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WAIVED DEFENSE CAN BE INTERPOSED IN AN ANSWER AMENDED BY LEAVE OF COURT.

The Second Department determined defendant doctor in this medical malpractice action should have been allowed to amend his answer to add the defense of discharge in bankruptcy. The court noted that even where a defense is waived pursuant to CPLR 3211(e) it can be interposed in an answer amended by leave of court pursuant to 3025(b):

Even when a defense is waived under CPLR 3211(e), “it can nevertheless be interposed in an answer amended by leave of court pursuant to CPLR 3025(b), as long as the amendment does not cause the other party prejudice or surprise resulting directly from the delay, and is not palpably insufficient or patently devoid of merit” … . Under the circumstances of this case, we find that [defendant's] affirmative defense of discharge in bankruptcy is neither patently insufficient nor palpably devoid of merit, and there would be little or no prejudice resulting from any delay in granting leave to amend his answer to add this affirmative defense … . Dixon v Chang, 2016 NY Slip Op 01797, 2nd Dept 3-16-16

CIVIL PROCEDURE (WAIVED DEFENSE CAN BE INTERPOSED IN AN ANSWER AMENDED BY LEAVE OF COURT)/AMENDED ANSWER (WAIVED DEFENSE CAN BE INTERPOSED IN AN ANSWER AMENDED BY LEAVE OF COURT)/AFFIRMATIVE DEFENSES (WAIVED DEFENSE CAN BE INTERPOSED IN AN ANSWER AMENDED BY LEAVE OF COURT)

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WIFE SHOULD HAVE BEEN ALLOWED TO INTERVENE IN AN ACTION SEEKING THE TURNOVER OF PERSONAL PROPERTY TO ENFORCE A JUDGMENT AGAINST HUSBAND; HER SEPARATE PROPERTY, AS OPPOSED TO MARITAL PROPERTY, COULD NOT BE REACHED BY A JUDGMENT CREDITOR.

The First Department determined the wife in a divorce proceeding, Wendy, should have been allowed to intervene in an action against her husband, Hugh, by plaintiff, Pensmore, seeking the turnover and sale of personal property to enforce a money judgment. Wendy submitted proof supporting her claim that the personal property in her possession was her separate property, not marital property, and therefore could not be reached by the creditor:

As a preliminary matter, we agree with Wendy that because Hugh was not in physical possession of the property which is the subject of the turnover order, the enforcement proceeding should have been brought as a special proceeding pursuant to CPLR 5225(b). Wendy was required to have been named as a party and separately served with the petition, because she is the one in actual possession of the disputed property (CPLR 5225[b] McKinney's Practice Commentary, 5225.5). Although Pensmore did not properly name Wendy, the error could have been cured by permitting Wendy to intervene, so long as the burden of proof remained on the judgment creditor (Pensmore) to establish that the judgment debtor (Hugh) has an interest in the property that is superior to the person in actual possession (Wendy) … .

The trial court was required to hold a hearing to determine whether the personal property in Wendy's possession is her sole separate property or marital property. * * *

While … an inchoate right to equitably share in marital property cannot be protected against third party creditors of a debtor spouse … , the same rule does not hold true for separate property of the non-debtor spouse. Domestic Relations Law § 236[B] provides that “all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held” is marital property (Domestic Relations Law § 236 [B][1][c]…). There is an exception, however, for “property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse;” such property is the separate property of that spouse (DRL § 236 [B][1][d]…). Separate property, is not “marital property” and it is not equitably distributed in a divorce action … . Although neither spouse has a vested interest in any property that is otherwise marital until it is distributed in a divorce action, separate property, unless transmuted or commingled, retains its character as the property of the spouse who owns it both during and after the marriage … . Pensmore Invs., LLC v Gruppo, Levey & Co., 2016 NY Slip Op 01789, 1st Dept 3-15-16

