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A Request for an Admission Which Goes to the Heart of the Litigation Is Improper—Defendant Should Have Been Allowed to Withdraw Its Admission that Its Employee Was Acting Within the Scope of His Employment When a Vehicle Accident Occurred

The Second Department determined Supreme Court should have allowed defendant to withdraw admissions made in response to a notice to admit. Plaintiff was involved in an accident with a vehicle driven by an employee of defendant, Islip Pizza.  In response to a notice to admit, the defendant stated that the employee was acting in the scope of his employment at the time of the collision. Because defendant’s liability, under the doctrine of respondeat superior, depended entirely on whether the employee was acting within the scope of his employment, the admission went to the heart of the matters at issue. A request for an admission which deals with an ultimate conclusion is improper (CPLR 3123 (a)). Defendant should have been allowed to withdraw it (CPLR 3123 (b)):

Under CPLR 3123(a), a party may serve upon another party a written request that it admit, among other things, “the truth of any matters of fact set forth in the request, as to which the party requesting the admission reasonably believes there can be no substantial dispute at the trial and which are within the knowledge of such other party or can be ascertained by him upon reasonable inquiry” (CPLR 3123[a]). The legislative policy underlying CPLR 3123(a) is to promote efficiency in the litigation process by “eliminat[ing] from the issues in litigation matters which will not be in dispute at trial. It is not intended to cover ultimate conclusions, which can only be made after a full and complete trial. A notice to admit which goes to the heart of the matters at issue is improper” … . Furthermore, under CPLR 3123(b), a court may at any time permit a party to amend or withdraw any admission “on such terms as may be just” (CPLR 3123[b]…).  Altman v Kelly, 2015 NY Slip Op 04076, 2nd Dept 5-13-15

 

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Corporate Officer May Be Personally Liable for Torts Committed in the Performance of Corporate Duties/Criteria for Determining a Motion to Dismiss for Failure to State a Cause of Action (Where Documentary Evidence Is Submitted) Explained

The Second Department determined defendant’s motion to dismiss for failure to state a cause of action was properly denied.  Plaintiff alleged he tripped and fell over a hole left when a for sale sign was removed. The defendant moved to dismiss alleging the property was owned by the corporation of which defendant was the sole shareholder.  The Second Department noted that an officer of a corporation may be personally liable for torts committed in the performance of corporate duties. The court explained its role in determining a motion to dismiss for failure to state a cause of action where documentary evidence is submitted: “When a defendant submits evidence in support of a motion to dismiss pursuant to CPLR 3211(a)(7), and the motion has not been converted into one for summary judgment, the criterion is whether the plaintiff has a cause of action, not whether he or she has stated one … . “[U]nless it has been shown that a material fact as claimed by the pleader to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it, . . . dismissal should not eventuate… ‘. [quotations omitted] Orlando v New York Homes By J & J Corp., 2015 NY Slip Op 04104, 2nd Dept 5-13-15

 

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Triggering Event for the Statute of Limitations Re: a Challenge of the Termination of Section 8 Rent Subsidies Is the Sending of the So-Called T-3 Letter-Notification, Irrespective of Whether the Two Prior Required Letter-Notifications Were Sent

The Court of Appeals, in a full-fledged opinion by Judge Stein, over a three-judge dissent, determined that the so-called T-3 letter to tenants from the New York City Housing Authority (NYCHA), which notifies tenants of the termination of their Section 8 rent subsidies, is the triggering event for the four-month statute of limitations for challenging the termination. The applicable “Williams consent judgment” mandates a three-step procedure for termination of the rent subsidies, essentially three notifications to tenants, of which the T-3 letter is the last. The issue before the court was whether the NYCHA’s inability to show the first two notifications were properly sent prevented the statute of limitations from running when the T-3 letter was sent.  The Court of Appeals held that, although the failure to follow the three-step procedure is a defense to the termination of the subsidies, the statute of limitations for any challenge properly runs from the sending of the T-3 letter:

The plain language of the Williams consent judgment draws a distinction between what is required to commence the limitations period for a challenge to a termination of Section 8 benefits, on the one hand, and what is required for NYCHA to establish the merit of such a termination — including NYCHA’s full compliance with the notice requirements — on the other hand. Matter of Banos v Rhea, 2015 NY Slip Op 04029, CtApp 5-12-15

 

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A Forged Deed Is Void Ab Initio and Any Encumbrance on Real Property Based Upon a Forged Deed Is Null and Void—Action Based Upon a Forged Deed Is Not Therefore Subject to the Six-Year Statute of Limitations for Fraud

