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LAW OFFICE CONFUSION NOT A SUFFICIENT EXCUSE FOR BANK ATTORNEY’S FAILURE TO ATTEND A SETTLEMENT CONFERENCE, DEFAULT JUDGMENT DISMISSING THE COMPLAINT SHOULD NOT HAVE BEEN VACATED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s (OneWest’s) motion to vacate a default judgment dismissing the complaint should not have been granted. One West’s attorney did not show up for a scheduled settlement conference:

OneWest moved pursuant to CPLR 5015(a)(1) to vacate the order entered upon its default in appearing at the conferences and to restore the action to the active calendar. In support of its motion, OneWest alleged that it was unaware of the scheduled conferences “due to law office confusion” following the substitution of counsel. The Supreme Court granted the motion. [Defendant] appeals.

A plaintiff seeking to vacate a default in appearing at a conference is required to demonstrate both a reasonable excuse for its default and a potentially meritorious cause of action… . Although “[a] motion to vacate a default is addressed to the sound discretion of the motion court” … , the defaulting party must submit evidence in admissible form establishing both a reasonable excuse and a potentially meritorious cause of action or defense … .

A court has the discretion to accept law office failure as a reasonable excuse for a party’s default … . However, “it was not the Legislature’s intent to routinely excuse such defaults” … , and mere neglect is not a reasonable excuse… .

Contrary to OneWest’s contention, it failed to provide a detailed and credible explanation of the default… . Rather, counsel’s affirmation in support of the motion contained only the conclusory and undetailed allegation of “law office confusion” after being substituted as counsel for OneWest, which does not constitute a reasonable excuse… . No other evidence was submitted to corroborate the allegation. OneWest, therefore, failed to demonstrate a reasonable excuse for its default … . OneWest Bank, FSB v Singer, 2017 NY Slip Op 06184, Second Dept 8-16-17

 

FORECLOSURE (LAW OFFICE CONFUSION NOT A SUFFICIENT EXCUSE FOR BANK ATTORNEY’S FAILURE TO ATTEND A SETTLEMENT CONFERENCE, DEFAULT JUDGMENT DISMISSING THE COMPLAINT SHOULD NOT HAVE BEEN VACATED (SECOND DEPT))/CIVIL PROCEDURE (FORECLOSURE, SETTLEMENT CONFERENCE, LAW OFFICE CONFUSION NOT A SUFFICIENT EXCUSE FOR BANK ATTORNEY’S FAILURE TO ATTEND A SETTLEMENT CONFERENCE, DEFAULT JUDGMENT DISMISSING THE COMPLAINT SHOULD NOT HAVE BEEN VACATED (SECOND DEPT))/ATTORNEYS (FORECLOSURE, LAW OFFICE CONFUSION NOT A SUFFICIENT EXCUSE FOR BANK ATTORNEY’S FAILURE TO ATTEND A SETTLEMENT CONFERENCE, DEFAULT JUDGMENT DISMISSING THE COMPLAINT SHOULD NOT HAVE BEEN VACATED (SECOND DEPT))/SETTLEMENT CONFERENCE LAW OFFICE CONFUSION NOT A SUFFICIENT EXCUSE FOR BANK ATTORNEY’S FAILURE TO ATTEND A SETTLEMENT CONFERENCE, DEFAULT JUDGMENT DISMISSING THE COMPLAINT SHOULD NOT HAVE BEEN VACATED (SECOND DEPT))(FORECLOSURE)

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LETTERS PURPORTING TO CONSTITUTE TIME OF THE ESSENCE NOTICE DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH CAN SUPPORT A MOTION TO DISMISS, ALTHOUGH NOT RAISED BELOW THE DOCUMENTARY EVIDENCE ISSUE WAS A PROPER BASIS FOR REVERSAL ON APPEAL (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the letters evincing a “time of the essence” notification in the underlying real estate transaction did not constitute “documentary evidence” which would support a motion to dismiss. Although he “documentary evidence” argument was not raised below, the court properly considered it as the basis for reversal as a matter of law:

“A motion pursuant to CPLR 3211(a)(1) to dismiss based on documentary evidence may be appropriately granted only where the documentary evidence utterly refutes the plaintiff’s factual allegations, thereby conclusively establishing a defense as a matter of law”… . “The evidence submitted in support of such motion must be documentary or the motion must be denied” … . “In order for evidence submitted in support of a CPLR 3211(a)(1) motion to qualify as documentary evidence,’ it must be unambiguous, authentic, and undeniable'”… .