FAMILY LAW (SEPARATE PROPERTY OF A NON-DEBTOR SPOUSE, AS OPPOSED TO MARITAL PROPERTY, CAN NOT BE REACHED BY A JUDGMENT CREDITOR)/PERSONAL PROPERTY (SEPARATE PROPERTY OF A NON-DEBTOR SPOUSE, AS OPPOSED TO MARITAL PROPERTY, CAN NOT BE REACHED BY A JUDGMENT CREDITOR)/DEBTOR-CREDITOR (SEPARATE PROPERTY OF A NON-DEBTOR SPOUSE, AS OPPOSED TO MARITAL PROPERTY, CAN NOT BE REACHED BY A JUDGMENT CREDITOR)/CIVIL PROCEDURE (NON-DEBTOR SPOUSE SHOULD HAVE BEEN ALLOWED TO INTERVENE IN ACTION TO ENFORCE JUDGMENT AGAINST DEBTOR-HUSBAND)/INTERVENE, MOTION TO (NON-DEBTOR SPOUSE SHOULD HAVE BEEN ALLOWED TO INTERVENE IN ACTION TO ENFORCE JUDGMENT AGAINST DEBTOR-HUSBAND)

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SIX-YEAR STATUTE OF LIMITATIONS APPLIES TO BREACH OF FIDUCIARY DUTY CLAIMS WHICH SOUND IN FRAUD.

The First Department, in a case remitted by the Court of Appeals, determined the six-year statute of limitations applied to “breach of fiduciary duty” causes of action because fraud allegations were at the heart of the claims. Where, as here, a “breach of fiduciary duty” cause of action seeks monetary damages and not equitable relief, the three-year statute of limitations usually applies. However, where, as here, allegations of fraud are central to the fiduciary duty cause of action, the six-year statute of limitations applies:

… [A] cause of action for breach of fiduciary duty based on allegations of actual fraud is subject to a six-year limitations period” … . An exception to this rule exists ” if the fraud allegation is only incidental to the claim asserted'” … . Thus, “where an allegation of fraud is not essential to the cause of action pleaded except as an answer to an anticipated defense of Statute of Limitations, courts look for the reality, and the essence of the action and not its mere name” … .

Here, although the fiduciary duty claims seek monetary relief, the six-year limitations period applies because the claims sound in fraud. Cusimano v Schnurr, 2016 NY Slip Op 01758, 1st Dept 3-15-16

 

CIVIL PROCEDURE (SIX-YEAR STATUTE OF LIMITATIONS APPLIES TO BREACH OF FIDUCIARY DUTY CLAIMS WHICH SOUND IN FRAUD)/FRAUD (SIX-YEAR STATUTE OF LIMITATIONS APPLIES TO BREACH OF FIDUCIARY DUTY CLAIMS WHICH SOUND IN FRAUD)/FIDUCIARY DUTY, BREACH OF (SIX-YEAR STATUTE OF LIMITATIONS APPLIES TO BREACH OF FIDUCIARY DUTY CLAIMS WHICH SOUND IN FRAUD)

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FRAUD CAUSE OF ACTION PROPERLY DISMISSED BECAUSE (1) IT WAS DUPLICATIVE OF THE BREACH OF CONTRACT CAUSE OF ACTION AND (2) PLAINTIFF, AS A SOPHISTICATED BUSINESS ENTITY, COULD NOT ARGUE IT RELIED ON ORAL REPRESENTATIONS WHICH CONTRADICTED THE WRITTEN CONTRACT; STRICT REQUIREMENTS FOR ATTACHMENT NOT MET.

The Third Department, affirming Supreme Court, determined plaintiff’s fraud cause of action was properly dismissed because (1) it was duplicative of the breach of contract cause of action, and (2), plaintiff, a sophisticated business entity,  could not be heard to rely upon alleged oral representations which contradicted the written contract.  In addition, the Third Department determined the requirements for attachment pursuant to CPLR 6201 (3) were not met by plaintiff. There was insufficient proof defendant was secreting assets of frustrate a potential judgment:

A cause of action for fraud does not exist where the alleged fraudulent act is premised upon a breach of a contractual obligation … . * * * … [A] sophisticated business entity cannot justifiably rely on oral representations when it thereafter enters into a contract containing terms that directly contradict those oral representations … . Accordingly, plaintiff’s fraud cause of action is subject to dismissal, either as duplicative of the contract cause of action or, in the alternative, based on plaintiff’s own allegations that it relied on oral representations that were contradicted by the terms of the contract that it thereafter entered into. Northeast United Corp. v Lewis, 2016 NY Slip Op 01713, 3rd Dept 3-10-16

CONTRACT LAW (SOPHISTICATED BUSINESS ENTITY CAN NOT ARGUE IT RELIED ON ORAL MISREPRESENTATIONS WHICH CONTRADICTED THE WRITTEN CONTRACT)/FRAUD (FRAUD CAUSE OF ACTION PROPERLY DISMISSED AS DUPLICATIVE OF BREACH OF CONTRACT CAUSE OF ACTION AND BECAUSE PLAINTIFF, A SOPHISTICATED BUSINESS ENTITY, COULD NOT BE HEARID TO HAVE RELIED UPON ORAL MISREPRESENTATIONS WHICH CONTRADICTED THE WRITTEN CONTRACT)/ATTACHMENT (STRICT REQUIREMENTS FOR ATTACHMENT PURSUANT TO CPLR 6201 (3) NOT MET)/CIVIL PROCEDURE (STRICT REQUIREMENTS FOR ATTACHMENT PURSUANT TO CPLR 6201 (3) NOT MET)

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COMMUNICATION BETWEEN SPOUSES DOES NOT CONSTITUTE PUBLICATION IN A DEFAMATIOIN ACTION; MOTION TO SET ASIDE PLAINTIFF’S VERDICT SHOULD HAVE BEEN GRANTED.

The Second Department determined defendants' oral motion to set aside the verdict in a defamation case should have been granted. Plaintiff alleged statements made by defendants (husband and wife) caused specified pecuniary loss. Because the defendants are spouses, communication between them did not constitute publication. The plaintiff was unable to demonstrate any statements made to third parties caused special harm:

“A motion for judgment as a matter of law pursuant to CPLR 4401 or 4404 may be granted only when the trial court determines that, upon the evidence presented, there is no valid line of reasoning and permissible inferences which could possibly lead rational persons to the conclusion reached by the jury upon the evidence presented at trial, and no rational process by which the jury could find in favor of the nonmoving party” … . “In considering such a motion, the trial court must afford the party opposing the motion every inference which may properly be drawn from the facts presented, and the facts must be considered in a light most favorable to the nonmovant” … .

Applying this standard here, we conclude that there was no valid line of reasoning and permissible inferences which could have led the jury to find that the plaintiff established his cause of action alleging defamation. “The elements of a cause of action [to recover damages] for defamation are a false statement, published without privilege or authorization to a third party, constituting fault as judged by, at a minimum, a negligence standard, and it must either cause special harm or constitute defamation per se” … . Here, because it is undisputed that the defendants are spouses, the communications between the defendants do not constitute publication … . … [T]o the extent that the plaintiff's defamation claim alleged that [defendants] communicated the [statement] to third parties, the plaintiff failed to prove that he suffered special harm, i.e., the loss of something having economic or pecuniary value, as a result of those statements .. . Gaccione v Scarpinato, 2016 NY Slip Op 01640, 2nd Dept 3-9-16

DEFAMATION (COMMUNICATION BETWEEN SPOUSES DOES NOT CONSTITUTE PUBLICATION)/CIVIL PROCEDURE (MOTION TO SET ASIDE VERDICT IN DEFAMATION ACTION SHOULD HAVE BEEN GRANTED)/VERDICT, MOTION TO SET ASIDE (DEFAMATION ACTION, MOTION TO SET ASIDE PLAINTIFF'S VERDICT SHOULD HAVE BEEN GRANTED)

MOTION TO RENEW BASED UPON LAW OFFICE FAILURE PROPERLY GRANTED; CRITERIA FOR GRANTING A MOTION TO RENEW IS FLEXIBLE.

