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SANCTIONS IMPOSED FOR A DELAYED RESPONSE TO DISCOVERY DEMANDS WERE TOO SEVERE, EFFECTIVELY PRECLUDING PROOF OF COUNTERCLAIMS CENTRAL TO THE DEFENSE; NEW TRIAL ORDERED (FIRST DEPT).

The First Department, reversing the verdict in favor of plaintiff employees, determined the sanctions imposed upon the employer (appellants) for a delayed response to discovery demands were too severe and ordered a new trial. The plaintiffs alleged appellants breached oral employment contracts. The appellants in their counterclaims alleged plaintiffs breached their fiduciary duty by violating Securities and Exchange Commission (SEC) regulations and destroying and replacing handwritten notes about conversations with one of the appellants. The sanctions effectively prevented the appellants from demonstrating plaintiffs’ violation of SEC violations and destruction of evidence:

Pursuant to CPLR 3126, if a party “refuses to obey an order for disclosure or wilfully fails to disclose information which the court finds ought to have been disclosed . . . , the court may make such orders with regard to the failure or refusal as are just.” Although “[i]t is within the trial court’s discretion to determine the nature and degree of the penalty,” “[t]he sanction should be commensurate with the particular disobedience it is designed to punish, and go no further than that” … . Further, “the drastic remedy of striking a party’s pleading . . . for failure to comply with a discovery order is appropriate only where [it is] conclusively demonstrate[d] that the non-disclosure was willful, contumacious or due to bad faith” … .

Although the court here did not strike a pleading, its ruling could fairly be viewed as having done so, since the precluded evidence was critical to the fiduciary duty claims. Moreover, the court’s drastic sanctions were disproportionate to the alleged discovery malfeasance. It is unclear why a short continuance to give plaintiffs time to review the newly-produced documents would not have been a viable option, or why further curative instructions would not have sufficed. The record as a whole does not support a finding of willfulness or bad faith so as to justify the severe sanctions imposed … . No basis exists to indicate that this was anything other than a disagreement over the scope of discovery. Indeed, the court at trial stated that the alleged discovery omissions “appear[] not to have been in bad faith.” Beach v Touradji Capital Mgt., LP, 2020 NY Slip Op 00230, First Dept 1-14-20

 

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THE BANK DID NOT PROVE STANDING, DEFENDANT’S DEFAULT, OR COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304; CRITERIA FOR PROVING EACH ISSUE EXPLAINED IN SOME DETAIL (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank’s motion for summary judgment should not have been granted because plaintiff’s standing, defendants’ default, and plaintiff’s compliance with the notice provisions of RPAPL 1304 were not proven. The Second Department explained the proof requirements for each:

… [T]he plaintiff failed to show that the note was properly endorsed and thus validly transferred to it … . * * *

… [T]he plaintiff also failed to submit admissible evidence of the defendants’ default in making the mortgage payments due under the terms of the note and mortgage … . * * *

The plaintiff also failed to proffer evidence establishing its compliance with the notice requirements of RPAPL 1304. U.S. Bank N.A. v Moulton, 2020 NY Slip Op 00171, Second Dept 1-8-20

 

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JURY CONFUSION AND THE INCONSISTENT VERDICT IN THIS LABOR LAW 241(6) ACTION REQUIRED A NEW TRIAL; EVEN A WORKER AUTHORIZED TO BE WITHIN THE RANGE OF AN EXCAVATOR BUCKET CAN CLAIM THE PROTECTION OF THE INDUSTRIAL CODE PROVISION WHICH PROHIBITS WORK IN AN AREA WHERE A WORKER MAY BE STRUCK BY EXCAVATION EQUIPMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the inconsistent verdict in this Labor Law 241(6) action required a new trial. The trial court had dismissed the action. The Second Department noted that even though plaintiff was a member of an excavator crew and therefore was authorized to be within range of a moving excavator bucket he still claim the protections provided by 12 NYCRR 23-9.5(k) which provides “[p]ersons shall not be . . . permitted to work in any area where they may be struck . . . by any excavation equipment.” Plaintiff’s hand was crushed by an excavator bucket:

The jury returned a verdict finding that the City defendants violated Industrial Code (12 NYCRR) 23-4.2(k), but that the violation was not a substantial factor in causing the accident. Although the instructions on the verdict sheet directed the jury to end its deliberations if it found that the violation of Industrial Code (12 NYCRR) 23-4.2(k) was not a substantial factor in causing the accident, the jury further found that the injured plaintiff was negligent and that his negligence was a substantial factor in causing the accident. The jury then proceeded to apportion fault 25% to the City defendants and 75% to the injured plaintiff. After the Supreme Court instructed the jurors to reconsider its verdict, the jury returned a second verdict which was identical to the first verdict, except that the jurors did not answer the questions as to the injured plaintiff’s negligence and apportionment of fault. …

“When a jury’s verdict is internally inconsistent, the trial court must direct either reconsideration by the jury or a new trial” ( …see CPLR 4111[c] …). “On reconsideration, the jury [is] free to substantively alter its original statement so as to conform to its real intention, and [is] not bound by the terms of its original verdict inasmuch as that verdict was not entered by the court” … . “Even after reconsideration by the jury, a trial court has discretion to set aside a verdict which is clearly the product of substantial confusion among the jurors” . “A new trial should be granted where . . . the record demonstrates … substantial confusion among the jurors in reaching a verdict” … . Torres v City of New York, 2020 NY Slip Op 00170, Second Dept 1-8-20

 

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PLAINTIFF BANK’S PRIOR FORECLOSURE ACTION WAS DISMISSED FOR FAILURE TO DEMONSTRATE STANDING; RES JUDICATA DOES NOT PRECLUDE THE INSTANT FORECLOSURE ACTION BECAUSE THE PRIOR ACTION WAS NOT DISMISSED ON THE MERITS; COLLATERAL ESTOPPEL DOES NOT PRECLUDE THE INSTANT ACTION BECAUSE THE STANDING ISSUE IS NOT THE SAME (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the prior dismissal of plaintiff bank’s foreclosure action for failure to demonstrate standing did not, under the doctrines of res judicata or collateral estoppel, preclude the present action. The prior dismissal was not on the merits and the standing issue in the current procedure is not the same as in the prior proceeding:

Here, as the prior action was dismissed for lack of standing, without reaching the merits of the foreclosure claim itself, the defendants failed to demonstrate that “a judgment on the merits exists between the same parties involving the same subject matter” … . “To accord res judicata effect to the [judgment in the prior action] would bar a court from ever addressing the merits of plaintiff’s mortgage foreclosure claim, even if plaintiff became able to demonstrate its standing to sue, and there is nothing in the record to suggest . . . [that there are] exceptional circumstances or an unreasonable neglect to prosecute that would warrant such an extreme sanction” … . …

… [T]the defendants failed to demonstrate that the issue of whether the plaintiff has standing under the circumstances of this action was identical to the issue adjudicated in the prior action … . In the prior action, the plaintiff failed to establish that it had possession of the original endorsed note at the time that action was commenced, while in the present action, the issue is whether the plaintiff had possession of the original endorsed note at the time this action was commenced … . HSBC Bank USA, N.A. v Pantel, 2020 NY Slip Op 00109, Second Dept 1-8-20

 

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THE BANK DID NOT PROVE IT HAD STANDING TO BRING THE FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank’s motion for summary judgment in this foreclosure action should not have been granted. Plaintiff bank did not submit sufficient proof of standing to bring the action:

Where, as here, a plaintiff’s standing to commence a foreclosure action is placed in issue by a defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief … . A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that, when the action was commenced, it was either the holder or assignee of the underlying note … . Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident … . Here, the plaintiff failed to meet its burden to establish, prima facie, its entitlement to summary judgment because the affidavit submitted in support of the motion was insufficient to establish standing … . Deutsche Bank Natl. Trust Co. v Conrado, 2020 NY Slip Op 00103, Second Dept 1-8-20

 

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PLAINTIFFS’ ACTION ALLEGING BREACH OF AN ORAL CONTRACT REGARDING REPAYMENT OF A LOAN SECURED BY A NOTE AND MORTGAGE SHOULD HAVE BEEN DISMISSED AS BARRED BY THE STATUTE OF FRAUDS; THE FRAUD AND UNJUST ENRICHMENT CAUSES OF ACTION MUST BE DISMISSED AS DUPLICATIVE OF THE BREACH OF CONTRACT CAUSE OF ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiffs’ action alleging breach of an alleged oral contract concerning the repayment of a loan secured by a note an mortgage should have been dismissed as barred by the statute of frauds. The fraud and unjust enrichment causes of action must also be dismissed as duplicative of the breach of contract cause of action:

The complaint alleged that contemporaneously with executing the note and mortgage, the plaintiffs and the defendant entered into an oral agreement providing, inter alia, that in exchange for assigning a contract to purchase certain real property to the defendant, the plaintiffs would be responsible for paying only the interest on the loan. The complaint, which asserted causes of action sounding in breach of contract, fraud, and unjust enrichment, sought, among other things, recovery of the settlement amount paid by the plaintiffs in the foreclosure action, less the amount of interest allegedly due pursuant to the oral agreement. The defendant moved pursuant to CPLR 3211(a) to dismiss the complaint. The Supreme Court denied the motion, and the defendant appeals.

Accepting the facts as alleged in the complaint as true, and according the plaintiffs the benefit of every possible inference, dismissal of the breach of contract cause of action should have been granted, since enforcement of the alleged oral agreement, ostensibly to modify the note and mortgage, is barred by the statute of frauds (see General Obligations Law §§ 5-703[1]; 5-1103 … ). Dismissal of the causes of action alleging fraud and unjust enrichment should also have been granted as they are duplicative of the unenforceable contractual cause of action and thus constitute an impermissible attempt to circumvent the statute of frauds … . Botanical Realty Assoc. Urban Renewal, LLC v Gluck, 2020 NY Slip Op 00099, Second Dept 1-8-20

 

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PLAINTIFF BANK DID NOT PRESENT SUFFICIENT EVIDENCE OF STANDING TO BRING THE FORECLOSURE ACTION; BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined plaintiff bank’s motion for summary judgment in this foreclosure action should not have been granted. Plaintiff did not demonstrate it had standing to bring the action:

… [T]he plaintiff failed to meet its prima facie burden of establishing that it had standing to commence the action. In support of its motion, the plaintiff relied on the affidavit of Melissa Gallio, the Vice President of Loan Documentation for the plaintiff. Gallio stated that her knowledge of this case was based upon her review of “the books and records” maintained by the plaintiff, and asserted that the plaintiff was “in possession of the Note and Mortgage” “[a]s of January 10, 2007.” However, Gallio’s assertions as to the contents of the records were inadmissible hearsay to the extent that the records she purported to describe were not submitted with her affidavit … . While a witness may read into the record from the contents of a document which has been admitted into evidence …  , a witness’s description of a document not admitted into evidence is hearsay … . Wells Fargo Bank, N.A. v Springer, 2020 NY Slip Op 00176, Second Dept 1-8-20

 

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NEITHER NEW YORK NOR PENNSYLVANIA IS THE HOME STATE OF THE CHILD IN THIS CUSTODY CASE; NEW YORK HAS JURISDICTION BECAUSE OF THE CHILD’S CONNECTIONS TO THE STATE; FAMILY COURT REVERSED (SECOND DEPT). ​

The Second Department, reversing Family Court, determined neither New York nor Pennsylvania was the “home state” of the child under the statutes and, under the circumstances, New York has jurisdiction to make an initial custody determination:

… [A]lthough the child was living in New York for six consecutive months immediately before this proceeding was commenced, he was not living with a parent in this state for that time period, because the mother did not move to New York until January 2018. Moreover, the maternal great grandmother was not a “person acting as a parent,” as that term is defined by statute, because she had not been awarded legal custody of the child by a court and did not claim a right to legal custody of the child … . …

Pennsylvania did not have jurisdiction over the matter. Pennsylvania also did not qualify as the home state of the child, since the child had been living in New York for more than six months prior to the commencement of the proceeding (see Domestic Relations Law § 76[1][a] …). Thus, the child did not have a home state at the time of commencement. In such a case, New York may exercise jurisdiction if “(i) the child . . . and at least one parent . . . have a significant connection with this state other than mere physical presence; and (ii) substantial evidence is available in this state concerning the child’s care, protection, training, and personal relationships” (Domestic Relations Law § 76[1][b] …).