“[J]udicial records, as well as documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable, would qualify as documentary evidence in the proper case” … . “At the same time, [n]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211(a)'” … .

Here, the letters submitted by the defendant did not constitute documentary evidence within the meaning of CPLR 3211(a)(1), and should not have been relied upon by the Supreme Court as a basis for granting the defendant’s motion to dismiss the complaint. The only documentary evidence submitted in support of the defendant’s motion was the purchase agreement, which did not “utterly refute” the plaintiffs’ allegations or conclusively establish a defense as a matter of law. Contrary to the defendant’s contention, the issue of whether the letters constitute documentary evidence within the intendment of CPLR 3211(a)(1) can be raised for the first time on appeal because it is one of law which appears on the face of the record and could not have been avoided if it had been raised at the proper juncture … . Feldshteyn v Brighton Beach 2012, LLC, 2017 NY Slip Op 06160, Second Dept 8-16-17

CIVIL PROCEDURE (MOTION TO DISMISS, LETTERS PURPORTING TO CONSTITUTE TIME OF THE ESSENCE NOTICE DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH CAN SUPPORT A MOTION TO DISMISS (SECOND DEPT))/EVIDENCE (MOTION TO DISMISS, LETTERS PURPORTING TO CONSTITUTE TIME OF THE ESSENCE NOTICE DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH CAN SUPPORT A MOTION TO DISMISS (SECOND DEPT))/APPEALS (LETTERS PURPORTING TO CONSTITUTE TIME OF THE ESSENCE NOTICE DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH CAN SUPPORT A MOTION TO DISMISS, ALTHOUGH NOT RAISED BELOW THE DOCUMENTARY EVIDENCE ISSUE WAS A PROPER BASIS FOR REVERSAL ON APPEAL (SECOND DEPT))/REAL ESTATE (LETTERS PURPORTING TO CONSTITUTE TIME OF THE ESSENCE NOTICE DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH CAN SUPPORT A MOTION TO DISMISS, ALTHOUGH NOT RAISED BELOW THE DOCUMENTARY EVIDENCE ISSUE WAS A PROPER BASIS FOR REVERSAL ON APPEAL (SECOND DEPT))/DISMISS, MOTION TO (CIVIL PROCEDURE,  (LETTERS PURPORTING TO CONSTITUTE TIME OF THE ESSENCE NOTICE DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH CAN SUPPORT A MOTION TO DISMISS (SECOND DEPT))/DOCUMENTARY EVIDENCE (CIVIL PROCEDURE, MOTION TO DISMISS, LETTERS PURPORTING TO CONSTITUTE TIME OF THE ESSENCE NOTICE DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH CAN SUPPORT A MOTION TO DISMISS (SECOND DEPT))/EVIDENCE (MOTION TO DISMISS, LETTERS PURPORTING TO CONSTITUTE TIME OF THE ESSENCE NOTICE DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH CAN SUPPORT A MOTION TO DISMISS (SECOND DEPT))

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ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT).

