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THE PETITION BROUGHT BY THE EXECUTOR PURSUANT TO SCPA 2103 SOUGHT DISCOVERY AND THE TURNOVER OF ANNUITY FUNDS WHICH HAD BEEN TRANSFERRED TO APPELLANT; THE SCPA 21O3 ACTION IS LIKE AN ACTION FOR CONVERSION OR REPLEVIN AND HAS A THREE-YEAR STATUTE OF LIMITATIONS; HERE THE MOTIONS TO AMEND THE ANSWERS TO ASSERT THE STATUTE OF LIMITATIONS DEFENSE AND FOR SUMMARY JUDGMENT ON THAT GROUND SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Surrogate’s Court, determined the appellant’s motion to amend their answers to assert the statute of limitations defense, and the summary judgment dismissing the petition on that ground should have been granted. The petition, brought by the executor pursuant to SCPA 2103, sought discovery and the turnover of funds from an annuity which had been distributed:

… [T]he Surrogate’s Court should have granted that branch of the appellants’ motion which was for leave to amend their answers to add the affirmative defense of the statute of limitations. The petitioner failed to demonstrate that she would be prejudiced or surprised by the proposed amendment. The petitioner also failed to demonstrate that the proposed amendment was palpably insufficient or patently devoid of merit.

“A discovery proceeding pursuant to SCPA article 21 has been likened to an action for conversion or replevin and a three-year statute of limitations has been applied” … . “A conversion cause of action accrues and the limitations period begins to run on the date the conversion allegedly occurred”… . Here, the appellants produced evidence … that the annuity funds at issue were withdrawn and deposited into a joint bank account … [and] then transferred into a personal account … on December 31, 2012, and January 3, 2013. Since the petition was not filed until June 23, 2016, the appellants demonstrated, prima facie, that the petitioner’s claim was time-barred.

… [T]he petition did not allege a cause of action sounding in fraud or breach of fiduciary duty. Moreover, even if the petition had alleged breach of fiduciary duty, the applicable statute of limitations would still be three years because the petition sought money damages only and fraud was not essential to the claim … . Matter of Chustckie, 2022 NY Slip Op 01452, Second Dept 3-9-22

Practice Point: An action by an executor of an estate pursuant to SCPA 2103 seeking the turnover of funds already distributed is in the nature of a conversion or replevin action and has a three-year statute of limitations.

 

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EVEN THOUGH PLAINTIFF DID NOT TIMELY FILE A NOTE OF ISSUE AND DID NOT COMPLY WITH A PRIOR DISCOVERY ORDER, THE JUDGE WAS WITHOUT AUTHORITY TO, SUA SPONTE, DISMISS THE COMPLAINT BECAUSE PLAINTIFF HAD NOT BEEN SERVED WITH A VAILD 90-DAY DEMAND TO FILE A NOTE OF ISSUE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the judge should not have, sua sponte, dismissed the complaint on the ground plaintiff failed to timely file a note of issue and failed to comply with a prior discovery order because plaintiff had not been served with a valid 90-day notice:

The Supreme Court improperly, sua sponte, directed dismissal of the complaint on the ground that the plaintiff failed to timely file a note of issue and failed to comply with a prior discovery order of the court. Because the plaintiff was not served with a valid 90-day demand to file a note of issue pursuant to CPLR 3216(b)(3), the court had no authority to dismiss the complaint based on the failure to timely file a note of issue … . Further, the plaintiff’s alleged failure to comply with the discovery order did not constitute extraordinary circumstances warranting the sua sponte dismissal of the complaint … .Moreau v Cayton,, 2022 NY Slip Op 01450, Second Dept 3-9-22

Practice Point: The judge did not have the authority to, sua sponte, dismiss the complaint, even though plaintiff had not timely filed a note of issue and had not complied with a prior discovery order, because the plaintiff had not been served with a valid 90-day demand to file a note of issue.

 

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THE BANK FAILED TO DEMONSTRATE STANDING TO BRING THE FORECLOSURE ACTION; THERE WERE QUESTIONS OF FACT WHETHER THE “HOLDER (OF THE NOTE)” REQUIREMENTS OF THE UCC WERE MET (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not demonstrate standing to bring the foreclosure action:

… [T]here was no evidence that the plaintiff is the assignee of note, and triable issues of fact exist as to whether the plaintiff was the holder of the note at the time the action was commenced. A promissory note is a negotiable instrument within the meaning of the Uniform Commercial Code (see UCC 3-104[2][d] …). A “holder” is “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession” (UCC 1-201[b][21][A] …). Where an instrument is endorsed in blank, it may be negotiated by delivery (see UCC 3-202[1]; 3-204[2] …). In the present case, there is a triable issue of fact as to whether the note was properly endorsed in blank by an allonge “so firmly affixed thereto as to become a part thereof” when it came into the possession of the plaintiff (UCC 3-202[2] …). …

