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DEFENDANT NEVER CONSENTED TO THE SUBSTITUTION OF COUNSEL IN THIS FORECLOSURE ACTION; THE MOTION FOR SUMMARY JUDGMENT, SERVED ON THE PURPORTED SUBSTITUTE COUNSEL, WAS NEVER SERVED UPON DEFENDANT AND WAS THEREFORE NULLIFIED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determine the plaintiff’s motion for a default judgment in this foreclosure action was not properly served and therefore must be reversed. The papers were served on an attorney but defendant had not consented to the substitution of thst attorney:

… [T]he record demonstrates that the plaintiff served its motion, inter alia, for an order of reference and its motion for a judgment of foreclosure and sale, on [attorney] Elo, not [defendant] Nakash or CAMBA [legal services]. Nakash retained CAMBA in July 2011 to appear on her behalf at the settlement conferences. Although in April 2013, CAMBA and Elo signed a substitution of counsel, Nakash never acknowledged or signed this substitution, nor was a substitution ordered by the Supreme Court. Moreover, Nakash attested that she did not know Elo, never authorized him to represent her, and never received the plaintiff’s motion papers or any orders from the court. Since the substitution was improper under CPLR 321(b), CAMBA, not Elo, was Nakash’s attorney of record when the plaintiff made its motions, and thus, the plaintiff failed to properly serve Nakash with these motions, depriving the Supreme Court of jurisdiction to entertain these motions and rendering so much of the resulting order dated March 17, 2014, and the order and judgment of foreclosure and sale as are in favor of the plaintiff and against Nakash nullities that must be vacated … . U.S. Bank N.A. v Nakash, 2021 NY Slip Op 03479, Second Dept 6-2-21

 

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WHERE THERE IS A DISPUTE ABOUT THE EXISTENCE OF A CONTRACT A CAUSE OF ACTION FOR UNJUST ENRICHMENT IS NOT DUPLICATIVE (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court noted that where there is a dispute about the existence of an enforceable contract, a cause of actiono for unjust enrichment is not duplicative:

With respect to the unjust enrichment … [t]hese claims should not have been dismissed as duplicative because “where there is a bona fide dispute as to the existence of a contract or the application of a contract in the dispute in issue, a plaintiff may proceed upon a theory of quasi contract as well as breach of contract, and will not be required to elect his or her remedies” … . CIP GP 2018, LLC v Koplewicz, 2021 NY Slip Op 03370, First Dept 5-27-21

 

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DEFENDANT ATTORNEY WAS UNABLE TO DEMONSTRATE PLAINTIFFS LEARNED OF DEFENDANT’S ALLEGED FRAUD MORE THAN TWO YEARS BEFORE THE ACTION WAS COMMENCED; THE STATUTE OF LIMITATIONS FOR THE UNJUST ENRICHMENT AND AIDING AND ABETTING BREACH OF FIDUCIARY DUTY IS SIX YEARS BECAUSE OF THE ALLEGATIONS OF FRAUD (FIRST DEPT).

The First Department determined the fraud, unjust enrichment and aiding and abetting breach of fiduciary duty causes of action were timely brought against defendant attorney. Defendant attorney represented a party who was found to have defrauded plaintiffs in an arbitration resulting in a $56,4 million judgment. Plaintiffs alleged the attorney’s participation in the fraud was not discovered until the arbitration proceedings:

The limitations period for fraud is the greater of six years from the date of the fraud or two years from the time when, with reasonable diligence, the plaintiff could have uncovered the fraud (CPLR 213[8] … ). In order to prevail, the defendant must show that there is no issue of fact under either prong. Here, defendant failed to show dispositively that plaintiffs were in possession of facts that would have triggered inquiry notice under CPLR 213(8) more than two years before the action was commenced … . …

