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FRAUD CAUSE OF ACTION, AS ALLEGED, IS NOT DUPLICATIVE OF THE ACTION FOR BREACH OF A LOAN GUARANTEE AND SHOULD NOT HAVE BEEN DISMISSED ON THAT GROUND (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff’s fraud cause of action was not duplicative on the action for breach of a loan guarantee and should not have been dismissed:

Plaintiff alleges that, as CEO of nonparty Karmaloop, Inc., defendant Gregory Selkoe solicited from plaintiff a bridge loan in the amount of $2,040,000. Plaintiff agreed, on condition that Selkoe personally guarantee the loan. Selkoe provided the personal guarantee, and also represented to plaintiff that he had previously given only one other personal guarantee, and that Karmaloop had never defaulted on any loan payment. Both of these representations were false, in that, unbeknownst to plaintiff, Selkoe had previously guaranteed a loan issued to another Karmaloop executive, and Karmaloop had defaulted on that loan.

The foregoing states a claim for fraudulent inducement, which is not duplicative of plaintiff’s claim for breach of the guarantee. Plaintiff does not allege that Selkoe misrepresented the intent to perform on the guarantee and underlying promissory note, which would render the fraud claim duplicative, but rather alleges that Selkoe misrepresented his and Karmaloop’s ability to perform … .

At this early juncture, we find that plaintiff should be “permitted to plead in the alternative (see CPLR 3014),” and its claim “for fraud, should not be dismissed as duplicative of the breach-of-contract cause of action” … . Man Advisors, Inc. v Selkoe, 2019 NY Slip Op 05483, First Dept 7-9-19

 

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DEED MADE UNDER FALSE PRETENSES IS VOID AB INITIO RENDERING THE RELATED MORTGAGE INVALID; THE LAW OF THE CASE DOCTRINE DOES NOT PRECLUDE RECONSIDERING A MATTER WHERE THERE IS NEW EVIDENCE (FIRST DEPT).

The First Department, reversing Supreme Court, in this foreclosure action, determined a deed made under false pretenses was void ab initio and therefore the related mortgage was invalid. The court noted that the law of the case doctrine does not prohibit it from reconsidering a matter where there is subsequent evidence affecting the prior determination:

It is undisputed that nonparty Rapsil Corporation conveyed the same property to two different recipients, first, defendant Rafael Pantoja (who obtained a mortgage from CitiMortgage), and, second, a bona fide entity that transferred it to the Salazar defendants. Although the deed that conveyed the property from Rapsil to Pantoja was unacknowledged, which ordinarily would render it only voidable, because Pantoja controlled Rapsil, the deed was made under false pretenses and was therefore void ab initio … . Accordingly, the CitiMortgage mortgage was invalid as well (Weiss v Phillips, 157 AD3d 1, 10 [1st Dept 2017]).

This determination is not inconsistent with our prior related decisions … . In any event, the law of the case doctrine does not limit our power to reconsider issues “where there are extraordinary circumstances, such as subsequent evidence affecting the prior determination” … . CitiMortgage, Inc. v Pantoja, 2019 NY Slip Op 05481, First Dept 7-9-19

 

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USING A NEW YORK VIRTUAL LAW OFFICE PROGRAM (VLOP) ONLY AS A MAILING ADDRESS AND AS AN AGENT TO ACCEPT SERVICE DOES NOT SATISFY THE REQUIREMENT THAT AN ATTORNEY PRACTICING IN NEW YORK HAVE A PHYSICAL OFFICE IN NEW YORK, HOWEVER THE ACTION BROUGHT BY THE VLOP ATTORNEY IS NOT A NULLITY AND SHOULD NOT HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, reversing Supreme Court, determined using a Virtual Law Office Program (VLOP) only as a mailing address and as an agent to accept service in New York is not enough to satisfy the Judiciary Law requiring an attorney practicing in New York to have a physical office in New York. However the action started by the attorney with the virtual law office is not, as Supreme Court held, a nullity:

To the extent that counsel uses the VLOP only as a mailing address and an agent authorized to accept service of process, it is insufficient to meet the physical presence requirement of Schoenefeld. While the additional services VLOP provides may well satisfy physical presence, an attorney needs to actually take advantage of those services to meet the requirements of Judiciary Law § 470. At bar, counsel does not claim that he actually uses the VLOP for anything but the delivery of mail and packages and for service of process. Although office space and conference rooms may be available to him, there is no claim that he actually uses those services. …

