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Note Which Was Extended and Consolidated with Other Debts Was Not Extinguished by the Consolidation, Extension and Modification Agreement (CEMA)—the Agreement, Therefore, Did Not Commence the Running of the Statute of Limitations for an Action on the Note

The Third Department, reversing Supreme Court, determined a Consolidation, Extension and Modification Agreement (CEMA) did not extinguish a note which was extended and consolidated under the agreement. Therefore the statute of limitations for action on the note did not commence running when the agreement was entered:

We agree with plaintiff that the plain language of the CEMA does not support Supreme Court’s conclusion that the CEMA extinguished the 1992 note and thereby recommenced the running of the statute of limitations. “It is well established that a subsequent note does not discharge the original indebtedness secured unless there is an express agreement between the parties” … . Defendant points to no express agreement and cites no authority supporting its claim that the CEMA operated to extinguish the 1992 note. Rather, the record makes clear that defendant still owed approximately $169,000 on the 1992 note at the time that the CEMA was executed. That debt was consolidated with two other debts into a new note and the mortgage liens were “coordinated, consolidated, combined and extended” to form a single lien. “Where, as here, balances of first mortgage loans are increased with second mortgage loans and CEMAs are executed to consolidate the mortgages into single liens, the first notes and mortgages still exist” … . Bechard v Monty’s Bay Recreation, Inc., 2015 NY Slip Op 04711, 3rd Dept 6-4-15

 

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Plaintiffs Should Have Been Allowed to Amend the Pleadings to Conform to the Proof at Trial—No Prejudice to Defendant

The Second Department determined plaintiffs should have been allowed to amend the pleadings to conform to the proof at trial. The complaint alleged breach of contract and negligence re: the installation of foam insulation. The contract called for the installation to conform to the manufacturer’s specifications.  The negligence cause of action alleged the work was not done in a good and workmanlike manner. Because defendant would not have been prejudiced, Supreme Court should have allowed plaintiffs to amend the breach of contract cause of action to allege the work was not done in a good and workmanlike manner.  Plaintiffs’ motion pursuant to CPLR 4404(b) for judgment in their favor on the breach of contract cause of action should have been granted. The negligence cause of action, which essentially duplicated the breach of contract cause of action, should have been dismissed. With respect the post-trial motion to amend the pleadings, the Second Department wrote:

… [T]he Supreme Court improvidently exercised its discretion in denying that branch of the plaintiffs’ motion which was for leave to amend the pleadings to conform to the evidence adduced at trial. “Whether to permit a party to amend a pleading is generally a matter of discretion for the trial court and, on review, the Appellate Division” … . Absent prejudice, courts are free, pursuant to CPLR 3025(c), to permit the amendment of pleadings, even after trial … . Leave shall be freely given upon such terms as may be just (see CPLR 3025[b]). “This favorable treatment applies even if the amendment substantially alters the theory of recovery” … .

Here, the proposed amendment to the breach of contract cause of action does not alter the theory of recovery. The complaint alleged that the defendant failed to perform the work in a good and workmanlike manner, albeit in the context of the cause of action alleging negligence. Furthermore, the defendant, who has the burden of establishing prejudice …, failed to assert that it would be prejudiced by permitting the plaintiffs to amend the complaint to conform to the evidence adduced at trial that the work was not performed in a good and workmanlike manner … . Mack-Cali Realty, L.P. v Everfoam Insulation Sys., Inc., 2015 NY Slip Op 04615, 2nd Dept 6-3-15

 

Trial Court Has the Discretion to Determine the Best Venue for Consolidated Actions—Here a County Other than the County Where the First Action Was Brought Was Properly Determined to Be the Most Appropriate Venue

In a medical malpractice case, the Second Department determined Supreme Court properly exercised its discretion re: the venue of these consolidated actions.  Although the venue of the initial action (Queens County) should usually serve as the venue of the consolidated actions, here the medical treatment was rendered at a hospital in Nassau County, many individual defendants resided in Nassau County, and the plaintiffs themselves resided in Nassau County at the time each action was commenced—making Nassau County the best venue for the proceedings:

“When a trial court orders consolidation or joint trials under CPLR 602(a), venue should generally be placed in the county where jurisdiction was invoked in the first action” … . However, where special circumstances are present, the court, in its discretion, may place venue elsewhere … .

