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THE DOCTRINE OF EQUITABLE ESTOPPEL SHOULD NOT HAVE BEEN APPLIED TO PRECLUDE THE VILLAGE FROM RAISING THE “FAILURE TO FILE A NOTICE OF CLAIM” DEFENSE TO DEFENDANT’S COUNTERCLAIM (CT APP).

The Court of Appeals, affirming the Appellate Division’s reversal of Supreme Court, in a full-fledged opinion by Judge Halligan, over a two-judge dissent, determined the defendant-developer, FPW, in a breach-of-a-real-estate-contract action brought by the plaintiff-village, was precluded from litigating a counterclaim because it never filed a notice of claim with the village. Supreme Court had ruled the doctrine of equitable estoppel precluded the village’s “lack-of-notice-of-claim” argument because the village was aware of the facts underlying the counterclaim from the start of the lawsuit and failed to raise the defense until the statute of limitations had run. The Court of Appeals rejected the equitable-estoppel argument:

We have explained that equitable estoppel generally “is not applied against the government, as a matter of policy, because to do so could easily result in large scale public fraud” and “violate the doctrine of separation of powers” … . Thus, “[w]e have recognized that estoppel may be warranted in unusual factual situations to prevent injustice . . . but we have limited its use against government agencies to all but the rarest cases” … . * * *

… [W]e conclude that the Village did not engage in wrongful or misleading conduct warranting the application of equitable estoppel. As the Appellate Division correctly determined, participation in litigation, without more, does not constitute action calculated to mislead or discourage a party from filing a notice of claim … . That holds true here, where the Village was pressing its own breach of contract claim and therefore had every reason to participate in discovery and related court conferences, independent of FPW’s counterclaim. Moreover, the Village’s answer to the counterclaim put FPW on notice that it was raising FPW’s “fail[ure] to perform all conditions precedent” as an affirmative defense, and compliance with a notice of claim statute such as CPLR 9802 “is a condition precedent” to an action against a municipality … . Incorporated Vil. of Freeport v Freeport Plaza W., LLC, 2026 NY Slip Op 03906, CtApp 6-18-26

Practice Point: Although the equitable estoppel doctrine can very rarely be applied to a municipality, the village did nothing improper or misleading which would warrant precluding the village’s “failure to file a notice of claim” defense to defendant’s counterclaim. There was a two-judge dissent.

 

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PETTIONERS (LICENSED CANNABIS RETAILERS) DID NOT DEMONSTRATE THAT THE RESPONDENT AGENCY’S REGULATIONS CONCERNING INSPECTIONS, SEARCHES AND SEIZURES AT PETITIONERS’ PLACES OF BUSINESS ARE UNCONSTITUTIONAL; THE ALLEGATION THAT THE MANNER IN WHICH THE INSPECTIONS ARE CONDUCTED VIOLATES THE CONSTITUTION IS PREMATURE BECAUSE THE ALLEGATION HAS NOT YET BEEN SUBJECTED TO ADMINISTRATIVE REVIEW, I.E., THE “EXHAUSTION OF REMEDIES” REQUIREMENT HAS NOT BEEN MET (THIRD DEPT). ​

The Third Department, reversing Supreme Court, in a full-fledged opinion by Justice Corcoran, determined the preliminary injunction prohibiting certain inspections of petitioners’ businesses, which are licensed for the retail sale of cannabis, should not have been granted. The respondent is an agency, the NYS Cannabis Control Board.

… [Re:] petitioners’ attempt to show the likelihood of a successful constitutional challenge, we find that Supreme Court abused its discretion in granting the preliminary injunction because petitioners failed to show that the statutory and regulatory scheme is invalid in all of its applications … . * * *  When viewed as a whole, we find that the statutory and regulatory framework provides “meaningful limitation[s]” on an inspector’s discretion and ensures that “the search is limited in scope to that necessary to meet the interest that legitimized the search in the first place” … . …

To the extent petitioners challenge the manner in which inspections were applied to their particular businesses, these “as-applied” claims are premature because they have not been subjected to administrative review. A facial challenge requires examination of the statute “on a cold page” and without reference to the particular conduct … , whereas an “as-applied” challenge “requires an analysis of the facts of a particular case” … . Matter of Super Smoke N Save LLC v New York State Cannabis Control Bd., 2026 NY Slip Op 03715, Third Dept 6-11-26

Practice Point: A court can review an agency’s regulations which are alleged to be unconstitutional “on a cold page,” but a court cannot review the manner in which the regulations are applied absent an agency determination (the “exhaustion of remedies” rule in administrative law).