Counsel’s correspondence and the papers served on his adversary and/or filed in court contradicted any physical presence in New York. …

Notwithstanding that we find that counsel is not authorized to maintain this action in New York State, we do not believe that it should have been dismissed. The Court of Appeals recently held that a nonresident attorney’s failure to comply with the requirement of Judiciary Law § 470 of maintaining a physical office in New York State at the time a complaint is filed does not render the filing a nullity and therefore that dismissal of the action is not required … . The party may cure the statutory violation with the appearance of compliant counsel or an application for admission pro hac vice by appropriate counsel … . Accordingly, we vacate the order and remand the matter to afford plaintiff an opportunity to cure the violation. Marina Dist. Dev. Co., LLC v Toledano, 2019 NY Slip Op 05480, First Dept 7-9-19

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CONTINUOUS REPRESENTATION DOCTRINE DID NOT APPLY TO TWO DISTINCT AND SEPARATE ACTIONS, LEGAL MALPRACTICE ACTION TIME-BARRED (FIRST DEPT).

The First Department determined the continuous representation doctrine did not apply and the legal malpractice action was time-barred. Plaintiff was represented by defendant law firm in a 2005 divorce. Plaintiff’s ex-wife then sued plaintiff alleging he fraudulently concealed an asset in the divorce proceedings. Defendant law firm successfully defended the fraud action. 12 years after the divorce action ended, plaintiff sued the law firm for malpractice, asking to be relieved of the obligation to pay the law firm’s legal fees in the fraud action:

The motion court correctly found that this action, which was commenced 12 years after the divorce action ended, is barred by the applicable three-year statute of limitations … . Contrary to plaintiff’s contentions, the continuous representation doctrine is inapplicable, because defendants were retained under two separately executed retainer agreements in the divorce action and the fraud action … . The first retainer agreement expressly stated that it did not cover any services following the entry of a final judgment of divorce. Thus, there was no mutual understanding that further representation was necessary on the specific subject matter of the malpractice claim … . Moreover, the divorce action and the fraud action, although related, were two distinct and separate actions … . Etzion v Blank Rome, LLP2019 NY Slip Op 05468, First Dept 7-9-19

 

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STATEMENTS MADE IN CONNECTION WITH A HOSPITAL’S QUALITY ASSURANCE INVESTIGATION ARE PRIVILEGED PURSUANT TO THE EDUCATION LAW AND PUBLIC HEALTH LAW; THE STATEMENTS ARE NOT DISCOVERABLE IN THE MEDICAL MALPRACTICE ACTION (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, over a concurrence, and refusing to follow the 2nd Department, determined certain statements made in connection with a hospital’s (SUNY Upstate’s) quality assurance investigation were privileged pursuant to the Education Law and Public Health Law and therefore were not subject to discovery in this medical malpractice action:

“The New York State Education Law shields from disclosure the proceedings [and] the records relating to performance of a medical or a quality assurance review function or participation in a medical and dental malpractice prevention program’ ” ( … see Public Health Law § 2805-m [2]). Although there is an exception to that privilege, “the exception is narrow” … and is limited to “statements made by any person in attendance at such a [quality assurance] meeting who is a party to an action or proceeding the subject matter of which was reviewed at such meeting” (Education Law § 6527 [3]; see Public Health Law § 2805-m [2] …).

Here, the “statements” at issue were provided shortly after the incident and were obtained as part of SUNY Upstate’s quality assurance investigation. The statements, however, were not made at a quality assurance committee meeting; nor were they made in response to any inquiries initiated by the committee … . None of the defendants appeared at any committee meeting. Thus, we agree with SUNY Upstate and defendants that plaintiff’s proposed construction of the statutory exception would not give any practical effect to the phrase “in attendance,” but rather would render that phrase meaningless … . Further, the Court of Appeals specifically instructed that the exception is “narrow and limited to statements given at an otherwise privileged peer review meeting” … .  Following plaintiff’s proposed construction “would extend the [statutory] exception to a point where it would swallow the general rule that materials used by a hospital in quality review and malpractice prevention programs are strictly confidential” … . Nowelle B. v Hamilton Med., Inc., 2019 NY Slip Op 05464, Fourth Dept 7-5-19

 