The Second Department determined attorney letters did not constitute documentary evidence which would support a motion to dismiss in this insurance-coverage dispute:

A motion to dismiss a complaint pursuant to CPLR 3211(a)(1) may be granted only if the documentary evidence submitted utterly refutes the factual allegations of the complaint and conclusively establishes a defense to the claims as a matter of law … . In order for evidence to qualify as documentary, it must be unambiguous, authentic, and undeniable … . Neither affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211(a)(1) … . Accordingly, the letters from the attorney and claims services relied upon by [the insurer] do not constitute documentary evidence for the purposes of CPLR 3211(a)(1). Additionally, the insurance policy, which does constitute documentary evidence, did not utterly refute the factual allegations of the complaint and did not conclusively establish a defense to the claims as a matter of law. Fox Paine & Co., LLC v Houston Cas. Co., 2017 NY Slip Op 06162, Second Dept 8-16-17

CIVIL PROCEDURE (MOTION TO DISMISS, DOCUMENTARY EVIDENCE, ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT))/DISMISS, MOTION TO (EVIDENCE, ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT))/EVIDENCE (MOTION TO DISMISS, DOCUMENTARY EVIDENCE, ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT))/DOCUMENTARY EVIDENCE (MOTION TO DISMISS, ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT))/INSURANCE LAW (CIVIL PROCEDURE, MOTION TO DISMISS, ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT))

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COURT SHOULD NOT HAVE ORDERED AN ACCOUNTING BEFORE DETERMINING A SUMMARY JUDGMENT MOTION, NEITHER PARTY REQUESTED AN ACCOUNTING (SECOND DEPT).

The Second Department determined the judge should not have ordered an accounting before deciding a summary judgment motion. Neither party had requested and accounting:

The plaintiffs, which are affiliated not-for-profit organizations, commenced this action against the defendant, their former accountant, alleging that it breached contractual and fiduciary duties by preparing misleading audit reports for them for several years, which caused the plaintiffs to suffer serious financial harm. In response, the defendant asserted counterclaims for an account stated and to recover damages pursuant to CPLR 3016(f) for breach of contract. Shortly after the plaintiffs filed a reply to the counterclaims, the defendant moved for summary judgment on the counterclaims. The plaintiffs opposed the motion. The Supreme Court held the defendant’s motion in abeyance pending an accounting even though neither party requested an accounting. The defendant appeals, by permission.

“Generally, a court may, in its discretion, grant relief that is warranted by the facts plainly appearing on the papers on both sides, if the relief granted is not too dramatically unlike the relief sought, the proof offered supports it, and there is no prejudice to any party'”… . Here, an accounting was not requested and, under the circumstances, it was an improvident exercise of discretion for the Supreme Court to, sua sponte, grant such relief … . Samuel Field YM & YWHA, Inc. v Irvings Roth & Rubin, PLLC, 2017 NY Slip Op 06208, Second Dept 8-16-17

 

CIVIL PROCEDURE (JUDGES, COURT SHOULD NOT HAVE ORDERED AN ACCOUNTING BEFORE DETERMINING A SUMMARY JUDGMENT MOTION, NEITHER PARTY REQUESTED AN ACCOUNTING (SECOND DEPT))/JUDGES (COURT SHOULD NOT HAVE ORDERED AN ACCOUNTING BEFORE DETERMINING A SUMMARY JUDGMENT MOTION, NEITHER PARTY REQUESTED AN ACCOUNTING (SECOND DEPT))/SUA SPONTE (CIVIL PROCEDURE, COURT SHOULD NOT HAVE ORDERED AN ACCOUNTING BEFORE DETERMINING A SUMMARY JUDGMENT MOTION, NEITHER PARTY REQUESTED AN ACCOUNTING (SECOND DEPT))

SIGNIFICANT GAPS IN THE STENOGRAPHIC RECORD, COUPLED WITH THE DEATH OF THE STENOGRAPHER AND THE INABILITY TO RECONSTRUCT THE RECORD, REQUIRED A NEW TRIAL (SECOND DEPT).