Nor are plaintiff’s unjust enrichment or aiding and abetting breach of fiduciary duty claims time-barred. Both claims are subject to the six-year statute of limitations because they are based on allegations of actual fraud (CPLR 213[8] …). Sabourin v Chodos, 2021 NY Slip Op 03392, First Dept 5-27-21

 

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DEFENDANT DRIVER RAISED A QUESTION OF FACT ABOUT WHETHER THE DRIVER OF THE CAR IN WHICH PLAINTIFF WAS A PASSENGER WAS NEGLIGENT; THE FACT THAT THE DEFENDANT’S OUT-OF-STATE AFFIDAVIT DID NOT HAVE A CERTIFICATE OF CONFORMITY DID NOT AFFECT ITS VALIDITY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the motion for summary judgment by Ellis, the driver of the car in which plaintiff was a passenger, should have been denied. And the cross motion for summary judgment by plaintiff should have been denied. The defendant driver’s description of the accident raised a question of fact whether Ellis was negligent. The fact that the defendant driver submitted an out-of-state affidavit without a certificate of conformity was not a fatal defect:

… [T]he … defendants raised a triable issue of fact through the affidavit of John Koranteng, the alleged operator of the … defendants’ vehicle. Koranteng averred that he checked to make sure that the left side of his vehicle was clear before he began to initiate a right turn onto Brooklyn Avenue. Koranteng claimed that, while he was turning right, the collision occurred when Ellis’s vehicle attempted to aggressively pass him on his driver’s side … . Ellis’s contention that Koranteng’s affidavit was not in admissible form and, therefore, should not have been considered, is without merit, since the absence of a certificate of conformity for an out-of-state affidavit is not a fatal defect … .

… [T]he Supreme Court should have denied the plaintiff’s cross motion for summary judgment on the issue of liability insofar as asserted against the … defendants. … [T]he … defendants raised a triable issue of fact through the submission of … Koranteng’s affidavit … . ” … [I]f triable issues of fact are raised by the defendants . . . summary judgment on the issue of liability must be denied, even if the moving plaintiff was an innocent passenger” … . Wise v Boyd Bros. Transp., Inc., 2021 NY Slip Op 03345, Second Dept 5-26-21

 

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FAILURE TO TAKE TIMELY STEPS TO SETTLE THE ORDER IN THIS FORECLOSURE ACTION RENDERED THE ACTION ABANDONED PURSUANT TO 22 NYCRR 202.48 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the foreclosure action was abandoned because no steps were taken to settle the order:

“Proposed orders . . . with proof of service on all parties where the order is directed to be settled or submitted on notice, must be submitted for signature, unless otherwise directed by the court, within 60 days after the signing and filing of the decision directing that the order be settled or submitted” (22 NYCRR 202.48[a]). “Failure to submit the order . . . timely shall be deemed an abandonment of the motion or action, unless for good cause shown” (22 NYCRR 202.48[b]). These provisions are not applicable where the decision does not explicitly direct that the proposed judgment or order be settled or submitted for signature (see Funk v Barry, 89 NY2d 364). However, the direction to “settle” order “ordinarily entails more complicated relief,” and therefore “contemplates notice to the opponent so that both parties may either agree on a draft or prepare counter proposals to be settled before the court” (id. at 367 …). Here, Nationstar failed to timely settle the order pursuant to the requirements of 22 NYCRR 202.48(a), and did not show good cause for its failure to do so … . Accordingly, the Supreme Court should have granted that branch of the defendant’s motion which was pursuant to 22 NYCRR 202.48 to deem, as abandoned, Nationstar’s motion. Aurora Loan Servs., LLC v Yogev, 2021 NY Slip Op 03297, Second Dept 5-26-21

 

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THE GUARANTEES QUALIFED AS INSTRUMENTS FOR THE PAYMENT OF MONEY ONLY AND SUPPORTED SUMMARY JUDGMENT IN LIEU OF COMPLAINT; ONLY PURELY LEGAL ARGUMENTS RAISED FOR THE FIRST TIME ON APPEAL CAN BE CONSIDERED (FIRST DEPT).

