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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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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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Reports by Attorneys Which Relate to an Insurer’s Decision to Accept or Reject a Claim Are Discoverable—Reports by Attorneys Made After the Claim Is Rejected Are Not Discoverable

The Fourth Department determined the records generated by attorneys which related to an insurer’s decision whether to accept or reject a claim were discoverable as records made in the regular course of business—even if the records relate in part to potential litigation.  Records generated by attorneys after the claim was denied are privileged and not discoverable:

“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’ ” … . “Reports prepared by . . . attorneys before the decision is made to pay or reject a claim are thus not privileged and are discoverable . . . , even when those reports are mixed/multi-purpose’ reports, motivated in part by the potential for litigation with the insured” … . Here, the documents submitted to the court for in camera review constitute multi-purpose reports motivated in part by the potential for litigation with plaintiff, but also prepared in the regular course of defendant’s business in deciding whether to pay or reject plaintiff’s claim, and thus plaintiff is entitled to disclosure of those documents.  Lalka v Aca Ins. Co., 2015 NY Slip Op 03995, 4th Dept 5-8-15

 

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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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Former Parishioners Did Not Have Standing to Challenge Sale of Church Property Which Had Been Authorized by Supreme Court Pursuant to the Religious Corporation Law

The Third Department determined former parishioners of a church should not have brought an action for declaratory judgment contesting the church’s (court-ordered) authorization to sell church property pursuant to the Religious Corporation Law.  The proper procedure would have been to bring a motion to intervene pursuant to CPLR 5015 (a).  The  court went on to determine that the parishioners did not have standing to challenge the sale because they were not members of the religious corporation:

Plaintiffs’ action was an impermissible collateral attack on the authorization order. The proper procedure would have been to move to vacate that order pursuant to CPLR 5015, which permits “any interested person” to move for such relief (CPLR 5015 [a]), rather than commencing a second plenary action collaterally attacking an order in a prior action … . …

Additionally, Supreme Court properly dismissed the complaint because plaintiffs lack standing to challenge the sale of the property. Plaintiffs may have been members of the congregation or “ecclesiastical body” of St. Patrick’s, but that does not make them members of the religious corporation … . “Member” is defined for religious corporation purposes as “one having membership rights in a corporation in accordance with the provisions of its certificate of incorporation or by-laws” (N-PCL 102 [a] [9]; see Religious Corporations Law § 2-b [1]). Pursuant to the incorporation documents and bylaws of St. Patrick’s and the relevant statutes, St. Patrick’s is managed by a five-member board of trustees consisting of the diocesan bishop, the vicar general of the diocese, the rector of the church and two laypersons selected by the other trustees (see Religious Corporations Law §§ 90, 91)[FN3]. Religious Corporations Law § 5 “vests the custody and control of a religious corporation’s [*3]real property in the board of trustees” … . As plaintiffs are not members of the religious corporation, they lack standing to challenge decisions concerning the transfer of the corporation’s property … . Citizens for St Patrick’s v Saint Patrick’s Church of W Troy, 2014 NY Slip Op 03314, 3rd Dept 5-8-14

 

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Motion to Dismiss In Which Documentary Evidence Was Submitted—Court’s Role Is to Determine Whether Plaintiff Has a Cause of Action, Not Whether Plaintiff Has Stated a Cause of Action—Although the Complaint Alleged Interference With a Competitive Bidding Process Involving Public Entities, the Case Fit an Exception to the Rule that Competitive Bidding Issues Be Determined in an Article 78 Proceeding—It Was Alleged a Private Party (Defendant) Interfered with the Competitive Bidding Process

Reversing Supreme Court, the Third Department determined plaintiff had adequately pled a cause of action for tortious interference with contract. The plaintiff alleged that defendant subverted a bidding process for the installation of artificial turf at state and local schools. Usually competitive bidding cases are brought in an Article 78 proceeding against the relevant public entity. This case fit an exception to that rule because it was brought against a private party working with the public entities. There was also some question whether the proceeding was a motion to dismiss for failure to state a cause of action or a motion for summary judgment.  Because documentary evidence was submitted, the court’s role was to determine whether the plaintiff has a cause of action, not whether plaintiff has stated one:

…[S]ince the motion (made shortly after serving the answer and before disclosure) argued an absence of any legal viability of the alleged causes of action, Supreme Court did not err in treating the motion as a narrowly framed post-answer CPLR 3211 (a) (7) ground asserted in a summary judgment motion … . When dismissal is sought for failure to state a cause of action and, as here, plaintiff submits affidavits, “a court may freely consider [those] affidavits . . . and ‘the criterion is whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one'” … .

Turning to the merits of the motion, “the laws requiring competitive bidding were designed to benefit taxpayers rather than corporate bidders and, thus, should be construed and administered with sole reference to the public interest” … . Therefore, the remedy for an alleged violation of the competitive bidding statutes typically involves a timely CPLR article 78 proceeding challenging the bidding process … . However, a narrow exception to the limited remedy may exist where a plaintiff does not seek relief from the public entity, but brings an action against someone working on behalf of the public entity in the competitive bidding process who allegedly engaged in egregious conduct unknown to the public entity aimed at intentionally subverting a fair process … . Allegations of restricting competition to artificial turf manufactured by A-Turf could be part of a cognizable claim under the narrow exception … . Chenango Contr., Inc. v Hughes Assoc., 2015 NY Slip Op 03903, 3rd Dept 5-7-15

 

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Jury’s Finding that the Defendant Was Negligent but that the Negligence Was Not the Proximate Cause of the Accident Was Against the Weight of the Evidence—Motion to Set Aside the Verdict Should Have Been Granted—New Trial Ordered

The Third Department determined Supreme Court should have granted plaintiff’s motion to set aside the verdict.  Plaintiff was injured when her bicycle struck a recessed manhole cover.  Defendant construction company had placed barrels in the roadway to create a pedestrian walkway.  The placement of barrels served to direct users of the walkway toward the recessed manhole. The jury found the placement of the barrels negligent but further found that negligence was not the proximate cause of the accident.  The verdict was against the weight of the evidence because the only reason the placement of the barrels would be deemed negligent is that the barrels diverted traffic toward the recessed manhole:

“A jury’s finding that a party was at fault but that [such] fault was not a proximate cause of the accident is inconsistent and against the weight of the evidence only when the issues are so inextricably interwoven as to make it logically impossible to find negligence without also finding proximate cause” … . Further, we view the evidence in the light most favorable to the nonmoving party, defendant, and afford deference to the jury’s credibility determinations … . A “plaintiff’s own conduct may be a superceding cause which severs the causal connection between [the] defendant’s negligence and the injury [when] a plaintiff’s negligence [is] more than mere contributory negligence, which would be relevant in apportioning culpable conduct” … .

* * * The only theory presented at trial as to why such placement was negligent, as indicated in the jury instructions, was that it diverted traffic toward a dangerous recessed manhole cover. Given that the uncontested evidence was that plaintiff was diverted in just such a manner, no fair interpretation of the evidence “would support the conclusion that [plaintiff’s] conduct was so extraordinary or unforeseeable as to make it unreasonable to hold defendant[] responsible for the resulting damages” … . Therefore, Supreme Court erred in denying plaintiff’s motion to set aside the verdict. Durrans v Harrison & Burrowes Bridge Constructors, Inc., 2015 NY Slip Op 03896, 3rd Dept 5-7-15