The plaintiff’s reliance on the assignments of the mortgage is misplaced “because the mortgage is not the dispositive document of title as to the mortgage loan” … . HSBC Bank USA, N.A. v Herod, 2022 NY Slip Op 01444, Second Dept 3-9-22

Practice Point: To establish standing, a bank has to prove it was the “holder” of the promissory note within the meaning of the UCC at the time the foreclosure action was commenced. Here there were questions of fact whether the note in the bank’s possession was endorsed in blank by an attached “allonge” as required by the UCC.

 

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THE COUNTY WHERE PLAINTIFF AND DEFENDANT OWNED A SEASONAL SECOND HOME (WHERE DEFENDANT LIVED AFTER COVID REACHED NEW YORK CITY) WAS NOT THE PROPER VENUE FOR THE DIVORCE ACTION (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Lasalle, reversing Supreme Court, determined the county where plaintiff and defendant owned a seasonal second home, and where defendant moved when COVID reached New York City, was not the proper venue for the divorce action:

The parties to this divorce action primarily resided in New York County, while maintaining a seasonal second home in Suffolk County. In March 2020, when the COVID-19 pandemic first reached New York City, the defendant retreated to the Suffolk County residence along with her pregnant and immunocompromised daughter and began spending more time there in order to assist the daughter during the pregnancy and after the child’s birth. In August 2020, the plaintiff commenced this action for a divorce and ancillary relief in Suffolk County, on the ground that the parties were residents of Suffolk County. The defendant moved pursuant to CPLR 510 and 511 for a change of venue, and the Supreme Court denied the motion.

This case presents the issue of whether sheltering in place in a seasonal home creates a sufficient degree of permanence to establish residency at that location. We hold that it does not under the circumstances of this case. Because the parties’ stays in Suffolk County were only seasonal and temporary, we hold that neither of them were residents of Suffolk County at the time of the commencement of the action. Accordingly, the Supreme Court should have granted the defendant’s motion pursuant to CPLR 510 and 511 to change the venue of the action from Suffolk County to New York County. Fisch v Davidson, 2022 NY Slip Op 01442, Second Dept 3-9-22

Practice Point: In this divorce action commenced in August 2020 (during the pandemic), the county were plaintiff and defendant owned a seasonal home, and where defendant moved when COVID reached New York City, was not the proper venue. New York County, where the couple primarily resided, was deemed the proper venue for the divorce proceedings.

 

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THE LOST NOTE AFFIDAVIT SUBMITTED BY THE BANK WAS INSUFFICIENT; THEREFORE THE BANK DID NOT DEMONSTRATE STANDING TO BRING THE FORECLOSURE ACTION; DEFENDANTS’ MOTION TO AMEND THE ANSWER TO ASSERT THE LACK OF STANDING DEFENSE SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action did not demonstrate standing to bring the action and Supreme Court should have granted defendant’s motion to amend the answer to assert lack of standing as a defense:

… [I]n support of its motion for summary judgment, the plaintiff submitted … a lost note affidavit of a representative of the plaintiff’s loan servicer, to which was annexed a copy of the consolidated note. However, the affidavit was insufficient to establish the facts preventing the production of the note … . …

… Supreme Court should have granted that branch of the defendant’s cross motion which was pursuant to CPLR 3025(b) for leave to amend her answer to assert the affirmative defense of lack of standing … . Leave to amend a pleading should be freely granted (see CPLR 3025[b]). In the absence of prejudice or surprise to the opposing party, a motion to amend should be granted unless the proposed amendment is palpably insufficient or patently devoid of merit … .. “Mere lateness is not a barrier to the amendment. It must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine” … …. [T]he defendant did not waive the affirmative defense of lack of standing (see RPAPL 1302-a). Deutsche Bank Natl. Trust Co. v Kreitzer. 2022 NY Slip Op 01441, Second Dept 3-9-22

Practice Point: The bank was unable to demonstrate standing to bring the foreclosure action because the lost note affidavit was insufficient. Even a late motion to amend an answer should be granted if there is no prejudice to the plaintiff. Here the motion to add the lack of standing defense to the answer should have been granted.

 

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THE TENANT HARASSMENT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED; SUPREME COURT HAD SUBJECT MATTER JURISDICTION FOR THAT CAUSE OF ACTION (SECOND DEPT).