Here, the claims relate to treatment rendered at St. Francis Hospital, located in Nassau County. Many of the individual defendants resided in Nassau County. All of the individual defendants worked in Nassau County at the time of the alleged malpractice and lack of informed consent. The plaintiffs themselves resided in Nassau County at the time each action was commenced. Under these circumstances, the Supreme Court providently exercised its discretion in granting those branches of the cross motions which were to place the venue of the consolidated action in Nassau County and denying that branch of the plaintiffs’ motion which was to place venue in Queens County… . Castro v Durban, 2015 NY Slip Op 04600, 2nd Dept 6-3-15

 

Defendant’s Submissions Did Not Rebut the Presumption of Receipt of the Summons and Complaint Properly Sent by Ordinary Mail

The Second Department determined defendant’s claims he was out of the country when the summons and complaint were mailed and never received them were insufficient to overcome the presumption of receipt based upon proper mailing by ordinary mail:

In support of that branch of his cross motion which was pursuant to CPLR 5015(a)(1), the defendant was required to demonstrate a reasonable excuse for his default in answering the complaint … . In support of his contention that he had a reasonable excuse, the defendant claimed that he was out of the country …, and when he returned to the United States there were no summons and complaint or notice of this action in the mail. The defendant’s submissions, however, failed to rebut the presumption of receipt based on proof of the proper mailing of the summons and complaint by ordinary mail … . Therefore, the defendant failed to establish a reasonable excuse for his default in answering the complaint … .

In support of that branch of his motion which was pursuant to CPLR 317, the defendant was required to demonstrate that he did not personally receive notice of the summons in time to defend and a potentially meritorious defense (see CPLR 317…). The evidence demonstrating that copies of the summons and complaint were mailed to the defendant at the correct residential address created a presumption of proper mailing and of receipt, and the defendant’s mere denial of receipt was insufficient to rebut that presumption … .  Williamson v Marlou Cab Corp., 2015 NY Slip Op 04636, 2nd Dept 6-3-15

 

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Conclusory Affidavit Insufficient to Meet Burden of Demonstrating Documents Were Privileged Because the Documents Were Prepared Solely In Anticipation of Litigation—Motion for a Protective Order Limiting Discovery Properly Denied

The Second Department determined the appellants were not entitled to a protective order precluding discovery of documents pursuant to CPLR 3103.  The appellants argued the documents were privileged because they were prepared in anticipation of litigation.  However, the conclusory attorney affidavit offered in support of the protective order did not meet the appellants’ burden to demonstrate the specific documents sought were “prepared solely in anticipation of litigation or trial…”:

CPLR 3101(a) mandates “full disclosure of all matter material and necessary in the prosecution or defense of an action.” Unlimited disclosure is not mandated, however, and a court may issue a protective order pursuant to CPLR 3103 denying, limiting, conditioning or regulating the use of any disclosure device “to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts” (CPLR 3103[a]…). “The supervision of disclosure and the setting of reasonable terms and conditions therefor rests within the sound discretion of the trial court and, absent an improvident exercise of that discretion, its determination will not be disturbed” … .

In support of that branch of their motion which was pursuant to CPLR 3103 for a protective order preventing the disclosure of certain witness statements and certain investigation and inspection reports, the appellants contended that such evidence was privileged as it was prepared in anticipation of litigation (see CPLR 3101[d][2]). “The burden of proving that a statement is privileged as material prepared solely in anticipation of litigation or trial is on the party opposing discovery” … . Such burden is met “by identifying the particular material with respect to which the privilege is asserted and establishing with specificity that the material was prepared exclusively in anticipation of litigation” … .