The Second Department determined a new trial was the only option where the stenographic record of the trial was incomplete and could not be reconstructed. Plaintiff’s motion to set aside the verdict, therefore, could not be entertained. Apparently the stenographer had fallen asleep during testimony and subsequently died:

After the jury returned a verdict in favor of the defendants on the issue of liability, the plaintiff moved pursuant to CPLR 4404(a) to set aside the verdict and for a new trial, on the grounds that the trial could not be transcribed and that the verdict was contrary to the weight of the evidence. A senior court reporter submitted an affidavit in connection with the motion in which she stated that the court reporter who was assigned to the trial had died, and that there were “significant gaps in [that court reporter’s] notes which rendered the trial unable to be transcribed.” …

A stenographic transcript is an aid to the judge, who is tasked with the final responsibility to certify the record (see CPLR 5525[c], [d]). The parties may agree on a statement in lieu of a transcript and the court may adopt, according to its own recollection, a statement in lieu of transcript submitted by one of the parties … . However, when no agreement and no reconstruction is possible, a new trial is required. Indeed, in civil cases, where a stenographer dies or is no longer in possession of minutes and the minutes cannot be obtained, meaningful appellate review is impaired and a new trial should be ordered if reconstruction is not possible … . Monaco v New York City Tr. Auth., 2017 NY Slip Op 06178, Second Dept 8-16-17

 

CIVIL PROCEDURE (SIGNIFICANT GAPS IN THE STENOGRAPHIC RECORD, COUPLED WITH THE DEATH OF THE STENOGRAPHER AND THE INABILITY TO RECONSTRUCT THE RECORD, REQUIRED A NEW TRIAL (SECOND DEPT))/STENOGRAPHIC RECORD (SIGNIFICANT GAPS IN THE STENOGRAPHIC RECORD, COUPLED WITH THE DEATH OF THE STENOGRAPHER AND THE INABILITY TO RECONSTRUCT THE RECORD, REQUIRED A NEW TRIAL (SECOND DEPT))/VERDICT, MOTION TO SET ASIDE (CIVIL PROCEDURE, SIGNIFICANT GAPS IN THE STENOGRAPHIC RECORD, COUPLED WITH THE DEATH OF THE STENOGRAPHER AND THE INABILITY TO RECONSTRUCT THE RECORD, REQUIRED A NEW TRIAL (SECOND DEPT))

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IN THE FACE OF A COMPLETE WRITTEN AGREEMENT, EVIDENCE OF A RELATED ORAL AGREEMENT SHOULD NOT HAVE BEEN CONSIDERED, DEFENDANT’S MOTION TO DISMISS FOUNDED UPON DOCUMENTARY EVIDENCE (THE WRITTEN AGREEMENT) SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the written consulting (retainer) agreement was complete and evidence of an oral agreement to form a joint venture should not have been considered. Defendant’s motion to dismiss founded on documentary evidence (the written retainer agreement), therefore, should have been granted. Plaintiff had alleged defendant breached the oral agreement:

“To succeed on a motion to dismiss pursuant to CPLR 3211(a)(1), the documentary evidence that forms the basis of the defense must be such that it resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff’s claim”… . A written agreement that is complete, clear, and unambiguous on its face must be enforced to give effect to the meaning of its terms and the reasonable expectations of the parties, and the court should determine the intent of the parties from within the four corners of the contract without looking to extrinsic evidence to create ambiguities … . The parol evidence rule generally operates to preclude evidence of a prior or contemporaneous communication during negotiations of an agreement that contradicts, varies, or explains a written agreement which is clear and unambiguous in its terms and expresses the parties’ entire agreement and intentions … . Where, as here, there is no merger clause, the court must examine the surrounding circumstances and the writing itself to determine whether the agreement constitutes a complete, integrated instrument … .