The Second Department determined that law office failure was properly deemed an adequate ground for a motion to renew based on evidence which could have been presented to support the original motion. The Second Department further determined that, upon renewal, the denial of defendant’s motion to dismiss for failure to timely file a complaint after service of the demand for a complaint was proper. The court noted the criteria for granting a motion to renew is flexible:

 

“Although a motion for leave to renew generally must be based on newly-discovered facts, this requirement is a flexible one, and a court has the discretion to grant renewal upon facts known to the movant at the time of the original motion, provided that the movant offers a reasonable justification for the failure to submit the additional facts on the original motion” … . What is considered a “reasonable justification” is within the Supreme Court’s discretion … . “Law office failure can be accepted as a reasonable excuse in the exercise of the court’s sound discretion” … .

Here … the Supreme Court did not improvidently exercise its discretion in granting that branch of the plaintiff’s motion which was for leave to renew his opposition to her motion, as the excuse of law office failure presented by the plaintiff was reasonable under the circumstances … .

Furthermore, upon renewal, considering all the circumstances of this case, the Supreme Court providently exercised its discretion in denying the appellant’s motion pursuant to CPLR 3012(b) to dismiss the complaint insofar as asserted against her for failure to serve a timely complaint. The plaintiff proffered a reasonable excuse for his delay in serving the complaint after being served by the appellant with a notice of appearance and demand for a complaint, and established that he had a potentially meritorious cause of action against the appellant … . Castor v Cuevas, 2016 NY Slip Op 01456, 2nd Dept 3-2-16

CIVIL PROCEDURE (LAW OFFICE FAILURE DEEMED ADEQUATE EXCUSE FOR GRANTING A MOTION TO RENEW)/CIVIL PROCEDURE (CRITERIA FOR A MOTION TO RENEW IS FLEXIBLE)/LAW OFFICE FAILURE (MOTION TO RENEW BASED UPON LAW OFFICE FAILURE PROPERLY GRANTED)/RENEW, MOTION TO (CRITERIA FOR GRANTING IS FLEXIBLE)/RENEW, MOTION TO (LAW OFFICE FAILURE DEEMED ADEQUATE GROUND FOR MOTION)

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STAND-ALONE EXECUTIVE LAW 63 (12) CAUSE OF ACTION FOR FRAUD REINSTATED AGAINST DONALD TRUMP ET AL.

In an action by the Attorney General against Donald Trump, alleging fraud in connection with the operation of Trump University, the First Department, overruling its own precedent, determined Executive law 63 (12) authorized a stand-alone fraud cause of action. The court further held that the three-year statute of imitations for causes of action created by statute did not apply because Executive Law 63 (12) did not create a cause of action which did not exist at common law, rather it merely authorized the Attorney General to bring a fraud cause of action. Applying the six-year statute of limitations, the First Department reinstated the Executive Law 63 (12) cause of action, and concluded questions of fact precluded summary judgment on both the statutory and common law fraud claims:

… [L]ike similar statutes that authorize causes of action, § 63(12) defines the fraudulent conduct that it prohibits, authorizes the Attorney General to commence an action or proceeding to foreclose that conduct, and specifies the relief, including equitable relief, that the Attorney General may seek. Indeed, the language of § 63(12) parallels the language of the Martin Act, under which the Attorney General is undisputedly authorized to bring a standalone cause of action for fraudulent conduct in the securities context … . * * *

… [W]e find … that the fraud claim under § 63(12) is not subject to the three-year statute of limitations imposed by CPLR 214(2), but rather, is subject to the residual six-year statute of limitations in CPLR 213(1) … . … § 63(12) does not create any liability nonexistent at common law, at least under the court’s equitable powers. … § 63(12) does not encompass a significantly wider range of fraudulent activities than were legally cognizable before the section’s enactment … .

