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THE DEBT WAS ACCELERATED WHEN THE BANKRUPTCY STAY WAS LIFTED; THE FORECLOSURE ACTION WAS THEREFORE TIME-BARRED; DISAGREEING WITH THE 2ND DEPARTMENT, THE DEFENDANTS DID NOT NEED TO INTERPOSE A COUNTERCLAIM TO CANCEL THE MORTGAGE PURSUANT TO RPAPL 1501 (THIRD DEPT).

The Third Department, in a full-fledged opinion by Justice Clark, determined the debt was accelerated when the automatic bankruptcy stay was lifted. Therefore the foreclosure action was untimely and the mortgage was properly cancelled pursuant to RPAP 1501:

… [T]he mortgage was accelerated on December 8, 2011, the date on which the bankruptcy court issued the order lifting the automatic bankruptcy stay as to plaintiff’s predecessor in interest and its assignees and/or successors in interest … . By filing a proof of claim in the bankruptcy proceeding and shortly thereafter seeking affirmative relief from the automatic bankruptcy stay, plaintiff’s predecessor in interest communicated a clear and unequivocal intent to accelerate the entire mortgage debt … . …

Supreme Court did not err in discharging and canceling the mortgage. RPAPL 1501 (4) states, as relevant here, that, where the statute of limitations period for the commencement of a mortgage foreclosure action has expired, “any person having an estate or interest in the real property subject to such encumbrance may maintain an action . . . to secure the cancellation and discharge of record of such encumbrance, and to adjudge the estate or interest of the plaintiff in such real property to be free therefrom” … . Contrary to the Second Department, we do not read RPAPL 1501 (4) as stating that the cancellation and discharge of a mortgage can only be obtained by commencing an action or interposing a counterclaim for such relief … .

… [D]efendants did not interpose a counterclaim seeking to discharge and cancel the mortgage. However, defendants requested, in their answer, dismissal of the complaint and such “other and further relief as [Supreme Court] deem[ed] just and equitable” and thereafter specifically requested in their cross motion that the mortgage be discharged and canceled. MTGLQ Invs., L.P. v Wentworth, 2021 NY Slip Op 00064, Third Dept 1-7-21

 

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A GENERAL BUSINESS LAW 349 DECEPTIVE BUSINESS PRACTICE ACTION AGAINST THE CITY SOUNDS IN TORT TRIGGERING THE NOTICE OF CLAIM REQUIREMENT (SECOND DEPT).

The Second Department noted that a deceptive business practice cause of action pursuant to General Business Law 349 sounds in tort. The GBL 349 cause of action against the city did not state a cause of action because no notice of claim was filed:

Administrative Code of the City of New York § 7-201 and General Municipal Law § 50-e together require a plaintiff, in order to bring an action sounding in tort against the City of New York, to serve a notice of claim within ninety days after the date the claim arises … . Failure to comply with a statutory notice of claim requirement is a ground for dismissal pursuant to CPLR 3211(a)(7) for failure to state a cause of action … .

General Business Law § 349(a) prohibits “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state” … . We agree with the Supreme Court’s determination that the plaintiffs’ first cause of action, which sought to recover damages for violations of General Business Law § 349, was a claim sounding in tort, and therefore was subject to the requirements of General Municipal Law § 50-e, as a cause of action sounding in fraud … . Accordingly, we agree with the court’s determination granting that branch of the defendants’ motion which was to dismiss the first cause of action due to the plaintiffs’ failure to serve a notice of claim within 90 days after the claim arose … . Singh v City of New York, 2020 NY Slip Op 08123, Second Dept 12-30-20

 

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PLAINTIFF’S MOTION TO RESTORE THE FORECLOSURE ACTION TO THE CALENDAR SHOULD HAVE BEEN GRANTED; ABSENT SPECIFIC AFFIRMATIVE DEFENSES PLAINTIFF BANK NEED NOT PROVE COMPLIANCE WITH STATUTORY AND CONTRACTUAL NOTICE REQUIREMENTS (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined plaintiff’s motion to restore the matter to the calendar should have been granted and plaintiff’s motion for summary judgment should have been granted. The court noted that defendant had not waived the defense of standing but plaintiff submitted sufficient proof of standing and held plaintiff, in the absence of specific affirmative defenses, need not present proof of compliance with statutory and contractual notice requirements:

The defendant’s contention that the plaintiff was required to demonstrate its compliance with statutory and/or contractual notice requirements in order to establish its entitlement to judgment as a matter of law is without merit … . Specifically, the defendant’s sixth affirmative defense generally and conclusorily alleged that the “plaintiff has failed to comply with all conditions precedent to commencement of this action.” This Court has held such language to be insufficient to raise the issue of the plaintiff’s compliance with either statutory or contractual notice requirements ( … CPLR 3013). Absent there being a cognizable affirmative defense alleging non-compliance with statutory or contractual notice requirements, the plaintiff was not required to address those issues as part of its prima facie burden in moving for summary judgment … . In opposition, the defendant failed to raise a question of fact that the plaintiff failed to comply with statutory or contractual notice requirements. One W. Bank, FSB v Rosenberg, 2020 NY Slip Op 08070, Second Dept 12-30-20