Here, both a reading of the written retainer agreement and a consideration of the surrounding circumstances lead to the conclusion that the written retainer agreement is a complete written instrument, and, thus, evidence of what may have been agreed orally between the parties prior to the execution of this integrated written instrument cannot be received to vary the terms of the writing … . Hoeg Corp. v Peebles Corp., 2017 NY Slip Op 06066, Second Dept 8-9-17

 

CONTRACT LAW (PAROL EVIDENCE RULE, IN THE FACE OF A COMPLETE WRITTEN AGREEMENT, EVIDENCE OF A RELATED ORAL AGREEMENT SHOULD NOT HAVE BEEN CONSIDERED, DEFENDANT’S MOTION TO DISMISS FOUNDED UPON DOCUMENTARY EVIDENCE (THE WRITTEN AGREEMENT) SHOULD HAVE BEEN GRANTED (SECOND DEPT))/CIVIL PROCEDURE (DISMISSAL FOUNDED ON DOCUMENTARY EVIDENCE,  IN THE FACE OF A COMPLETE WRITTEN AGREEMENT, EVIDENCE OF A RELATED ORAL AGREEMENT SHOULD NOT HAVE BEEN CONSIDERED, DEFENDANT’S MOTION TO DISMISS FOUNDED UPON DOCUMENTARY EVIDENCE (THE WRITTEN AGREEMENT) SHOULD HAVE BEEN GRANTED (SECOND DEPT))/EVIDENCE (PAROL EVIDENCE RULE, IN THE FACE OF A COMPLETE WRITTEN AGREEMENT, EVIDENCE OF A RELATED ORAL AGREEMENT SHOULD NOT HAVE BEEN CONSIDERED, DEFENDANT’S MOTION TO DISMISS FOUNDED UPON DOCUMENTARY EVIDENCE (THE WRITTEN AGREEMENT) SHOULD HAVE BEEN GRANTED (SECOND DEPT))/PAROL EVIDENCE RULE (IN THE FACE OF A COMPLETE WRITTEN AGREEMENT, EVIDENCE OF A RELATED ORAL AGREEMENT SHOULD NOT HAVE BEEN CONSIDERED, DEFENDANT’S MOTION TO DISMISS FOUNDED UPON DOCUMENTARY EVIDENCE (THE WRITTEN AGREEMENT) SHOULD HAVE BEEN GRANTED (SECOND DEPT))

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DECEASED PLAINTIFF’S LAWSUIT DISMISSED FOR FAILURE TO TIMELY SUBSTITUTE A REPRESENTATIVE OF PLAINTIFF’S ESTATE (SECOND DEPT).

The Second Department determined the causes of action brought by plaintiff’s decedent were properly dismissed because counsel did not timely substitute a representative for the deceased plaintiff:

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“CPLR 1021 requires a motion for substitution to be made within a reasonable time”… . “The determination of reasonableness requires consideration of several factors, including the diligence of the party seeking substitution, the prejudice to the other parties, and whether the party to be substituted has shown that the action or the defense has potential merit” … .

Here, the plaintiff’s counsel failed to demonstrate that he made any diligent efforts to substitute a representative for the deceased plaintiff. Additionally, the plaintiff’s counsel did not demonstrate a reasonable excuse for failing to seek a substitution. Further, the plaintiff’s counsel failed to submit an affidavit of merit, and did not rebut the contention of  [defendants] that they were prejudiced in their ability to defend the case. Howlader v Lucky Star Grocery, Inc., 2017 NY Slip Op 06067, Second Dept 8-9-17

 

CIVIL PROCEDURE (TRUSTS AND ESTATES, SUBSTITUTION FOR DECEASED PLAINTIFF, DECEASED PLAINTIFF’S LAWSUIT DISMISSED FOR FAILURE TO TIMELY SUBSTITUTE A REPRESENTATIVE OF PLAINTIFF’S ESTATE (SECOND DEPT))/TRUSTS AND ESTATES (CIVIL PROCEDURE,  SUBSTITUTION FOR DECEASED PLAINTIFF, DECEASED PLAINTIFF’S LAWSUIT DISMISSED FOR FAILURE TO TIMELY SUBSTITUTE A REPRESENTATIVE OF PLAINTIFF’S ESTATE (SECOND DEPT))/ATTORNEYS (TRUSTS AND ESTATES, SUBSTITUTION FOR DECEASED PLAINTIFF, DECEASED PLAINTIFF’S LAWSUIT DISMISSED FOR FAILURE TO TIMELY SUBSTITUTE A REPRESENTATIVE OF PLAINTIFF’S ESTATE (SECOND DEPT))

