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Dissolved Corporation Amenable to Suit Under New Jersey Law/Substitute Service Upon Insurer of Dissolved Corporation Proper

In an asbestos case, the First Department determined that, under New Jersey law, a dissolved corporation (Jenkins Bros.) was still amenable to suit for pre-dissolution actions, and service of process upon the insurer was appropriate where service on the dissolved corporation was not possible:

In this action for personal injuries allegedly due to asbestos exposure while plaintiffs were employed by Jenkins Bros., a dissolved New Jersey corporation, appellant insurance company, Jenkins’ liability insurer during the relevant time periods, maintains that Jenkins is not amenable to suit based on its bankruptcy and subsequent dissolution. The plain language of the New Jersey dissolution statute, which governs here, provides for a corporation that has been dissolved to “sue and be sued in its corporation name . . . ” (NJSA § 14A:12-9[2]), and the statute places no restriction on how long a dissolved corporation maintains its capacity to be sued for its tortious conduct committed pre-dissolution … . Thus, contrary to appellant’s argument, Jenkins Bros. is amenable to suit pursuant to the laws of the state of its incorporation … .

The motion court properly directed that substituted service be made on appellant. It is undisputed that service was attempted at multiple corporate addresses, to no avail, and that plaintiffs were only able to locate two former corporate representatives. Accordingly, substituted service on the insurer is proper and does not violate due process …. Appellant accepted premiums from Jenkins and agreed to defend and indemnify Jenkins for tortious conduct committed during the coverage periods. This coverage includes liability for conduct that may have led to injuries such as asbestos disease which carries a long latency period between exposure and manifestation of disease … . Matter of New York City Asbestos Litig, 2014 NY Slip Op 02686, 1st Dept 4-17-14

 

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No Private Right of Action for Homeowners Against Lenders Under the Home Affordable Modification Program (HAMP)—Home Affordable Modification Program Was Not Enacted Solely for the Benefit of Homeowners(?)

The Second Department, after finding that the doctrine of judicial estoppel did not apply because there was no final determination adopting the plaintiff’s contrary position in the first litigation, determined the federal Home Affordable Modification Program (HAMP), enacted pursuant to the Emergency Economic Stabilization Act of 2008 (EESA), did not create a private right of action against a lender or loan servicer.  The lender had denied plaintiff’s application for a permanent HAMP loan modification and plaintiff’s brought suit alleging breach of contract (re: a trial period plan or TPP), fraud in the inducement, promissory estoppel and a violation of General Business Law 349:

When, as here, a statute does not provide an express private right of action, the courts will imply a private right of action only upon examination of the following three factors: (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme” … .

As to the first factor, the Emergency Economic Stabilization Act of 2008 (12 USC §§ 5201-5261; hereinafter the EESA), which authorized the United States Department of the Treasury to promulgate the HAMP, was enacted “to immediately provide authority and facilities that the Secretary of the Treasury can use to restore liquidity and stability to the financial system of the United States” (12 USC § 5201[1]) and “to ensure that such authority and such facilities are used in a manner that (A) protects home values, college funds, retirement accounts, and life savings; (B) preserves homeownership and promotes jobs and economic growth; (C) maximizes overall returns to the taxpayers of the United States; and (D) provides public accountability for the exercise of such authority” (12 USC § 5201[2]). Similarly, Section 201(a)(2)(A)(i) of the Helping Families Save Their Homes Act of 2009 (111 P.L. 22, § 201[a][2][A][i], 123 Stat 1632, 1638) simply articulated a Congressional finding that, in order to reduce the number of foreclosures and stabilize real property values, mortgage lenders should be given authorization to modify mortgage loans consistent with applicable guidelines promulgated by the United States Department of the Treasury pursuant to EESA. Thus, although financially struggling homeowners may derive a benefit from the HAMP, that program was not promulgated solely for their particular benefit … . As to the second factor, the underlying purpose of the HAMP is to incentivize mortgage loan servicers to reduce monthly mortgage payments and, thus, prevent avoidable home foreclosures … . Accordingly, a private right of action against a lender or loan servicer arising from an alleged breach of a TPP agreement is inconsistent with the purpose of HAMP, as judicial recognition of such a private right of action would deter lenders and loan servicers from participating in the HAMP … . As to the third factor, the EESA expressly provides for civil actions by the Secretary of the Treasury (see 12 USC § 5229[a][1]) and for actions seeking equitable relief against the Secretary of the Treasury (see 12 USC § 5229[a][2], [3]), but makes no reference to private rights of action by borrowers against mortgage lenders or loan servicers. Moreover, given that, as noted above, private rights of action could conceivably deter lenders and loan servicers from participating in the HAMP, which would, in turn, undermine the HAMP’s purpose, allowing for a private right of action would be inconsistent with the legislative scheme of EESA. Since the plaintiffs’ claims here are intertwined with the defendants’ alleged obligations under the HAMP, and as no private right of action exists under the HAMP, the Supreme Court should have granted the defendants’ motion to dismiss the amended complaint on the ground that it failed to state a cause of action… . [emphasis added]  Davis v Citibank NA, 2014 NY Slip Op 02557, 2nd Dept 4-16-14