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ALTHOUGH THE TWO THYROID SURGERIES WERE PERFORMED BY THE SAME DOCTOR, THE 2005 SURGERY AND THE 2010 SURGERY WERE DISCRETE EVENTS; THE STATUTE OF LIMITATIONS WAS NOT TOLLED BY THE CONTINUOUS TREATMENT DOCTRINE (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined the medical malpractice action based upon a 2005 thyroid surgery by the same doctor who performed the 2010 thyroid surgery was time-barred. The two surgeries were discrete events and the statute of limitations was not tolled by the continuous treatment doctrine:

Defendants established that [the 2005] claims are time-barred inasmuch as more than 2½ years elapsed between the date of the alleged conduct and the commencement of the action … , and plaintiff failed to raise an issue of fact in opposition. Contrary to plaintiff’s contention, the continuous treatment doctrine does not apply. It is undisputed that plaintiff did not treat with Dr. Chahfe in relation to the 2005 surgery after her final follow-up appointment in 2005, and that she did not return to Dr. Chahfe until 2010. The surgical procedures in 2005 and 2010 were ” discrete and complete’ events that cannot be linked by way of the continuous treatment doctrine” … , and there was no evidence of anticipated further treatment related to the 2005 procedure at the time plaintiff left Dr. Chahfe’s care in 2005 … . Angelhow v Chahfe, 2019 NY Slip Op 05437, Fourth Dept 7-5-19

 

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DEFENDANT IN THIS FORECLOSURE ACTION DID NOT ASSERT THE BANK LACKED STANDING IN HIS ANSWER AND DID NOT OPPOSE THE BANK’S MOTION FOR SUMMARY JUDGMENT, THE JUDGE SHOULD NOT HAVE, SUA SPONTE, RAISED THE STANDING ISSUE AND DENIED PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT ON THAT GROUND (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the judge should not have, sua sponte, denied plaintiff bank’s motion for summary judgment in this foreclosure action on the ground the bank did not establish standing. The bank need not affirmatively demonstrate standing absent the defendant’s assertion that the bank lacked standing. Here the defendant did not address the bank’s standing in his answer and did not oppose the motion for summary judgment:

… [A]s a general matter, a plaintiff need not establish its standing (i.e., that it held and/or owned the note at the time the action was commenced) as an essential element of the cause of action. Rather, it is only where the plaintiff’s standing is placed in issue by the defendant that the plaintiff must shoulder the additional burden of establishing its standing to commence the action, a burden satisfied by evidence that it was the holder or assignee of the underlying note at the time the action was commenced” … .

In the present case, the defendant did not raise the issue of standing by asserting lack of standing as an affirmative defense in his answer or moving to dismiss the complaint on that ground in a pre-answer motion to dismiss … . Inasmuch as the defendant “failed to . . . raise the issue, it was inappropriate for the Supreme Court to, sua sponte, do so on the defendant[‘s] behalf” … . The issue of standing was not properly before the Supreme Court … . Deutsche Bank Natl. Trust Co. v Matzen, 2019 NY Slip Op 05386, Second Dept 7-3-19

 

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PLAINTIFF’S NEW COUNSEL FILED A SECOND COMPLAINT ARISING OUT OF THE SAME FACTS AS THE FIRST COMPLAINT TO ALLEGE CERTAIN INTENTIONAL TORTS BEFORE THE STATUTE OF LIMITATIONS RAN OUT, DISMISSAL OF THE SECOND COMPLAINT WAS NOT REQUIRED, CONSOLIDATION OF THE TWO COMPLAINTS WAS ORDERED (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that dismissal of a second complaint arising out of the same facts as the first complaint, filed two months earlier, was not required. Plaintiff had hired new counsel 13 days before the statute of limitations ran out. The first complaint mentioned both intentional and negligent conduct. The second complaint fleshed out specific intentional torts:

CPLR 3211 (a) (4) does not require a trial court to dismiss an action upon the ground that another similar action is pending, instead allowing it to “make such order as justice requires” … . … “[t]he purpose of the defense of the pendency of another action between the same parties for the same cause is to prevent a party from being harassed or burdened by having to defend a multiplicity of suits” . In our view, the reasons stated by plaintiff for commencing this action rather than moving for leave to amend the first complaint are not…  so clearly inadequate that dismissal was required to serve that purpose … . …

We note that Supreme Court agreed with plaintiff that there was insufficient time to pursue a motion for leave to amend pursuant to CPLR 2214 (b). As the court observed, it was possible that plaintiff could have obtained timely relief by bringing a request for leave to amend the first complaint via an order to show cause … . Nevertheless, even if counsel erred in failing to pursue that course, dismissal of this action is too harsh a consequence.