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DECLARATORY JUDGMENT ACTION SEEKING A DETERMINATION OF THE OWNERSHIP OF A STOCK CERTIFICATE REPRESENTING SHARES IN A COOPERATIVE APARTMENT IS GOVERNED BY A THREE-YEAR STATUTE OF LIMITATIONS, THE STOCK CERTIFICATE IS PERSONAL NOT REAL PROPERTY (SECOND DEPT).

The Second Department noted that the declaratory judgment action which sought a determination of the ownership of a stock certificate representing shares in a cooperative apartment was governed by the three-year statute of limitation. The stock certificate was personal property, not real estate:

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The defendants established that the action was barred by the three-year statute of limitations for recovery of a chattel (see CPLR 214[3]). “In order to determine the Statute of Limitations applicable to a particular declaratory judgment action, the court must examine the substance of that action to identify the relationship out of which the claim arises and the relief sought'”

… . “If the court determines that the underlying dispute can be or could have been resolved through a form of action or proceeding for which a specific limitation period is statutorily provided, that limitation period governs the declaratory judgment action” … . Here, the plaintiff seeks to recover a stock certificate representing shares in a cooperative apartment corporation. An action to recover a stock certificate is governed by the three-year statute of limitations for recovery of a chattel … . “Shares of stock issued in connection with cooperative apartments are personal property, not real property” … . Loscalzo v 507-509 President St. Tenants Assn. Hous. Dev. Fund Corp., 2017 NY Slip Op 06070, Second Dept 8-9-17

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CIVIL PROCEDURE (DECLARATORY JUDGMENT ACTION SEEKING A DETERMINATION OF THE OWNERSHIP OF A STOCK CERTIFICATE REPRESENTING SHARES IN A COOPERATIVE APARTMENT IS GOVERNED BY A THREE-YEAR STATUTE OF LIMITATIONS, THE STOCK CERTIFICATE IS PERSONAL NOT REAL PROPERTY (SECOND DEPT))/DECLARATORY JUDGMENT (STATUTE OF LIMITATIONS, DECLARATORY JUDGMENT ACTION SEEKING A DETERMINATION OF THE OWNERSHIP OF A STOCK CERTIFICATE REPRESENTING SHARES IN A COOPERATIVE APARTMENT IS GOVERNED BY A THREE-YEAR STATUTE OF LIMITATIONS, THE STOCK CERTIFICATE IS PERSONAL NOT REAL PROPERTY (SECOND DEPT))/SECURITIES (SHARES IN COOPERATIVE APARTMENT, DECLARATORY JUDGMENT ACTION SEEKING A DETERMINATION OF THE OWNERSHIP OF A STOCK CERTIFICATE REPRESENTING SHARES IN A COOPERATIVE APARTMENT IS GOVERNED BY A THREE-YEAR STATUTE OF LIMITATIONS, THE STOCK CERTIFICATE IS PERSONAL NOT REAL PROPERTY (SECOND DEPT))/COOPERATIVES (DECLARATORY JUDGMENT ACTION SEEKING A DETERMINATION OF THE OWNERSHIP OF A STOCK CERTIFICATE REPRESENTING SHARES IN A COOPERATIVE APARTMENT IS GOVERNED BY A THREE-YEAR STATUTE OF LIMITATIONS, THE STOCK CERTIFICATE IS PERSONAL NOT REAL PROPERTY (SECOND DEPT))

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REQUIREMENTS FOR SERVICE ON AN UNAUTHORIZED FOREIGN LIMITED LIABILITY COMPANY NOT MET, DEFAULT JUDGMENT PROPERLY DENIED (SECOND DEPT).