Nevertheless, petitioner is not entitled to summary determination of its fraud claims, under either the common law or the statute, because material issues of fact exist as to those claims. Matter of People of the State of N.Y. by Eric T. Schneiderman v Trump Entrepreneur Initiative LLC, 2016 NY Slip Op 01430, 1st Dept 3-1-16

 

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LEVEL OF SUPERVISORY CONTROL NEEDED TO SUPPORT A LABOR LAW 200 CAUSE OF ACTION AND THE CRITERIA FOR SETTING ASIDE A VERDICT AS AGAINST THE WEIGHT OF THE EVIDENCE EXPLAINED.

The Second Department determined defendants’ motions to set aside the verdict in this Labor Law 200/common law negligence action were properly denied. The court explained the level of supervision required to hold gas station subtenants liable for a forklift injury, and the criteria for setting aside a verdict:

 

“To be held liable under Labor Law § 200 for injuries arising from the manner in which work is performed, a defendant must have the authority to exercise supervision and control over the work” … . “A defendant has the authority to supervise or control the work for purposes of Labor Law § 200 when [the] defendant bears the responsibility for the manner in which the work [was] performed” … . “[M]ere general supervisory authority at a work site for the purpose of overseeing the progress of the work and inspecting the work product is insufficient to impose liability under Labor Law § 200” … . “If the challenged means and methods of the work are those of a subcontractor, and the owner or contractor exercises no supervisory control over the work, no liability attaches under Labor Law § 200 or the common law” … .

… “To be awarded judgment as a matter of law pursuant to CPLR 4401, a defendant must show that there is no rational process by which the jury could find for the plaintiff against the moving defendant” … . In considering a motion for judgment as a matter of law, “the trial court must afford the party opposing the motion every inference which may properly be drawn from the facts presented, and the facts must be considered in a light most favorable to the nonmovant” … . “In making this determination, a court must not engage in a weighing of the evidence,’ nor may it direct a verdict where the facts are in dispute, or where different inferences may be drawn or the credibility of witnesses is in question'” … . …

“[A] jury verdict should not be set aside as contrary to the weight of the evidence unless the jury could not have reached the verdict by any fair interpretation of the evidence” … . “Whether a jury verdict should be set aside as contrary to the weight of the evidence does not involve a question of law, but rather requires a discretionary balancing of many factors” … . The apportionment of fault among the parties is generally an issue of fact for the jury … , and the jury’s apportionment of fault should not be set aside unless it could not have been reached based upon a fair interpretation of the evidence … . Hernandez v Pappco Holding Co., Ltd., 2016 NY Slip Op 01295, 2nd Dept 2-24-16

 

LABOR LAW (LEVEL OF SUPERVISORY CONTROL NEEDED TO SUPPORT A LABOR LAW 200 CAUSE OF ACTION)/NEGLIGENCE (LEVEL OF SUPERVISORY CONTROL NEEDED TO SUPPORT A LABOR LAW 200 CAUSE OF ACTION)/CIVIL PROCEDURE (CRITERIA FOR SETTING ASIDE A VERDICT AS AGAINST THE WEIGHT OF THE EVIDENCE)/VERDICT, MOTION TO SET ASIDE (CRITERIA FOR SETTING ASIDE A VERDICT AS AGAINST THE WEIGHT OF THE EVIDENCE)

STATUTE OF LIMITATIONS DEFENSE MAY BE RAISED FOR THE FIRST TIME IN AN ANSWER TO AN AMENDED COMPLAINT; RELATION-BACK DOCTRINE NOT APPLICABLE TO ORAL-CONTRACT ACTION WHERE ORIGINAL ACTION WAS BASED SOLELY ON A WRITTEN CONTRACT.

The Second Department, reversing Supreme Court determined defendant did not waive the statute of limitations defense not raised in the answer to the original complaint, but raised in the answer to the amended complaint. The court further concluded a subsequent action based upon an alleged oral agreement did not relate back to the original action based upon a written agreement and was therefore time-barred:

 

Generally, a defense based upon the statute of limitations is waived unless raised by pre-answer motion or in the defendant’s answer (see CPLR 3211[e]). A defendant, however, may assert a statute of limitations defense for the first time in an answer served in response to a plaintiff’s amended complaint … . Moreover, a party may amend its pleading once without leave of court, among other circumstances, within 20 days after service of that pleading (see CPLR 3025[a]). An amended answer, made as a matter of right pursuant to CPLR 3025(a), may include a statute of limitations defense previously omitted … . * * *