Where, as here, relief is required under CPLR 3211 (a) (4) to correct similar pending actions, “consolidation or joint trial is permissible and in many instances preferable to dismissal”… . In his opposition to defendant’s motion to dismiss, plaintiff requested such relief as an alternative remedy. Thus, the requirement for notice to defendant before consolidation is ordered has been satisfied (see CPLR 602 [a] … ). Accordingly, we direct Supreme Court to consolidate this action with the first action, and remit for that purpose. LaBuda v LaBuda, 2019 NY Slip Op 05366, Third Dept 7-3-19

[​Note that it may have been possible for the plaintiff to file a copy of the proposed supplemental summons with a motion to amend the complaint which would have tolled the statute of limitations. (see Karagiannis v North Shore Long Is. Jewish Health Sys., Inc., 80 AD3d 569, 569 [2d Dept 2011])]

 

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THE DOCTRINES OF COLLATERAL ESTOPPEL AND RES JUDICATA APPLY TO THE ARBITRATOR’S DETERMINATION THAT PETITIONER DID NOT ABUSE A MENTAL HEALTH SERVICES RECIPIENT, THE CONTRARY SUBSEQUENT DETERMINATION BY AN ADMINISTRATIVE LAW JUDGE ANNULLED (THIRD DEPT).

The Third Department, reversing the administrative law judge (ALJ), determined that the doctrines of collateral estoppel and res judicata applied to the original arbitrator’s finding that petitioner, a security assistant employed by the Office of Mental Health (OMH), did not abuse a mental health service recipient. The arbitrator found that the service recipient was the aggressor. The proceedings before the ALJ, which found that petitioner had abused the service recipient, were annulled:

The fundamental point here is that the arbitrator reviewed the underlying event and determined that the service recipient fell to the floor and was the sole aggressor. As such, we conclude that respondent was precluded under principles of res judicata and collateral estoppel from relitigating the question of whether petitioner physically abused the service recipient by pushing her to the floor. It follows that his petition to annul respondent’s determination should be granted and the determination annulled. The matter must be remitted to respondent for amendment of the findings to state that the report is unsubstantiated and for compliance with the requirements of Social Services Law § 494. Matter of Anonymous v New York State Justice Ctr. for the Protection of People With Special Needs, 2019 NY Slip Op 05364, Third Dept 7-3-19

 

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PLAINTIFF BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE PROVISIONS OF RPAPL 1304 AND DID NOT SUBMIT ADMISSIBLE PROOF OF STANDING PURSUANT TO A MERGER, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that plaintiff bank in this foreclosure action did not demonstrate compliance with the notice requirements of Real Property Actions and Proceedings Law (RPAPL) 1304 and did not demonstrate it had standing, based upon a merger, to foreclose:

… [T]he plaintiff failed to demonstrate, prima facie, its strict compliance with RPAPL 1304  … . The plaintiff did not submit an affidavit of service or proof of mailing by the United States Postal Service evidencing that the plaintiff properly served the defendants pursuant to RPAPL 1304. Instead, the plaintiff relied upon the affidavit of its employee Lesa Duddey, a vice president of document control. In her affidavit, Duddey averred that her “review of records” maintained by the plaintiff “reveal[ed]” that the plaintiff sent 90-day notices by registered or certified mail and first class mail to each of the defendants, and she described a correspondence log that purportedly evidenced such mailings. “While mailing may be proved by documents meeting the requirements of the business records exception to the rule against hearsay” … , here, the plaintiff failed to submit a copy of the correspondence log in support of its motion. Consequently, the statements in Duddey’s affidavit regarding the correspondence log are inadmissible hearsay and lack probative value … . The plaintiff did not establish proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed … . The presence of 20-digit numbers on the copies of the 90-day notices submitted by the plaintiff, standing alone, did not suffice to establish, prima facie, proper mailing under RPAPL 1304 … .

… [W]e note that the plaintiff also failed to submit sufficient evidence in admissible form of ABN’s merger with the plaintiff to establish, prima facie, that the plaintiff was the holder of the note at the time of the commencement of the action … . CitiMortgage, Inc. v Osorio, 2019 NY Slip Op 05383, Second Dept 7-3-19

 

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