The Court of Appeals, in a full-fledged opinion by Judge Rivera, over a three-judge dissent, determined that a forged deed is void ab initio and neither a forged deed nor a mortgage interest based upon a forged deed is valid at any time.  Therefore, the six-year statute of limitations for fraud does not apply and the action was not time-barred: “The legal question raised in this appeal is whether plaintiff … is time-barred under CPLR 213 (8) from seeking to set aside and cancel, as null and void, defendant Bank of America's mortgage interest in real property conveyed on the authority of a forged deed. Under our prior case law it is well-settled that a forged deed is void ab initio, meaning a legal nullity at its inception. As such, any encumbrance upon real property based on a forged deed is null and void. Therefore, the statute of limitations set forth in CPLR 213 (8) does not foreclose plaintiff's claim against defendant. ” Faison v Lewis. 2015 NY Slip Op 04026, CtApp 5-12-15

 

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Rule Requiring Submission of Order or Judgment for Signature within 60 Days Applies Only When Court Directs that the Proposed Order Be Settled or Submitted for Signature

The Fourth Department determined an action had not been abandoned for failure to submit the order for signature within 60 days pursuant to 22 NYCRR 202.48.  That rule applies only when the court directs a party to submit or settle an order or judgment:

…[W]e agree with plaintiff that the court erred in dismissing the complaint sua sponte pursuant to 22 NYCRR 202.48. That rule provides that “[p]roposed orders or judgments . . . must be submitted for signature, unless otherwise directed by the court, within 60 days after the signing and filing of the decision directing that the order be settled or submitted . . . Failure to submit the order or judgment timely shall be deemed an abandonment of the motion or action, unless for good cause shown” (22 NYCRR 202.48 [a], [b]). As the Court of Appeals wrote, “[b]y its plain terms, section 202.48 (a) speaks to the circumstances where the court’s decision expressly directs a party to submit or settle an order or judgment” (Funk v Barry, 89 NY2d 364, 367). Thus, the Court held that “the 60-day period applies only where the court explicitly directs that the proposed judgment or order be settled or submitted for signature” (id. at 365). Here, the order of reference did not explicitly direct plaintiff to settle or submit an order or judgment for signature. Rather, it directed plaintiff to submit a “Motion or [an] Ex Parte Application” seeking a judgment of foreclosure and sale. We therefore conclude that the court erred in dismissing the complaint in reliance on 22 NYCRR 202.48… . Midfirst Bank v Bellinger, 2014 NY Slip Op 03365, 4th Dept 5-9-14

 

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Insurance Company’s Documents Protected by Attorney-Client Privilege/Where there is a Discrepancy Between an Order and the Related Decision, the Decision Controls

The Fourth Department determined Supreme Court should not have ordered disclosure of documents generated by an insurance company in relation to plaintiff’s claim because they were protected by attorney-client privilege.  (The court noted, with respect to the lower court’s decision and order in this case,  that where there is a discrepancy between and order and a decision, the decision controls:)

A party seeking to invoke the attorney-client privilege must show that “the information sought to be protected from disclosure was a confidential communication’ made to the attorney for the purpose of obtaining legal advice or services . . . [, and] the burden of proving each element of the privilege rests upon the party asserting it” … . “For the privilege to apply when communications are made from client to attorney, they must be made for the purpose of obtaining legal advice and directed to an attorney who has been consulted for that purpose.’ . . . [F]or the privilege to apply when communications are made from attorney to client—whether or not in response to a particular request—they must be made for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship” … .

It is well settled that “[t]he payment or rejection of claims is a part of the regular business of an insurance company. Consequently, reports which aid it in the process of deciding which of the two indicated actions to pursue are made in the regular course of its business” … . Notably, “while information received from third persons may not itself be privileged . . . , a lawyer’s communication to a client that includes such information in its legal analysis and advice may stand on different footing. The critical inquiry is whether, viewing the lawyer’s communication in its full content and context, it was made in order to render legal advice or services to the client”… . Nicastro v New York Cent Mut Fire Ins Co, 2014 NY Slip Op 03381, 4th Dept 5-9-14

 

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Request for Petitioner’s Income Tax Records Properly Denied—Insufficient Showing the Desired Information Could Not Be Gained from Other Sources

Over a two-justice dissent, the Fourth Department determined petitioner could not be ordered to turn over his income tax records.  Petitioner claimed that he had provided the down payment and monthly mortgage payments for decedent’s home where petitioner resided. Petitioner further claimed that decedent promised the home to him in a verbal agreement (and therefore the home should not pass by the will to petitioner’s sister).  Respondent wanted access to petitioner’s tax records to see if petitioner had sufficient income to make the down payment:

We conclude that Surrogate’s Court properly denied respondent’s motion, inasmuch as respondent has not made a sufficiently strong showing that the information contained in petitioner’s income tax records “were indispensable to this litigation and unavailable from other sources” …, such as “other financial or business records” … . Indeed, respondent “failed to make any factual showing in this regard, since the hearsay affirmation[s] of [respondent’s] attorney [are] wholly conclusory” …, petitioner’s deposition testimony, the only exhibit submitted in support of the motion, accounted for petitioner’s employment history during the times in question, although in a vague manner …, and respondent did not establish that it sought the requested information from any alternate source… .  Matter of Monaco, 2014 NY Slip Op 03423, 4th Dept 5-9-14

 

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Attorney-in-Fact Used His Power to Create a Gift (by Deed) to Himself and/or Third Parties—Deed Declared Null and Void

The Fourth Department determined the deed purporting to transfer a life estate to the attorney-in-fact was null and void. Essentially, the attorney-in-fact used his power to make a gift to himself and/or third parties, which created an unrebutted presumption of impropriety:

It is well settled that “[a] power of attorney . . . is clearly given with the intent that the attorney-in-fact will utilize that power for the benefit of the principal” … . “The relationship of an attorney-in-fact to his principal is that of agent and principal . . . and, thus, the attorney-in-fact must act in the utmost good faith and undivided loyalty toward the principal, and must act in accordance with the highest principles of morality, fidelity, loyalty and fair dealing’ . . . Consistent with this duty, an agent may not make a gift to himself or a third party of the money or property which is the subject of the agency relationship” … . “In the event such a gift is made, there is created a presumption of impropriety [that can] be rebutted [only] with a clear showing that the principal intended to make the gift” …, or that the gift was in the principal’s best interest … . Borders v Borders, 2015 NY Slip Op 04022, 4th Dept 5-8-15

 

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Fraud Upon the Court Must Be Demonstrated by Clear and Convincing Evidence/Striking of Pleadings and Entering Default Judgment Against Offending Party Appropriate Under the Facts

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined the standard for demonstrating a party has committed fraud upon the court is “clear and convincing.”  Under the facts, the court determined that defendants' fraud upon the court had been demonstrated and that striking the pleadings and entering a default judgment against the defendants was appropriate:

We …conclude that in order to demonstrate fraud on the court, the non-offending party must establish by clear and convincing evidence that the offending “party has acted knowingly in an attempt to hinder the fact finder's fair adjudication of the case and his adversary's defense of the action” … . A court must be persuaded that the fraudulent conduct, which may include proof of fabrication of evidence, perjury, and falsification of documents concerns “issues that are central to the truth-finding process” … . Essentially, fraud upon the court requires a showing that a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system's ability impartially to adjudicate a matter by improperly influencing the trier or unfairly hampering the presentation of the opposing party's claim or defense … . A finding of fraud on the court may warrant termination of the proceedings in the non-offending party's favor … . For “when a party lies to the court and [its] adversary intentionally, repeatedly, and about issues central to the truth-finding process, it can fairly be said that [the party] has forfeited [the] right to have [the] claim decided on the merits” … . Therefore, once a court concludes that clear and convincing evidence establishes fraud on the court, it may strike a pleading and enter a default judgment.

We caution that dismissal is an extreme remedy that “must be exercised with restraint and discretion” … . Dismissal is most appropriate in cases like this one, where the conduct is particularly egregious, characterized by lies and fabrications in furtherance of a scheme designed to conceal critical matters from the court and the nonoffending party; where the conduct is perpetrated repeatedly and wilfully, and established by clear and convincing evidence, such as the documentary and testimonial evidence found here. Dismissal is inappropriate where the fraud is not “central to the substantive issues in the case” …, or where the court is presented with “an isolated instance of perjury, standing alone, [which fails to] constitute a fraud upon the court” … . In such instances, the court may impose other remedies including awarding attorney fees …, awarding other reasonable costs incurred … , or precluding testimony … . In the rare case where a court finds that a party has committed fraud on the court warranting dismissal, the court should note why lesser sanctions would not suffice to correct the offending behavior … . CDR Creances SAS v Cohen, 2014 NY Slip Op 03294, CtApp 5-8-14

 

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120-Day Time Limit for Bringing a Summary Judgment Motion Properly Extended by Stipulation

The Fourth Department determined the 120-day time limit for making summary judgment motions (after the filing of a note of issue) was properly extended by stipulation.  The dissent felt that such a stipulation was invalid because it violated public policy: “While we agree with our dissenting colleague that the court was not required to accept the express stipulation of the parties to extend the 120-day deadline in CPLR 3212, we note that the court in fact did so in advance of the motion … . Moreover, unlike our dissenting colleague, we do not view the timing requirements applicable to motions for summary judgment as a matter of public policy that may not be affirmatively waived by a party …”. Bennett v St. John’s Home & St. John’s Health Care Corp., 2015 NY Slip Op 03952, 4th Dept 5-8-15

 

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