s [petitioner general partner’s] subscription note, it is clear that Belle Isle did not have an intent to create a true debtor-creditor relationship as to 85% of the face value of the note. Specifically, while the face value of the subscription note was $540,000, the additional collateral agreement had the practical effect of satisfying the principal of said note by Sznajderman’s payment of only 15% of the face value, which was to be used by SS & T, the so-called creditor, to purchase bonds. Importantly, these bonds were not collateral; rather, they were ostensibly used to pay off the principal of the subscription note in 25 years. …

Further, Sznajderman’s payment of interest during the first year did not legitimize the debt because interest after the first year, which was designed to be paid from Sznajderman’s net operating proceeds, was only paid sporadically, despite such proceeds being available. We agree with the Tribunal that, based upon this sporadic collection of interest, it is highly unlikely that Belle Isle would attempt to collect “its partners’ very large interest accruals when the subscription notes mature.” … . As such, we find that substantial evidence supports the Tribunal’s conclusion that, while Sznajderman’s investment had economic substance in general, … the subscription note, to the extent of 85% of its face value, was artificially inflated and, as such, did not establish true debt and most certainly elevated form over substance … . Matter of Sznajderman v Tax Appeals Trib. of the State of N.Y., 2019 NY Slip Op 00007, Third Dept 1-3-19

 

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