The Second Department, reversing (modifying Supreme Court, determined the tenant harassment cause of action should not have been dismissed, noting that Supreme Court had subject matter jurisdiction for that cause of action:

… Supreme Court erred in granting that branch of the defendants’ motion which was pursuant to CPLR 3211(a)(7) to dismiss the third cause of action, which alleged harassment in violation of Local Law No. 7 (2008) of City of New York (Administrative Code of City of NY § 27-2005[d]). Contrary to the court’s determination, the plaintiffs sufficiently pleaded that cause of action. Furthermore, the court was vested with subject matter jurisdiction to make a determination on that cause of action … .Akter v Zara Realty Holding Corp., 2022 NY Slip Op 01434, Second Dept 3-9-22

​Practice Point: Supreme Court has subject matter jurisdiction over a tenant harassment cause of action pursuant to the the NYC Administrative Code.

 

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DEFENDANTS WERE NOT SERVED WITH NOTICE OF THE FORECLOSURE SALE; THEIR MOTION TO VACATE THE FORECLOSURE SALE SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants in this foreclosure action were entitled to service of the notice of the foreclosure sale. Because the defendants were not served with the notice, their motion to vacate the foreclosure sale should have been granted:

“Parties to an action involving the sale of real property pursuant to a judgment, who have appeared in the action and have not waived service, are entitled to have served upon them, pursuant to CPLR 2103, all papers in the action, including a notice of sale” … , a court is authorized to set aside a judicial sale within one year thereafter, for failure to comply with the requirement as to notice, but only if a substantial right of a party was prejudiced by the defect.

Here, the defendants established that they were prejudiced by the lack of notice of the sale inasmuch as they were deprived of the opportunity to protect their interest in the subject property … . 38-12 Astoria Blvd., LLC v Ramos, 2022 NY Slip Op 01433, Second Dept 3-9-22

Practice Point: Defendants who have appeared in a foreclosure action are entitled to notice of the foreclosure sale. Here defendants were not served with the notice of sale. Their motion to vacate the foreclosure sale should have been granted.

 

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CAUSES OF ACTION ALLEGING BREACH OF FIDUCIARY DUTY DO NOT ACCRUE UNTIL THE FIDUCIARY DUTY IS OPENLY REPUDIATED; CAUSES OF ACTION FOR CONVERSION BASED UPON FRAUD ARE TIMELY SIX YEARS FROM THE CONVERSION OR TWO YEARS FROM DISCOVERY OF THE CONVERSION; THE RELEVANT CAUSES OF ACTION HERE, THEREFORE, SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined causes of action alleging defendant Filardo, plaintiff car dealership’s employee, used fraudulent schemes to steal funds from plaintiff over a period of years, should not have been dismissed on statute of limitations grounds, and/or on the ground the causes of action were not adequately pled:

The plaintiff asserted causes of action against Filardo for breach of fiduciary duty (first cause of action), breach of the duty of loyalty (second cause of action), faithless servant doctrine (third cause of action), conversion (fifth cause of action), fraudulent concealment by fiduciary (sixth cause of action), and promissory estoppel (ninth cause of action), and causes of action against both defendants for aiding and abetting fraud (fourth cause of action), civil conspiracy (seventh cause of action), fraud and deceit (eighth cause of action), unjust enrichment (tenth cause of action), money had and received (eleventh cause of action), and fraud by non-disclosure (twelfth cause of action). …

“The statute of limitations for a cause of action alleging a breach of fiduciary duty does not begin to run until the fiduciary has openly repudiated his or her obligation or the relationship has been otherwise terminated” … Here, the plaintiff alleged that its relationship with Filardo was not terminated until November 2017, and there is no allegation that Filardo openly repudiated his employment obligations prior to that time … .

… [W]hen the allegations of fraud are essential to a cause of action alleging conversion based upon actual fraud, the cause of action is governed by the limitations period for fraud set forth in CPLR 213(8). That statute provides that, in an action based upon fraud, “the time within which the action must be commenced shall be the greater of six years from the date the cause of action accrued or two years from the time the plaintiff or the person under whom the plaintiff claims discovered the fraud, or could with reasonable diligence have discovered it” … .Star Auto Sales of Queens, LLC v Filardo, 2022 NY Slip Op 01476, Second Dept 3-9-22

Practice Point: The statute of limitations for breach of fiduciary duty does not start running until the fiduciary openly repudiates the duty.

Practice Point: The statute of limitations for conversion based upon fraud is six years from the conversion or two years from discovery of the conversion.