 

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DEFENDANT HAD SUFFICIENT CONTACTS WITH NEW YORK TO ALLOW THIS BREACH OF CONTRACT ACTION TO BE BROUGHT IN NEW YORK (FIRST DEPT).

The First Department, reversing Supreme Court, determined defendant, which issued preferred stock to plaintiff, had sufficient contacts with New York to bring the breach of contract action in New York:

Pursuant to the certificates of designation governing the preferred stock issued by defendant to plaintiff, defendant was required to provide dividends to a paying agent, which then provided the funds to a depository to pay the preferred stockholders. To facilitate dividend distributions, defendant designated entities located in New York as the paying agent and the depository. Further, defendant’s agreements with each of the depositories required the depository to maintain facilities in New York City. Defendant also contracted with multiple underwriters based in New York to sell the preferred stock. * * *

… [The] New York-based contacts are sufficiently related to plaintiff’s underlying breach of contract claim because “at least one element [of the cause of action] arises from the New York contacts” … . Defendant allegedly breached its duty under the certificates of designation not to sell stock to its affiliates “unless full cumulative dividends on the [preferred stock] . . . have been paid.” Defendant’s alleged breach consisted of not only its agreement to sell stock to one of its affiliates but also its failure to make full cumulative dividend payments to the preferred stockholders before completing the sale. … [D]efendant’s failure to make dividend payments, which necessarily would have been sent to its paying agent in New York, sufficiently connects defendant’s contacts with New York to the breach of contract cause of action … . Katz v Navios Mar. Holdings, Inc., 2026 NY Slip Op 03731, First Dept 6-11-26

Practice Point: Consult this decision for insight into when a defendant’s contacts with New York are sufficient to support a breach of contract action.brought in New York.​

 

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“EXHAUSTION OF REMEMDIES” IS NOT ALWAYS REQUIRED BEFORE AN AGENCY ACTION CAN BE CHALLENGED IN COURT; HERE THE CHALLENGE INVOLVED A PURE QUESTION OF LAW (SECOND DEPT).

The Second Department noted that the “exhaustion of remedies” rule does not apply to administrative actions where, as here, an agency’s action is challenged as either unconstitutional or beyond the agency’s power. Here petitioners alleged the respondent NYC Water Board overcharged for excess water consumption. That agency’s procedure was properly reviewed by the court (but the argument was ultimately rejected):

… “[E]xhaustion of administrative remedies is not required where an agency’s action is challenged as either unconstitutional or beyond its grant of power, or when resort to an administrative remedy would be futile, or when its pursuit would cause irreparable injury” … . This is because while review of some claims “hinges upon factual issues reviewable at the administrative level [which] must first be addressed to the agency so that a necessary factual record can be established” … , other claims present “a circumstance where the issue to be determined is purely a question of law” … . To the extent the fifth cause of action sought a declaration that the Water Board is acting in contravention of an established statutory scheme for setting rates for excess water consumption, exhaustion was not required … , and the court should not have dismissed that portion of the fifth cause of action on those procedural grounds. Matter of Town of Carmel v New York City Water Bd., 2026 NY Slip Op 03680, Second Dept 6-10-26

Practice Point: This decision presents an example of when a court challenge to an agency action does not trigger the “exhaustion of remedies” requirement. Here the challenge presented a pure question of law which did not require the development of a factual record at the agency level.

 

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HERE THE STATE STATUTE OF LIMITATIONS FOR TOXIC TORTS ACTIONS WAS PRE-EMPTED BY A FEDERAL “DISCOVERY RULE” WHICH ALLOWS A TOXIC-TORT ACTION TO BE BROUGHT WITHIN ONE YEAR AFTER THE DATE PLAINTIFF KNEW OR REASONABLY SHOULD HAVE KNOWN THE CAUSE OF AN INJURY, EVEN IF MORE THAN FIVE YEARS HAVE ELAPSED SINCE THE DISCOVERY OF THE INJURY (SECOND DEPT). ​

The Second Department, in a full-fledged opinion by Justice Dowling, determined the federal “discovery rule” for toxic tort actions pre-empts the state statute of limitations. The lawsuit alleged a town landfill near a school emitted toxic materials causing illness among the school’s staff and students:

42 USC § 9658 has been deemed a “discovery rule” … , and “does not purport to create an entirely new statute of limitations framework for state toxic tort actions” … . Instead, the statute provides “a limited ‘[e]xception to State statutes’ [that] applies only if the state statute ‘provides a commencement date which is earlier than the federally required commencement date'” … . Thus, in New York, where suit was not brought within three years of the discovery-of-injury date as provided by CPLR 214-c(2), the primary effect of 42 USC § 9658 is to allow a plaintiff to bring suit within one year after “the date the plaintiff knew (or reasonably should have known)” the cause of an injury, even if more than five years have elapsed since discovery of the injury … . * * *

… [W]ith respect to those plaintiffs in this action who did not bring suit within three years of the discovery of their alleged injuries (see CPLR 214-c[2]), 42 USC § 9658 applies to allow those plaintiffs to bring suit within one year after “the date the plaintiff knew (or reasonably should have known)” the cause of an injury, even if more than five years have elapsed since discovery of the injury … . Klaus v Town of Brookhaven, 2026 NY Slip Op 03669, Second Dept 6-10-26

Practice Point: Here the state statute of limitations for toxic tort cases was pre-empted by a federal “discovery rule” which allows suit within one year after “the date the plaintiff knew (or reasonably should have known)” the cause of an injury, even if more than five years have elapsed since discovery of the injury.

 

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THE BANK’S NOTICE OF DEFAULT WHICH STATED THE MORTGAGE DEBT WOULD BE ACCELERATED IF THE ARREARS WERE NOT PAID IN 32 DAYS WAS A STATEMENT OF FUTURE INTENT AND DID NOT SERVE TO ACCELERATE THE DEBT; THEREFORE THE NOTICE DID NOT TRIGGER THE SIX-YEAR STATUTE OF LIMITATIONS AND THE FORECLOSURE ACTION WAS TIMELY BROUGHT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the notice by the bank stating that the mortgage debt would be accelerated if the defendant did not pay the arrears withing 32 days was merely a statement of future intent and did not serve to accelerate the debt. Therefore the notice did not trigger the running of the six-year statute of limitations and the foreclosure action should not have been dismissed:

… [T]he July 31, 2010 default notice did not accelerate the debt. The language in the default notice, that the mortgage debt would be accelerated if Edmund J. Burns, Jr., did not pay the arrears within 32 days from the date of the default notice, was merely an expression of future intent that fell short of an actual acceleration of the mortgage debt … . The mortgage debt was not accelerated until the plaintiff commenced the first action on December 12, 2012, and elected in the complaint to call due the entire loan amount and demanded payment of the outstanding loan in full … . This action was timely commenced on June 29, 2017, prior to the expiration of the statute of limitations on December 12, 2018. Bank of N.Y. Mellon Trust Co., N.A. v Burns, 2026 NY Slip Op 03658, Second Dept 6-10-26

Practice Point: In a foreclosure action, a notice of default which states the mortgage debt will be accelerated if the arrears are not paid in 32 days does not accelerate the debt and therefore does not trigger the six-year statute of limitations.

 

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A PLAINTIFF CAN USE THE SIX-MONTH “SAVINGS CLAUSE” IN CPLR 205(A) MORE THAN ONCE; WHEN THERE HAS BEEN AN APPEAL OF THE DISMISSAL OF THE COMPLAINT, THE SIX-MONTH PERIOD DOESN’T START TO RUN UNTIL 30 DAYS AFTER SERVICE OF THE APPELLATE DIVISION’S ORDER WITH NOTICE OF ENTRY (FIRST DEPT). ​

The First Department determined the dismissal of the complaint should have been “without prejudice” because plaintiff is entitled to use the six-month “savings clause” (CPLR 205(a)) more than once. The six-month period begins to run when when an appeal taken as of right is exhausted. Therefore the six-month period won’t start running until 30 days after the service of the First Department’s order with notice of entry:

The motion court properly determined that plaintiff did not have capacity to initiate this action because plaintiff has not yet obtained the necessary letters of administration. Dismissal of the action was therefore warranted. However, plaintiff is entitled to use the savings clause of CPLR 205(a) more than once … . Accordingly, we modify to make the dismissal without prejudice… .