Here, the appellants failed to meet their burden of establishing that the requested material was prepared solely in anticipation of litigation and, therefore, is protected from disclosure by the qualified immunity privilege of CPLR 3101(d)(2). An attorney’s affirmation containing conclusory assertions that requested materials are conditionally immune from disclosure pursuant to CPLR 3101(d)(2) as material prepared in anticipation of litigation, without more, is insufficient to sustain a party’s burden of demonstrating that the materials were prepared exclusively for litigation … . Ligoure v City of New York, 2015 NY Slip Op 04456, 2nd Dept 5-27-15

 

“Conclusory” Affidavit Submitted In Support of Motion to Dismiss for Failure to State a Cause of Action Did Not Demonstrate the Allegation Defendants Were Directly Liable for Negligent Maintenance of a Taxi Cab Was “Not a Fact At All”—Analytical Criteria Explained

The Second Department determined plaintiff’s complaint should not have been dismissed in its entirety because the documentary evidence submitted in support of the motion to dismiss for failure to state a cause of action (CPLR 3211(a)(7)) did not demonstrate the facts alleged (which could support defendants’ direct liability for negligent maintenance of a taxi cab) “were not facts at all.” Plaintiff was injured when his motorcycle struck a tire which had come off defendants’ taxi cab. Although the information in the affidavit submitted by a defendant was sufficient to warrant the dismissal of causes of action which relied on piercing the corporate veil, the information did not demonstrate defendants could not be directly liable for negligent maintenance of the cab. The related causes of action should not have been dismissed.  The Second Department explained the analytical criteria to be applied when documentary evidence is submitted in support of a motion to dismiss for failure to state a cause of action:

“In considering a motion to dismiss pursuant to CPLR 3211(a)(7), the court should accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory” … . Where evidentiary material is submitted and considered on a motion pursuant to CPLR 3211(a)(7), and the motion is not converted into one for summary judgment, “the question becomes whether the plaintiff has a cause of action, not whether the plaintiff has stated one, and unless it has been shown that a material fact claimed by the plaintiff 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” … .

Here, [defendant’s] affidavit falls short of establishing, conclusively, that [plaintiff] has no cause of action. The affidavit completely fails to address [plaintiff’s] allegation that the subject taxi was not “roadworthy.” The affidavit, while offering conclusory statements, did not supply competent evidence as to which of the various defendants, if any, might have had a duty to maintain, or might in fact have maintained, the offending taxi prior to the accident. Indeed, [defendant’s] conclusory statements are completely unsupported with evidence or specific factual references … and, hence, are of no probative force … . Rathje v Tomitz, 2015 NY Slip Op 04467, 2nd Dept, 5-27-15

 

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“Whistleblower Statute” Cause of Action Should Have Survived the Motion to Dismiss—No Need to Cite Particular Statute, Rule or Regulation Alleged to Have Been Violated by the Employer in the Complaint

The Second Department determined plaintiff’s Labor Law 740 cause of action should have survived a motion to dismiss for failure to state a cause of action.  “A cause of action based upon Labor Law § 740, commonly known as the ‘whistleblower statute,’ is available to an employee who ‘discloses, or threatens to disclose to a supervisor or to a public body an activity, policy or practice of the employer that is in violation of law, rule or regulation which violation creates and presents a substantial and specific danger to the public health or safety’…”. The court noted that, to survive dismissal, the particular law, rule or regulation which was purportedly violated need not be specified in the complaint:

Here, the amended complaint alleged, inter alia, that the plaintiff’s employment with the corporate defendants was terminated after he complained to the individual defendants and the human resources department about certain activities and practices which the corporate defendants engaged in or tolerated. It further alleged that such conduct violated various laws or rules or regulations, and threatened public safety. Notably, “for pleading purposes, the complaint need not specify the actual law, rule or regulation violated, although it must identify the particular activities, policies or practices in which the employer allegedly engaged, so that the complaint provides the employer with notice of the alleged complained-of conduct” … . Ulysse v AAR Aircraft Component Servs., 2015 NY Slip Op 04474, 2nd Dept 5-27-15

 

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Foreign Corporation’s Sole Residence for Venue Purposes Is the County Designated In Its Filed Application to Conduct Business in New York State

In the context of a dispute over proper venue, the Second Department determined that plaintiff foreign corporation’s sole residence in New York State is the county designated in its application for authority to conduct business in New York State as filed with the State. Therefore plaintiff’s bringing the action in Nassau County, where it alleged its principal place of business is located, as opposed to New York County, the county designated in its filed application, was improper:

…[T]he law is clear that “[f]or purposes of venue, the sole residence of a foreign corporation is the county in which its principal office is located, as designated in its application for authority to conduct business filed with the State of New York” …, regardless of where it transacts business or maintains its actual principal office (see CPLR 503[c]; Business Corporation Law § 102[a][10]…). We note that, since the plaintiff’s response to the defendants’ demand to change venue failed to set forth factual averments that were prima facie sufficient to show that its designation of Nassau County for trial of the action was proper, the defendants were authorized to notice their motion to change venue to be heard in Saratoga County (see CPLR 511[b]…). Further, the defendants are not responsible for the delay occasioned by the denial of their motion by the Supreme Court, Saratoga County.