 

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PLANTIFF ALLEGED FAILURE TO DIAGNOSE CANCER IN 2014 IN THIS MEDICAL MALPRACTICE ACTION; DESPITE THE ENACTMENT OF LAVERN’S LAW (CPLR 214-A) IN 2018, WHICH EXTENDED THE STATUTE OF LIMITATIONS FOR FAILURE TO DIAGNOSE CANCER BY VIRTUE OF ITS RETROACTIVE-APPLICATION AND REVIVAL PROVISIONS, THE ACTION WAS TIME-BARRED (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff’s med mal action alleging failure to diagnose lung cancer based upon a CT scan in 2014 was time barred pursuant to the retroactive-application and revival limitations in CPRL 214-a, enacted on January 31, 2018 (called Lavern’s Law):

[Lavern’s Law] “appl[ies] to acts, omissions, or failures occurring within 2 years and 6 months prior to the effective date of this act, and not before” … . Thus, by its terms, the discovery toll in Lavern’s Law’s applies retroactively to causes of action that were not time-barred as of Lavern’s Law’s effective date, i.e., causes of action accruing on or after July 31, 2015. Plaintiff’s causes of action, which accrued on May 16, 2014, predate the earliest date to which Lavern’s Law’s retroactive discovery toll applies.

Lavern’s Law also provides for the revival of certain time-barred medical malpractice causes of action. Where a claim based on the negligent failure to diagnose cancer or a malignant tumor occurred and, “within ten months prior to the effective date of the act . . . became time-barred under any applicable limitations period then in effect, such action or claim may be commenced within six months of the effective date of the act . . . .” … . Therefore, a failure to diagnose cancer or malignant tumor cause of action that became time-barred between March 31, 2017 and January 31, 2018 may be revived if it is commenced no later than July 31, 2018 … . Because plaintiff’s claims became time-barred on November 16, 2016, the limited revival provision of the new law (for certain claims that became time-barred after March 31, 2017) does not avail her … .Ford v Lee, 2022 NY Slip Op 01414, First Dept 3-8-22

Practice Point: Lavern’s Law (CPLR 214-a, enacted in 2018) extended the statute of limitations for failure to diagnose cancer by virtue of its retroactive-application and revival provisions, neither of which applied to plaintiff here who alleged failure to diagnose in 2014.

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THE COMPLAINT SUFFICIENTLY STATED FACTS AMOUNTING TO A BREACH-OF-FIDUCIARY-DUTY CAUSE OF ACTION AGAINST DEFENDANT REAL ESTATE BROKER, DESPITE PLAINTIFF-SELLER’S CONSENT TO THE BROKER’S “DUAL AGENCY;” IT WAS ALLEGED THE BROKER WAS AWARE THE PROPERTY WAS TO BE SUBDIVIDED AND SOLD BY THE BUYERS FOR THREE TIMES THE PRICE AND SHE WOULD BE THE BUYERS’ BROKER FOR THE SUBSEQUENT SALES (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined the complaint sufficiently stated a cause of action for breach of fiduciary duty by the defendant real estate broker, despite the plaintiff’s consent to the broker’s “dual agency:”

Although the complaint does not explicitly articulate a cause of action for breach of fiduciary duty, such a cause of action is manifest in its factual allegations, and the documentary evidence fails to utterly refute those allegations … . In connection with his sale of certain real property, plaintiff signed a disclosure form pursuant to Real Property Law § 443, giving his informed consent to a “dual agency with designated sales agent” relationship with defendants. The form states that a dual agent cannot give the seller or buyer “undivided loyalty.” Nevertheless, it does not relieve defendants from all fiduciary duty. The form states that defendant Nikki Carchedi, of defendant Stone House Properties, “is appointed to represent the seller in this transaction.” The complaint establishes a cause of action for breach of a fiduciary duty beyond the acknowledged “divided” duty by alleging that [defendant] Carchedi failed to disclose that she had a personal stake in the sale to the buyers, who planned to subdivide the property immediately after purchase and retain her as the broker for the sale of the subdivided parcels, and that they did so, listing the subdivided parcels for almost three times the price plaintiff received in his sale … . We also note plaintiff’s assertion that the agent representing the buyer was the son of Carchedi’s longtime client about whom plaintiff had expressed concern. Hahn v Stone House Props. LLC, 2022 NY Slip Op 01416, First Dept 3-8-22

​Practice Point: Even though breach-of-fiduciary-duty was not explicitly pled, the facts alleged stated a cause of action against defendant real estate broker.

Practice Point: Even though the seller signed a form consenting to the broker’s “dual agency,” the broker was not relieved of her fiduciary duty to the seller. Allegedly, the broker was aware the buyers were going to subdivide the property, sell it at three times the price, and that she would be the broker for the subsequent sales.

 

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