The First Department determined the plaintiffs were entitled to summary judgment in lieu of complaint based upon guarantees which met the definition of instruments for the payment of money only. The court noted that two arguments raised for the first time on appeal (documents not qualified as business records and failure to include a payment schedule) could not be considered because they were not purely legal arguments. A third argument, which was purely legal, was considered:

Defendants’ contention that the guaranties do not qualify as instruments for the payment of money only, as required by CPLR 3213, because they guarantee performance as well as payment and reference must be made to documents outside the guaranties to determine if the debt service coverage ratio (DSCR) conditions have been met, is unavailing. Although this argument was raised for the first time on appeal, since these are “legal issues appearing on the face of the record which could not have been avoided” if they had been raised earlier, we will address the argument … .

The guaranty at issue in 27 West 72nd St. qualifies as an instrument for the payment of money only because it guarantees only payment and not performance. … [T]he … operative provision of the guaranty says, “Guarantor guarantees the payment of the Guaranteed Obligations.”

The guaranty at issue in 31 East 28th St. also qualifies as an instrument for the payment of money only. Although it says, “Guarantor guarantees the payment and performance of the Guaranteed Obligations as and when due and payable,” the mere addition of the words “and performance” does not necessarily remove the guaranty from the category of instruments for the payment of money only, particularly when the sentence ends with “as and when due and payable.”  27 W. 72nd St. Note Buyer LLC v Terzi, 2021 NY Slip Op 03364, First Dept 5-27-21

 

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THE FIDUCIARY TOLLING RULE TOLLED THE STATUTE OF LIMITATIONS IN THIS CONSTRUCTIVE TRUST ACTION AGAINST AN EXECUTOR (WHO WAS REMOVED BY THE COURT) UNTIL THE SUCESSOR FIDUCIARY WAS APPOINTED (THIRD DEPT).

The Third Department, reversing Surrogate’s Court, determined the constructive trust action based upon alleged self-dealing by an executor who was removed by the court was not time-barred. The fiduciary tolling rule applied:

Under the fiduciary tolling rule, a claim alleging wrongful conduct by an individual in his or her fiduciary capacity does not accrue until there is an open repudiation of the fiduciary obligation or a judicial settlement of the fiduciary’s account … . This rule tolls the statute of limitations “for all misconduct committed by the fiduciary prior to repudiation of its obligation or termination of the [fiduciary] relationship” … since, absent either repudiation or removal, the aggrieved parties “were entitled to assume that the [fiduciary] would perform his [or her fiduciary] responsibilities” … , and it is highly unlikely that a sitting fiduciary would assert a constructive trust claim against himself or herself. …  Under this rule, the toll continues until a successor fiduciary is appointed … . Matter of George, 2021 NY Slip Op 03231, Third Dept 5-20-21

 

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THE ARBITRATION AWARD IS VALID EVEN IF BASED ON AN ERROR OF LAW OR FACT; THE FAILURE TO PROVIDE A LETTER OF ENGAGEMENT DID NOT PRECLUDE THE ATTORNEY’S ACTION FOR BREACH OF CONTRACT; CPLR 5225 DOES NOT REQUIRE A SPECIAL PROCEEDING TO ENFORCE THE JUDGMENT (FIRST DEPT).