The relation-back doctrine permits a plaintiff to interpose a claim or cause of action which would otherwise be time-barred, where the allegations of the original complaint gave notice of the transactions or occurrences to be proven and the cause of action would have been timely interposed if asserted in the original complaint … . The relation-back doctrine is inapplicable where the original allegations did not provide the defendant notice of the need to defend against the allegations of the amended complaint … . Moezinia v Ashkenazi, 2016 NY Slip Op 01300, 2nd Dept 2-24-16

 

CIVIL PROCEDURE (STATUTE OF LIMITATIONS DEFENSE MAY BE RAISED FOR THE FIRST TIME IN AN ANSWER TO AN AMENDED COMPLAINT)/CIVIL PROCEDURE (RELATION-BACK DOCTRINE NOT APPLICABLE TO ORAL CONTRACT WHERE ORIGINAL COMPLAINT CONCERNED A WRITTEN CONTRACT)/STATUTE OF LIMITATIONS (DEFENSE MAY BE RAISED FOR THE FIRST TIME IN ANSWER TO AN AMENDED COMPLAINT)/RELATION-BACK DOCTRINE (RELATION-BACK DOCTRINE NOT APPLICABLE TO ORAL CONTRACT WHERE ORIGINAL COMPLAINT CONCERNED A WRITTEN CONTRACT)

CRITERIA FOR A MOTION TO RENEW IS FLEXIBLE; HERE MOTION SHOULD HAVE BEEN GRANTED EVEN THOUGH MOVANT SHOULD HAVE BEEN AWARE OF THE “NEW” EVIDENCE.

The Second Department, reversing Supreme Court, determined plaintiff’s motion to renew an application for an order of reference in a mortgage foreclosure action should have been granted. The court noted that the criteria for a motion to renew is flexible, there is no time-limit for bringing the motion, and the motion can be granted even when movant should have been aware of the “new” evidence:

 

Generally, “a motion for leave to renew is intended to bring to the court’s attention new or additional facts which were in existence at the time the original motion was made, but unknown to the movant” … . However, the requirement that a motion for leave to renew be based upon new or additional facts unknown to the movant at the time of the original motion is a flexible one and the court, in its discretion, may also grant renewal, in the interest of justice, upon facts which were known to the movant at the time the original motion was made … . Except where a motion to renew is based upon a change in the law, which is not the case here, CPLR 2221 does not impose a time limit for making a motion for leave to renew … . Here, the plaintiff established its entitlement to an order of reference, as it submitted documentary proof that the defendants failed to answer the complaint within the time allowed, that it was the holder of the note and mortgage, that the defendants defaulted, “and that, as a preliminary step in obtaining a judgment of foreclosure, the appointment of a referee to compute the amount due on the . . . mortgage would be proper” … . Although the plaintiff should have been aware of the durable power of attorney at the time it initially sought an order of reference, the Supreme Court, under the circumstances, improvidently exercised its discretion in denying the plaintiff’s motion for leave to renew, where the plaintiff, having otherwise established its entitlement to an order of reference, submitted, inter alia, the durable power of attorney in support of its renewal motion and the motion was unopposed. Citimortgage, Inc. v Espinal, 2016 NY Slip Op 01148, 2nd Dept 2-17-16

 

CIVIL PROCEDURE (MOTION TO RENEW, FLEXIBLE CRITERIA, NO TIME-LIMIT, MOTION SHOULD HAVE BEEN GRANTED EVEN THOUGH MOVANT SHOULD HAVE BEEN AWARE OF THE NEWLY PROFERRED EVIDENCE)/MOTION TO RENEW (FLEXIBLE CRITERIA, NO TIME-LIMIT, SHOULD HAVE BEEN GRANTED EVEN THOUGH MOVANT SHOULD HAVE BEEN AWARE OF THE NEWLY PROFERRED EVIDENCE)

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