The record demonstrates the child’s and the mother’s significant connection with New York, as well as the availability of substantial evidence in this state, which is where the child and the mother continue to reside with the maternal great grandmother, and where the child is enrolled in school and is seen by a pediatrician … . Matter of Defrank v Wolf, 2020 NY Slip Op 00126, Second Dept 1-8-20

 

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THE TIP OF PLAINTIFF THIRD-GRADER’S FINGER WAS SEVERED WHEN A DOOR IN THE SCHOOL BUILDING SLAMMED SHUT; THE DEFENDANT-SCHOOL’S (DEPARTMENT OF EDUCATION’S [DOE’S]) MOTION FOR SUMMARY JUDGMENT WAS PROPERLY GRANTED; THE DOOR WAS NOT DEFECTIVE, THE SCHOOL HAD NO NOTICE OF A PROBLEM WITH THE DOOR, SUPERVISION COULD NOT HAVE PREVENTED THE ACCIDENT, AND NYC IS NOT LIABLE FOR AN ACCIDENT ON SCHOOL (DOE) PROPERTY (SECOND DEPT).

The Second Department determined defendant school (NYC Department of Education [DOE]) was entitled to summary judgment in this premises liability and negligent supervision action. Plaintiff third-grader alleged a door closed on his finger, severing the tip. The school demonstrated it had no notice of any problems with the door and that supervision could not have prevented the accident. The Second Department noted that the unsigned depositions were properly considered because they were submitted by the DOE and therefore were adopted as accurate, and further noted that, because the accident occurred on school property, the city (NYC) was not liable:

The unsigned deposition transcripts of the school’s custodial engineer and the injured plaintiff’s teacher, who testified on behalf of their employer, the DOE, were admissible under CPLR 3116(a) because the transcripts were submitted by the DOE and, therefore, were adopted as accurate … . …

The deposition testimony of the building’s custodial engineer established that he inspected the door at least twice per week before the accident. Moreover, the school principal provided evidence that a search of the school’s records revealed no “indication of any maintenance, repairs, work orders, or other issues reported” with respect to the door during the two-year time period prior to the accident. This evidence, together with evidence that the subject door was in regular use, including regular use by the infant plaintiff, was sufficient to establish, prima facie, that the door was not defective … . …

When an accident occurs in so short a span of time that even the most intense supervision could not have prevented it, lack of supervision is not the proximate cause of the injury … . E.W. v City of New York, 2020 NY Slip Op 00175, Second Dept 1-8-20

 

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PARTY WHICH PURCHASED THE PROPERTY AFTER FORECLOSURE WAS COMMENCED WAS ENTITLED TO INTERVENE IN THE FORECLOSURE PROCEEDINGS BUT DID NOT HAVE STANDING TO ALLEGE PLAINTIFF BANK DID NOT COMPLY WITH NOTICE REQUIREMENTS; THE ESTATE OF THE ORIGINAL BORROWER IS NOT A NECESSARY PARTY (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the party (appellant) which purchased the property after foreclosure was commenced should have been allowed to intervene in the foreclosure proceedings. The Second Department further determined the estate of the original borrower was not a necessary party, the appellant did not have standing to allege plaintiff bank’s noncompliance with the notice requirements of Real Property Actions and Proceedings Law (RPAPL) 1304 and plaintiff’s failure to serve a notice of default:

On September 10, 2015, the plaintiff commenced this action to foreclose a mortgage on premises owned by the defendant Shawn A. Carrington. Carrington failed to answer the complaint. On March 23, 2016, Carrington sold the premises to the appellant 1698 Management Corp. …

The appellant was entitled to intervene as of right pursuant to CPLR 1012(a) since it established that the representation of its interest by the parties would be inadequate, that the action involved the disposition of title to real property, and that it would be bound and adversely affected by a judgment of foreclosure and sale … . Contrary to the court’s determination, the appellant was not limited to continuing the action in Carrington’s name pursuant to CPLR 1018. The fact that the appellant obtained its interest in the premises after the action was commenced and the notice of pendency was filed does not definitively bar intervention … , nor does the fact that Carrington defaulted in answering the complaint … . Furthermore, under the circumstances of this case, the appellant’s motion, made less than five months after it purchased the premises, and before an order of reference was issued, was timely … . US Bank N.A. v Carrington, 2020 NY Slip Op 00173, Second Dept 1-8-20

 

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