The Second Department determined the Limited Liability Company Law requirements for a default judgment against an unauthorized foreign limited liability company were not met:

A plaintiff seeking leave to enter a default judgment must file proof of proper service of the summons and the complaint, the defendant’s default, and the facts constituting the claim (see CPLR 3215[f] …).

The plaintiff averred that it served the defendant, a foreign limited liability company not authorized to conduct business in New York, pursuant to Limited Liability Company Law § 304. As relevant to the plaintiff’s contentions, that statute requires three things. First, service upon the unauthorized foreign limited liability company may be made by personal delivery of the summons and complaint, with the appropriate fee, to the Secretary of State … . Second, in order for the personal delivery to the Secretary of State to be “sufficient,” the plaintiff must also give the defendant direct notice of its delivery of the process to the Secretary of State, along with a copy of the process. The direct notice may be sent to the defendant by registered mail, return receipt requested, to the defendant’s last known address … . Third, after process has been delivered to the Secretary of State and direct notice of that service has been sent to the defendant, the plaintiff must file proof of service with the clerk of the court. That proof of service must be in the form of an “affidavit of compliance.” The affidavit of compliance must be filed with the return receipt within 30 days after the plaintiff has received the return receipt from the post office. Service of process shall be complete 10 days after the affidavit of compliance has been filed with the clerk with a copy of the summons and complaint … . Strict compliance with Limited Liability Company Law § 304 is required, including as to the filing of an “affidavit of compliance” … . Where the plaintiff has failed to demonstrate strict compliance, the plaintiff will not be entitled to a default judgment … . Here, the plaintiff failed to submit an affidavit of compliance with the return receipt within 30 days after it received the return receipt from the post office. Accordingly, the plaintiff’s unopposed motion for leave to enter a default judgment was properly denied … . Global Liberty Ins. Co. v Surgery Ctr. of Oradell, LLC, 2017 NY Slip Op 06065, Second Dept 8-9-17

CIVIL PROCEDURE (LIMITED LIABILITY COMPANY LAW, DEFAULT JUDGMENT, REQUIREMENTS FOR SERVICE ON AN UNAUTHORIZED FOREIGN LIMITED LIABILITY COMPANY NOT MET, DEFAULT JUDGMENT PROPERLY DENIED (SECOND DEPT))/LIMITED LIABILITY COMPANY LAW (DEFAULT JUDGMENT, REQUIREMENTS FOR SERVICE ON AN UNAUTHORIZED FOREIGN LIMITED LIABILITY COMPANY NOT MET, DEFAULT JUDGMENT PROPERLY DENIED (SECOND DEPT))/DEFAULT JUDGMENTS (UNAUTHORIZED FOREIGN LIMITED LIABILITY COMPANY, REQUIREMENTS FOR SERVICE ON AN UNAUTHORIZED FOREIGN LIMITED LIABILITY COMPANY NOT MET, DEFAULT JUDGMENT PROPERLY DENIED (SECOND DEPT))

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ACTION TO DISSOLVE A CLOSELY HELD CORPORATION BASED UPON BREACH OF A FIDUCIARY DUTY WAS TIMELY AND JUDICIAL DISSOLUTION WAS PROPERLY GRANTED (THIRD DEPT).

The Third Department determined Supreme Court properly dissolved a closely-held corporation, finding that the respondent shareholders had “breached their fiduciary duties owed to petitioners by engaging in oppressive conduct aimed at ‘freez[ing]’ petitioners out of the corporation, as well as looting, wasting and/or diverting corporate assets for noncorporate purposes.” The decision is detailed and fact-specific. The court noted that the shares of two of the petitioners were beneficial shares in that they were held in trust by their father, who was also a petitioner. Although the children did not have standing to bring an action to dissolve the corporation because the holders of beneficial shares cannot vote, their father, as trustee, could vote, which conferred standing. The court further noted that an action to dissolve a corporation based on a breach of a fiduciary duty is equitable in nature and therefore the six-year statute of limitations applies. The action was timely because the first overt repudiation of a fiduciary duty by the respondents occurred within six years of the action:

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Here, the gravamen of the petition is that respondents, as the majority shareholders, breached their fiduciary duties owed to petitioners, as the minority shareholders. Although the petition alleges fraudulent acts in the form of looting, the allegation of fraud is not essential to the breach of fiduciary duty claim. In light of this, and the fact that the remedy of a judicial dissolution is equitable in nature, we find that “the six-year limitations period of CPLR 213 (1) applies” … , and it does not commence “until there has been an open repudiation by the fiduciary or the relationship has otherwise been clearly terminated”… . In our view, respondents’ attempt in 2009 to force petitioners to sell their shares is the earliest point at which respondents can be said to have openly repudiated the fiduciary relationship. Given that this proceeding was commenced within six years of the 2009 force-out attempt, we agree with Supreme Court that this proceeding is not time-barred. * * *

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Business Corporation Law § 1104-a permits a court to dissolve a closely-held corporation where, as is relevant here, those in control of the corporation have engaged in “oppressive actions toward the complaining shareholders” or have “looted, wasted, or diverted” corporate assets for noncorporate purposes (Business Corporation Law § 1104-a [a] [1], [2] …). “Although the term ‘oppressive actions’ is not statutorily defined, the Court of Appeals has held that ‘oppression should be deemed to arise . . . when the majority conduct substantially defeats expectations that, objectively viewed, were both reasonable under the circumstances and were central to the petitioner[s’] decision to join the venture'”… . Contrary to respondents’ contention, this standard is equally applicable to passive shareholders, such as petitioners, inasmuch as the standard is not focused on the complaining shareholders’ level of involvement with the corporation but, rather, their reasonable expectations and whether those expectations were defeated … . Matter of Twin Bay Vil., Inc. v Kasian, 2017 NY Slip Op 06024, Third Dept 8-3-17

 

CORPORATION LAW (DISSOLUTION, ACTION TO DISSOLVE A CLOSELY HELD CORPORATION BASED UPON BREACH OF A FIDUCIARY DUTY WAS TIMELY AND JUDICIAL DISSOLUTION WAS PROPERLY GRANTED (THIRD DEPT))/DISSOLUTION (CORPORATION LAW, ACTION TO DISSOLVE A CLOSELY HELD CORPORATION BASED UPON BREACH OF A FIDUCIARY DUTY WAS TIMELY AND JUDICIAL DISSOLUTION WAS PROPERLY GRANTED (THIRD DEPT))/FIDUCIARY DUTY (CORPORATION LAW, ACTION TO DISSOLVE A CLOSELY HELD CORPORATION BASED UPON BREACH OF A FIDUCIARY DUTY WAS TIMELY AND JUDICIAL DISSOLUTION WAS PROPERLY GRANTED (THIRD DEPT))/CLOSELY HELD CORPORATIONS (DISSOLUTION, ACTION TO DISSOLVE A CLOSELY HELD CORPORATION BASED UPON BREACH OF A FIDUCIARY DUTY WAS TIMELY AND JUDICIAL DISSOLUTION WAS PROPERLY GRANTED (THIRD DEPT))/CIVIL PROCEDURE (STATUTE OF LIMITATIONS, ACTION TO DISSOLVE A CLOSELY HELD CORPORATION BASED UPON BREACH OF A FIDUCIARY DUTY WAS TIMELY AND JUDICIAL DISSOLUTION WAS PROPERLY GRANTED (THIRD DEPT))/STATUTE OF LIMITATIONS (DISSOLUTION OF CORPORATIONS, ACTION TO DISSOLVE A CLOSELY HELD CORPORATION BASED UPON BREACH OF A FIDUCIARY DUTY WAS TIMELY AND JUDICIAL DISSOLUTION WAS PROPERLY GRANTED (THIRD DEPT))

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