In view of the foregoing circumstances, the Supreme Court should have granted the defendants’ motion to change the venue of the action from Nassau County to Saratoga County, despite the fact that an order granting class certification had already been issued in the action. American Bldrs. & Contrs. Supply Co., Inc. v Capitaland Home Improvement Showroom, LLC, 2015 NY Slip Op 04262, 2nd Dept 5-20-15

 

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Criteria for Motion to Dismiss for Failure to State a Cause of Action (Where Documentary Evidence Submitted) Explained—Criteria for Motion to Dismiss Based on Documentary Evidence Explained—Pleading Requirements for Legal Malpractice Explained

In finding the legal malpractice complaint properly survived motions to dismiss, the Second Department explained the criteria for a motion to dismiss for failure to state a cause of action where documentary evidence is submitted (question is whether plaintiff has a cause of action, not whether one has been stated, affidavits considered to remedy defects in complaint), the criteria for a motion to dismiss founded on documentary evidence (documents must utterly refute allegations in complaint), the elements of legal malpractice, and the adequacy of damages allegations in a legal malpractice complaint (cannot be conclusory or speculative but plaintiff not obligated to show it actually sustained damages) :

On a motion to dismiss pursuant to CPLR 3211(a)(7), the complaint is to be afforded a liberal construction, the facts alleged are presumed to be true, the plaintiff is afforded the benefit of every favorable inference, and the court is to determine only whether the facts as alleged fit within any cognizable legal theory (see CPLR 3026…). Where a party offers evidentiary proof on a motion pursuant to CPLR 3211(a)(7), “the criterion is whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one” … . ” [A] court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint'” … .

A motion to dismiss a complaint pursuant to CPLR 3211(a)(1) may be granted only where the documentary evidence utterly refutes the plaintiff’s factual allegations, conclusively establishing a defense as a matter of law… .

To state a cause of action to recover damages for legal malpractice, a plaintiff must allege (1) that the attorney failed to exercise the care, skill, and diligence commonly possessed and exercised by a member of the legal profession, and (2) that such negligence was a proximate cause of the actual damages sustained … . A plaintiff must plead “actual[,] ascertainable damages” resulting from the attorney’s negligence … . Conclusory or speculative allegations of damages are insufficient… . However, “[a] plaintiff is not obligated to show, on a motion to dismiss, that it actually sustained damages. It need only plead allegations from which damages attributable to the defendant’s malpractice might be reasonably inferred” … . Randazzo v Nelson, 2015 NY Slip Op 04299, 2nd Dept 5-20-15

 

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Release Null and Void Under the General Obligations Law–Plaintiff Paid a Fee to Participate in the Basketball Game In Which He Was Injured

Plaintiff paid a fee to participate in a basketball league and signed a release of liability.  He was injured during a game when his hand went through the glass of a door behind a basketball hoop. The defendants sought permission to amend their answer to assert the defense of release and Supreme Court allowed the amendment. The Second Department determined the motion for leave to amend the answer should have been denied because the affirmative defense was “patently devoid of merit.” General Obligations Law 5-326 nullifies any such release where the owner or operator of a sports facility charges a fee for use of the facility. Falzone v City of New York, 2015 NY Slip Op 04273, 2nd Dept 5-20-15

[General Obligations Law 5-326 provides: “Every covenant, agreement or understanding in or in connection with, or collateral to, any contract, membership application, ticket of admission or similar writing, entered into between the owner or operator of any pool, gymnasium, place of amusement or recreation, or similar establishment and the user of such facilities, pursuant to which such owner or operator receives a fee or other compensation for the use of such facilities, which exempts the said owner or operator from liability for damages caused by or resulting from the negligence of the owner, operator or person in charge of such establishment, or their agents, servants or employees, shall be deemed to be void as against public policy and wholly unenforceable.”]