 

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SURROGATE’S COURT HAD THE AUTHORITY TO APPROVE, NUNC PRO TUNC, A METHOD OF SERVICE ON AN OUT-OF-STATE PARTY ACCOMPLISHED WITHOUT PRIOR COURT APPROVAL (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Duffy, in a matter of first impression, determined Surrogate’s Court had the authority to approve, nunc pro tunc, service upon an out-of-state party by a method which was not in compliance with the Surrogate’s Court Procedure Act (SCPA). Here the attempts at service which complied with the SCPA were unsuccessful. Without procuring permission from court, the executor served the party by first class mail and the letter was not returned. Surrogate’s court approved the service by mail nunc pro tunc:

… [S]ince we find that the Surrogate’s Court had the authority to deem service on the appellant complete, nunc pro tunc, pursuant to SCPA 307(3)(b), which allows for substituted service such as regular first-class mail, the remaining issue to address is whether the court properly determined that such substituted service was valid; to wit, whether service on the appellant by regular first-class mail met the requirements of due process such that personal jurisdiction over the appellant was established … . * * *

… [T]he Executor undertook diligent but unsuccessful attempts to serve the appellant pursuant to SCPA 307(2) before regular first-class mail service was undertaken. Moreover, this is not a circumstance where the appellant had no knowledge of the proceeding that was taking place. Here, the appellant acknowledged that she (1) received a copy of the notice of probate at the time of the commencement of the probate proceeding, (2) immediately retained an attorney to represent her interests in the probate proceeding, and (3) subsequently received a copy of the will. The appellant was also aware of the scheduled hearing on July 12, 2017, in advance of that date, and neither she nor her attorney at that time chose to attend the proceeding. Thus, we find that the substituted service on the appellant by regular first-class mail satisfied the requirements of due process … . Matter of Pollina, 2020 NY Slip Op 08068, Second Dept 12-30-20

 

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THE PETITIONER, A PROBATIONARY POLICE OFFICER CHALLENGING HIS TERMINATION, RAISED QUESTIONS OF FACT IN THIS ARTICLE 78 PROCEEDING; THEREFORE THE SUMMARY DETERMINATION PURSUANT TO CPLR 409 WAS NOT AVAILABLE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined this Article 78 proceeding reviewing the termination of a probationary police officer (Lake) involved questions of fact rendering a summary determination pursuant to CPLR 409(b) improper:

Since Lake submitted sufficient evidence to raise a triable issue of fact as to whether the reasons put forth by the Town were pretextual, the Town was not entitled to a summary determination on the petition (see CPLR 409[b] …). To the contrary, the record presented triable issues of fact as to whether Lake’s employment was terminated in bad faith for reasons unrelated to his job performance … . Under the these circumstances, the matter should be remitted to the Supreme Court, Suffolk County, for an immediate trial … . Matter of Lake v Town of Southold, 2020 NY Slip Op 08064, Second Dept 12-30-20

 

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THE FORECLOSURE ACTION WAS TIME-BARRED; THE DISCONTINUANCE DID NOT DE-ACCELERATE THE DEBT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant’s motion for summary judgment in this foreclosure action should have been granted. The action was time-barred. The debt was accelerated when the foreclosure action was started and the discontinuance did not de-accelerate the debt:

Plaintiff’s … contention—that the stipulation of discontinuance in the 2007 action revoked the acceleration of the debt—is likewise without merit. … Here, the stipulation of discontinuance in the 2007 action is silent on the issue of the revocation of the election to accelerate and does not otherwise indicate that the plaintiff would accept installment payments from the defendant and thus did not constitute an affirmative act revoking acceleration … . Deutsche Bank Natl. Trust Co. v Ebanks, 2020 NY Slip Op 08035, Second Dept 12-30-20

 

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THE ACTION SHOULD NOT HAVE BEEN DISMISSED PURSUANT TO CPLR 3216 FOR FAILURE TO PROSECUTE; ISSUE HAD NOT BEEN JOINED AND OTHER CONDITIONS PRECEDENT TO DISMISSAL WERE NOT MET (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion to vacate the conditional order dismissing the action for failure to prosecute pursuant to CPLR 3216 should not have been granted:

The conditional order constituted a defective 90-day notice pursuant to CPLR 3216. The court was without authority to issue a 90-day notice since issue was not joined in the action (see CPLR 3216[b][1] … ). Moreover, the conditional order failed to state that the plaintiff’s failure to comply “will serve as a basis for a motion” by the court to dismiss the action for failure to prosecute … . The purported dismissal was not properly effectuated since the court never directed the parties to show cause why the action should not be dismissed, and failed to issue a formal order of dismissal on notice to the parties as required by CPLR 3216 … . Moreover, the conditional order was erroneous since it directed the plaintiff to move for an order of reference, even though the plaintiff had already moved for an order of reference. Accordingly, we grant the plaintiff’s motion to vacate the conditional order and restore the action to the active calendar. U.S. Bank N.A. v Thompson, 2020 NY Slip Op 08098, Second Dept 12-30-20

 

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ALTHOUGH THE TWO INDICTMENTS ALLEGED THE SAME MODUS OPERANDI FOR MEDICAID FRAUD, THE CHARGES INVOLVED DIFFERENT PARTIES AND TIME PERIODS; THE WRIT OF PROHIBITION SEEKING TO PRECLUDE PROSECUTION ON DOUBLE JEOPARDY GROUNDS DENIED OVER A DISSENT (FIRST DEPT).

The First Department, over a dissent, denied the writ of prohibition seeking to preclude a second prosecution for Medicaid fraud on double jeopardy grounds. Although the alleged scheme to defraud was the same, the two indictments involved different parties and different time periods:

In essence, the wrongdoing charged in each indictment is the filing of fraudulent Medicaid reimbursement claims and related misconduct, such as payment of kickbacks. However, the indictments charge different specific criminal acts, which were perpetrated on different dates and over different time periods. Moreover, the indictments do not allege fraudulent billing of any of the same managed care organizations. While it appears that the different fraudulent acts charged in the two indictments had a similar modus operandi and were part of a common plan, this alone does not suffice to render them part of the same “criminal transaction” under CPL 40.10(2)(b) … . Matter of Dieffenbacher v Jackson, 2020 NY Slip Op 08015, First Dept 12-29-20

 

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THE PROOF WAS NOT SUFFICIENT TO SUPPORT PIERCING THE CORPORATE VEIL AND SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED ON THAT ISSUE (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined the proof was not sufficient to support piercing the corporate veil and summary judgment should have been granted on that issue:

“Generally, a plaintiff seeking to pierce the corporate veil must show that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff’s injury” … .

“Since, by definition, a corporation acts through its officers and directors, to hold a shareholder/officer … personally liable, a plaintiff must do more than merely allege that the individual engaged in improper acts or acted in ‘bad faith’ while representing the corporation.” … Instead, “[t]he party seeking to pierce the corporate veil must establish that the owners [of the corporation], through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will intervene” … .

Here, … the complaint … does not sufficiently allege injury to plaintiff. …

[Plaintiff]  “failed to produce evidence that the individual defendants took steps to render the corporate defendant insolvent in order to avoid plaintiffs’ claim for damages or otherwise defraud plaintiffs” … . Sutton 58 Assocs. LLC v Pilevsky, 2020 NY Slip Op 08020, First Dept 12-29-20

 

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THERE WAS A QUESTION OF FACT WHETHER THE ONE-YEAR STATUTE OF LIMITATIONS IN THE CONTRACT WITH DEFENDANT SUBCONTRACTOR WAS REASONABLE BECAUSE THE RUNNING OF THE STATUTE COULD BE TRIGGERED BY A PARTY OVER WHICH DEFENDANT HAD NO CONTROL (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Singh, reversing Supreme Court, determined the counterclaims by defendant subcontractor, Nastasi, in this breach of a construction contract action, should not have been dismissed. The central issue was whether the one-year contractual statute of limitations was enforceable. Because the statute could be triggered by the failure of the owner to pay the plaintiff general contractor, Turner, a circumstance over which the defendant subcontractor, Nastasi, had no control, there was a question of fact whether the one-year limitations period was reasonable:

The relevant question when deciding whether a limitations period is enforceable is whether and when the damages were objectively ascertainable … . A contractual limitations period is unenforceable without a concrete determination of damages accrual … .

Here, the provisions setting a one-year limitation period for claims arising out of the contracts between Turner and Nastasi are reasonable on their face. However, the contracts also provide that payments by the owner are conditions precedent to any sums owed by Turner to Nastasi. As observed in D&S Restoration, it was neither fair nor reasonable to impose such a condition precedent, which was not within Nastasi’s control, but had the capability of nullifying its claim (D&S Restoration, 160 AD3d at 926).

… [T]he intent of the owner should not govern the interplay of the two provisions. Such a holding will unreasonably permit a party to choose to stay silent on the issue of owner payment unless it suited them, and unilaterally set the accrual date for the claim. Turner Constr. Co. v Nastasi & Assoc., Inc., 2020 NY Slip Op 08024, First Dept 12-29-20

 

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