Defendant’s contention that the grace period for plaintiff to bring a third action expired on December 3, 2025 (six months after the order appealed from was filed with notice of entry) is unavailing. “[A] prior action terminates for purposes of CPLR 205(a) when an appeal taken as of right is exhausted” … . Thus, “the six-month period for recommencing an action . . . begins to run once 30 days have elapsed following service of [our] order . . . with notice of entry” … . Lewis v TCPRNC, LLC, 2026 NY Slip Op 03635, First Dept 6-9-26

Practice Point: The six-month “savings clause” in CPR 205(a) can be used more than once.

Practice Point: Where, as here, there has been an appeal of the initial dismissal of the complaint, the CPLR 205(a) six-month period does not start to run until 30 days after the service of the appellate division’s order with notice of entry.

 

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PLAINTIFF IN THIS SLIP AND FALL CASE DID NOT CALL HER TREATING PHYSICIAN AS A WITNESS AND DID NOT DEMONSTRATE THE PHYSICIAN WAS UNAVAILABLE OR THAT HIS TESTIMONY WOULD BE CUMULATIVE; PLAINTIFF RELIED SOLELY ON THE TESTIMONY OF A PSYCHIATRIST WHO FIRST SAW PLAINTIFF SIX YEARS AFTER THE ACCIDENT; DEFENDANT’S REQUEST FOR A “MISSING WITNESS” JURY INSTRUCTION SHOULD HAVE BEEN GRANTED; VERDICT SET ASIDE (FIRST DEPT).

The First Department, granting defendant’s motion to set aside the jury verdict and direct a new trial in this sidewalk slip and fall case, determined plaintiff’s failure to call her treating physician as a witness warranted the “missing witness” jury instruction. Plaintiff called only, Dr. Guy, a psychiatrist who saw plaintiff only a few times six years after the injury:

Plaintiff alleges that she was injured when she was walking on the sidewalk adjacent to defendant’s property when her foot became trapped in a hole, causing her to fall. At trial, plaintiff alleged that because of the accident, she suffered a cervical herniation that caused radiculopathy and required surgery. She further alleged that injuries to her knee and her lumbar spine would require future surgery.

The trial court should have given the jury a missing witness charge with regard to Dr. Jason Gallina, plaintiff’s treating physician and surgeon from the period beginning months after the accident until at least a year afterward. Dr. Gallina was the orthopedic surgeon who performed plaintiff’s cervical fusion surgery, and he was the doctor who allegedly recommended the lumbar surgery that plaintiff contended she would need in the future.

The law is well settled that a missing witness charge is warranted for the failure to call a treating physician as a witness at trial, unless the party opposing the inference shows that the witness is either unavailable or not under the party’s control, or that the witness’s testimony would be cumulative … . * * *

Although the burden was on plaintiff to show that Dr. Gallina was unavailable or not under her control, she made no such showing  … . … [T]he testimony from Dr. Gallina would not have been cumulative. Dr. Guy is a physiatrist, while Dr. Gallina is the orthopedic surgeon who performed plaintiff’s surgery. Encarnacion v St. Barnabas Hosp., 2026 NY Slip Op 03630, First Dept 6-9-26

Practice Point: The plaintiff in a personal injury action must call the treating physician as a witness or adequately explain the failure to do so. In the absence of an adequate explanation, the defendant is entitled to a “missing witness” jury instruction.​

 

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HERE THE VILLAGE SOUGHT TO ANNUL THE CITY’S IMPOSITION OF HIGHER SEWER CHARGES; THE CITY INTERPOSED SEVERAL COUNTERCLAIMS THAT WERE BASED ON THEORIES NOT INCLUDED IN THE CITY’S EARLIER NOTICE OF CLAIM WHICH ALLEGED ONLY BREACH OF CONTRACT; BECAUSE THE COUNTERCLAIMS RAISED THEORIES NOT ENCOMPASSED BY THE CITY’S EARLIER NOTICE OF CLAIM, THEY WERE DISMISSED (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined all of the city’s counterclaims against the village should have been dismissed for failure to meet the “notice of claim” requirements. The village commenced this hybrid CPLR article 78 and declaratory judgment action seeking to annul the city’s determination to charge a higher rate for sewer services than had been charged under the parties “longtime agreement.” The city interposed counterclaims based on theories not encompassed by the city’s notice of claim. All the counterclaims should have been dismissed on that ground:

“CPLR 9802 sets forth the procedure by which certain actions against villages may be maintained” … . “In addition to providing for the maintenance of contract actions against villages, the statute also provides, in pertinent part, that ‘no other action shall be maintained against [a] village unless the same shall be commenced within one year after the cause of action therefor shall have accrued, nor unless a notice of claim shall have been made and served in compliance with [General Municipal Law § 50-e]’ ” …). Consequently, “[i]t is a condition precedent to, and indeed an essential element of, any cause of action . . . against a village that the [claimant] have served upon the village a notice of claim setting forth, inter alia, the nature of the claim and the items of damage or injuries claimed to have been sustained” … . “A claimant need not state a precise cause of action in haec verba in a notice of claim . . . , but a claimant may not raise in the [pleading] causes of action or legal theories that were not directly or indirectly mentioned in the notice of claim and that change the nature of the earlier claim or assert a new one” … . Furthermore, “the requirements of notice of claim statutes[, including CPLR 9802,] apply to the filing of counterclaims” … . “[T]he notice of claim requirements of CPLR 9802 [also] apply to . . . causes of action [or claims] for declaratory relief” … .

Here, the notice of claim was premised exclusively on the theory that the City was entitled to monetary damages and a declaratory judgment based on the Village’s alleged breach of the parties’ agreement. Conversely, the City’s first counterclaim seeks a declaration that the agreement had actually expired before the breach alleged in the notice of claim, and the third counterclaim seeks monetary damages for debt allegedly incurred by the Village after the purported expiration of the agreement. The fourth and fifth counterclaims for quantum meruit and unjust enrichment, respectively, are also premised on legal theories other than breach of contract. We thus conclude that those counterclaims improperly raise claims or legal theories “that were not directly or indirectly mentioned in the notice of claim and that change the nature of the earlier claim[s] or assert . . . new one[s]” … . Village of Allegany v City of Olean, 2026 NY Slip Op 03555, Fourth Dept 6-5-26

Practice Point: A condition precedent to an action against a village is the filing of a notice of claim. The condition applies to counterclaims and requests for declaratory judgments. Here the city’s earlier notice of claim against the village was based solely on an alleged breach of contract. The subsequent counterclaims raised by the city in response to the village’s Article 78 proceeding were based on theories not encompassed by the city’s earlier notice of claim and were dismissed on that ground.

 

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THE ISSUANCE DATE OF A DEPARTMENT OF CORRECTIONS AND COMMUNITY SUPERVISION (DOCCS) DECISION BY A HEARING OFFICER IS THE DATE THE DECISION IS MAILED; THE 60-DAY APPEAL PERIOD STARTS RUNNING ON THE DATE OF MAILING; HERE DOCCS DID NOT PROVE WHEN THE DECISION WAS MAILED AND THEREFORE FAILED TO PROVE THE APPEAL WAS UNTIMELY; THE DATE STAMPED BY A POSTAGE METER IS NOT NECESSARILY THE DATE OF MAILING (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the respondent Department of Corrections and Community Supervision (DOCCS) did not demonstrate petitioner’s appeal of the suspension of her visiting rights was untimely. Petitioner is the fiancee of an incarcerated person and the suspension of visiting rights was related to an incident during one of the visits. The fiancee attempted to appeal the suspension.  DOCCS argued that the appeal was untimely and Supreme Court agreed. The Third Department determined DOCCS failed to prove the appeal was untimely because it did not prove when the decision suspending visitation was mailed. Mailing triggers the 60-day period for appeal. The envelope in which the decision was mailed was stamped by a postage meter on January 8, 2024, but that does not prove it was mailed on January 8. Petitioner’s appeal was received by DOCCS on March 13, 2024. Without proof of the exact date the decision was mailed, DOCCS did not demonstrate the 60-day appeal period had expired on March 13:

… [P]etitioner’s 60-day appeal window began to run on the date the decision was mailed. * * *

… [T]he issuance date of the Hearing Officer’s decision is the day it was placed in the mail. … [R]espondents’ submissions in support of their motion to dismiss do not reveal this date. Although the record contains a copy of the envelope in which the decision was mailed, it shows only the date the envelope was put through a postage meter, which “is not the equivalent of a postmark date” … . Respondents have not proffered an affidavit of mailing to establish the date it was placed in the mail. As such, respondents did not meet their burden of establishing that claimant’s appeal was untimely … . Matter of Moses v New York State Dept. of Corr. & Community Supervision, 2026 NY Slip Op 03485, Third Dept 6-4-26

Practice Point: If an appeal period is triggered by when a decision is mailed, the party attempting to prove the appeal was untimely must prove precisely when the decision was mailed. The date stamped by a postage meter is not proof of the the precise date of mailing.

 

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