The First Department, reversing Supreme Court, determined (1) the arbitrator’s award was valid even if an error of law or fact was made; (2) the failure to provide a letter of engagement did not preclude the petitioner-attorney’s action for breach of contract; (3) petitioner was not required to commence a special proceeding to enforce the judgment; (4) the motions to enforce the judgement do not violate the Commercial Division rules:

… [E]ven if the arbitrator had made an error of law or fact in concluding that respondents had breached the retainer agreements, this alone would not justify vacating the award … . …

… [T]he court improperly denied the motions [to enforce the judgment] based upon its finding that petitioner had failed to commence a separate special proceeding to enforce the judgment. The language of CPLR 5225 clarifies that the court had jurisdiction to resolve the turnover motion. While CPLR 5225(a) provides that a judgment creditor seeking turnover of money or personal property “in possession or custody” of the judgment debtor does so “[u]pon motion of the judgment creditor,” CPLR 5225(b) provides that a judgment creditor seeking turnover of money or personal property in a third party’s possession or custody does so “[u]pon a special proceeding commenced by the judgment creditor” … Given that petitioner brought the motions against the judgment debtor as opposed to a third party, it was not required to commence a separate proceeding. Matter of Gibson, Dunn & Crutcher LLP v World Class Capital Group, LLC, 2021 NY Slip Op 03252, First Dept 5-20-21

 

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THE JUDGE SHOULD NOT HAVE, SUA SPONTE, DISMISSED THE COMPLAINT BECAUSE PLAINTIFF MISSED A STATUS CONFERENCE; THE SUA SPONTE ORDER IS NOT APPEALABLE; PLAINTIFF CORRECTLY MOVED TO VACATE THE ORDER AND APPEALED THE DENIAL (FIRST DEPT).

The First Department, reversing Supreme Court, determined the judge should not have, sua sponte, dismissed the complaint because plaintiff missed a status conference. The First Department noted that the sua sponte dismissal order was not appealable as of right. Therefore plaintiff correcting moved to vacate the order and then appealed the denial of that order:

Contrary to defendant Hudson’s argument, the status conference order sua sponte dismissing the complaint was not appealable as of right (CPLR 5701[a][2] …). Plaintiff followed proper procedure by “apply[ing] to vacate the order and then appeal[ing] from the denial of that motion so that a suitable record [could] be made and counsel afforded the opportunity to be heard on the issues” … .

The court improvidently exercised its discretion in imposing the extreme penalty of dismissal without giving plaintiff notice that such a sanction might be imminent … . Further, the sanction of dismissal was not warranted, and would not have been warranted even upon a motion on notice, based on plaintiff’s noncompliance with one order … . MJC Elec., Inc v Hudson Meridian Constr. Group, LLC, 2021 NY Slip Op 03258, First Dept 5-20-21

 

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A GENERAL RELEASE AND WAIVER WHICH IS CONTRADICTED BY ACTIONS WHICH POST-DATE THE DOCUMENT CANNOT BE CONSTRUED AS A RELEASE; THE JUDGE DID NOT HAVE THE POWER, SUA SPONTE, PURSUANT TO CPLR 5019, TO VACATE THE COURT’S OWN ORDER (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined (1) actions which post-date a release and waiver which conflict with the terms of the release and waiver indicate the document can not be construed as a release, and (2) the judge did not have the authority, sua sponte, to vacate the court’s own order:

“‘Where a waiver form purports to acknowledge that no further payments are owed, but the parties’ conduct indicates otherwise, the instrument will not be construed as a release'” … . …

The Supreme Court erred in, sua sponte, vacating the December 2016 order. “‘Pursuant to CPLR 5019(a), a trial court has the discretion to correct an order or judgment which contains a mistake, defect, or irregularity not affecting a substantial right of a party, or is inconsistent with the decision upon which it is based. However, a trial court has no revisory or appellate jurisdiction, sua sponte, to vacate its own order or judgment'” … . Additionally, “[p]ursuant to CPLR 5015(a), a court may relieve a party from an order or judgment, but only ‘on motion of [an] interested person’ and ‘with such notice as the court may direct” … .

Here, to the extent that the Supreme Court was acting pursuant to CPLR 5019(a), the court erred, since that statute cannot be used by courts to vacate prior orders or judgments or “reconsider[ ] the merits of summary judgment” … . United Airconditioning Corp. v Axis Piping, Inc.2021 NY Slip Op 03210, Second Dept 5-19-21

 

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