 

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Health Service Provider’s Action to Recoup Overpayment of a Surcharge Subject to Six-Year Statute of Limitations

The Second Department determined a statutory provision making payment of a surcharge re: certain hospital services subject to an audit within six years imposed a six-year statute of limitations upon any attempt to recoup overpayment of the surcharge:

The statutory text of Public Health Law § 2807-j(8-a)(a) provides that “[p]ayments and reports . . . shall be subject to audit by the commissioner for a period of six years following the close of the calendar year in which such payments and reports are due, after which such payments shall be deemed final and not subject to further adjustment or reconciliation.” Giving effect to the plain meaning of the text, that section of the statute provides that all payments are deemed final and not subject to further adjustment or reconciliation after the period of six years following the close of the calendar year in which they are due. Thus, the clear language of that section establishes that the determination of the DOH to apply a six-year limitations period to a provider’s administrative application for a refund of an overpayment was not arbitrary and capricious or irrational. Contrary to the Supreme Court’s reasoning, the absence of any reference in Public Health Law § 2807-j(8)(c) to a limitations period specifically applicable to administrative requests for a refund of overpayments does not compel the conclusion that the six-year limitations period contained in Public Health Law § 2807-j(8-a)(a) is inapplicable to such requests.  Matter of New York Med & Diagnostic Ctr Inc v Shah, 2014 NY Slip Op 02592, 2nd Dept 4-16-14

 

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Participation in Arbitration Precluded Action to Stay Arbitration

The Second Department determined plaintiffs participated in arbitration initially and therefore could not bring a proceeding to stay arbitration:

Pursuant to CPLR article 75, “a party who has not participated in the arbitration and who has not made or been served with an application to compel arbitration, may apply to stay arbitration on the ground that a valid agreement was not made” (CPLR 7503[b]). Consequently, “a party seeking to avoid arbitration on the ground of no agreement to arbitrate can raise such objection only when it has not participated in the arbitration” … .

Here, the record demonstrates that the plaintiffs “participated in the arbitration” (CPLR 7503[b]…). The plaintiffs could not actively engage in the arbitration proceedings and simultaneously retain their right to seek subsequent judicial intervention pursuant to CPLR 7503(b), as such “forum-hedging” is incompatible with the legislative policy underlying CPLR 7503(b) … . Stone v Noble Constr Mgt Inc, 2014 NY Slip Op 02571, 2nd Dept 4-16-14

 

Extension for Service of Complaint After Statute of Limitations Had Run Properly Granted in Exercise of Discretion

The Second Department determined Supreme Court properly exercised its discretion to allow service of a complaint after the 120 period for service had passed and the statute of limitations had run:

When considering whether to grant an extension of time to effect service beyond the 120-day statutory period in the interest of justice, the court may consider the plaintiff’s diligence, or lack thereof, along with other relevant factors, including the expiration of the statute of limitations, the potentially meritorious nature of the cause of action, the length of delay in service, the promptness of the plaintiff’s request for the extension of time, and any prejudice to the defendant … . A determination of whether to grant the extension in the interest of justice is generally within the discretion of the motion court … .

In the instant case, an attempt at proper service was made within the 120-day period, which was later adjudicated to be defective. Furthermore, the statute of limitations had expired by the time the appellant challenged service as defective in its motion to vacate the default judgment, the plaintiff promptly cross-moved for an extension of time to effect proper service, and there was no demonstrable prejudice to the appellant attributable to the delay in effecting proper service. Under the circumstances, granting an extension of time pursuant to CPLR 306-b to serve the appellant was a provident exercise of discretion … .  Siragusa v D’Esposito, 2014 NY Slip Op 02570, 2nd Dept 4-16-14

 

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Brazilian Citizens Had Alternative Legal Remedies and Therefore Could Not Use a Writ of Prohibition to Stop a New York Prosecution/The Fact that the Petitioners Would Have to Come to New York to Employ the Alternative Remedies During the Course of a Criminal Prosecution Did Not Render those Remedies Inadequate

The First Department determined a writ of prohibition could not be employed by Brazilian citizens to stop a prosecution by the district attorney.  Petitioners had other legal remedies including pretrial motions and appeal if convicted.  The fact that petitioners would have to defend the prosecution in New York to use the alternative remedies did not render those remedies inadequate:

In this action for a writ of prohibition directing the DA to stay the prosecution of petitioners, Brazilian citizens (the former mayor of Sao Paolo and his son) who have been indicted in New York for crimes relating to the theft of more than $11 million in Brazilian public funds that were allegedly transferred to petitioners’ account in a bank located in New York, the petition was properly denied. The extraordinary remedy of prohibition is not available to petitioners, who assert that the underlying criminal action violates their statutory and constitutional rights to a speedy trial and their right to due process, or, in the alternative, that the indictment should be dismissed either in furtherance of justice pursuant to CPL 210.40(1) or under principles of international comity. These claims allege errors of law for which petitioners have adequate alternative remedies, including filing pretrial motions in the underlying criminal action and challenging any conviction on appeal … . That petitioners would have to voluntarily leave their home country to appear for arraignment since Brazil will not extradite its own citizens before availing themselves of such remedies does not render them inadequate … . Matter of Naluf v Vance, 2014 NY Slip Op 02546, 1st Dept 4-15-14

 

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Service of a Notice of Claim on the City Did Not Constitute the Service of a Notice of Claim on the New York City Transit Authority

The First Department determined the service of a notice of claim on the City did not constituted the service of a notice of claim on the New York City Transit Authority:

It is well settled that service of a notice of claim on the City through the Comptroller’s Office is not service upon a separate public authority … . Since plaintiff did not comply with the condition precedent of service of a notice of claim upon the Transit Authority defendants, and they deny having received the notice of claim from the Comptroller’s Office, dismissal is required.  Glasheen v Valera, 2014 NY Slip Op 02512, 1st Dept 4-10-14

 

Court Has Discretion to Deny a Motion to Dismiss for Failure to Prosecute Pursuant to CPLR 3216 Even in the Absence of an Adequate Excuse and a Showing of a Potentially Meritorious Cause of Action

In finding plaintiff did not intend to abandon the action, the Second Department explained the “extremely forgiving” nature of CPLR 3216:

Where a 90-day demand to resume prosecution of an action pursuant to CPLR 3216(b)(3) has been properly served, a plaintiff may avoid dismissal, as a matter of law, by either timely filing a note of issue or moving, before the default date, to vacate the notice or to extend the 90-day period (see CPLR 3216[c]…). Even where a plaintiff has failed to pursue either of these options, however, “the statute prohibits the Supreme Court from dismissing a complaint based on failure to prosecute whenever the plaintiff has shown a justifiable excuse for the delay and the existence of a potentially meritorious cause of action” … .

Moreover, CPLR 3216 is an “extremely forgiving” statute …, which “never requires, but merely authorizes, the Supreme Court to dismiss a plaintiff’s action based on the plaintiff’s unreasonable neglect to proceed” … . Under the plain language of CPLR 3216, a court retains some “residual discretion” to deny a motion to dismiss, even when a plaintiff fails to comply with the 90-day requirement and additionally fails to proffer an adequate excuse for the delay or a potentially meritorious cause of action … . Thus, while the statute prohibits the Supreme Court from dismissing a complaint based on failure to prosecute whenever the plaintiff has shown a justifiable excuse for the delay and the existence of a potentially meritorious cause of action (see CPLR 3216[e]…), “such a dual showing is not strictly necessary in order for the plaintiff to escape such a dismissal” … .

Here, the record demonstrates affirmative steps taken by the plaintiff to continue the prosecution of this action that are inconsistent with an intent to abandon it. Ramon v Zangari, 2014 NY Slip Op 02420, 2nd Dept 4-9-14

 

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Plaintiff Did Not Demonstrate Standing—No Proof Underlying Debt Was Transferred to the Plaintiff Along with the Mortgage

The Second Department determined the plaintiff in a mortgage foreclosure proceeding did not demonstrate standing because there was no proof the underlying debt was transferred to the plaintiff along with the mortgage:

Where, as here, standing is put into issue by the defendant, the plaintiff must prove its standing in order to be entitled to relief… .  In a mortgage foreclosure action, “[a] plaintiff has standing where it is the holder or assignee of both the subject mortgage and of the underlying note at the time the action is commenced” … . ” Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation'” … . “Where a mortgage is represented by a bond or other instrument, an assignment of the mortgage without assignment of the underlying note or bond is a nullity” . Here, the evidence submitted by the plaintiff in support of its motion did not demonstrate that the note was physically delivered to it prior to the commencement of the action, and the plaintiff similarly failed to submit a written assignment of the note. Bank of NY Mellon v Gales, 2014 NY Slip Op 02402, 2nd Dept 4-9-14

 

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A Union Is Not an Entity Separate from Its Members—A Union, Therefore, Can Not Be Sued By a Member Unless Every Member Participated In the Action Which Gave Rise to the Suit

The Court of Appeals, in a full-fledged opinion by Judge Abdus-Salaam, over a dissent, upheld the so-called “Martin” rule (Martin v Curran, 303 NY 276 [1951]) which prohibits a suit against an unincorporated association, here a union, unless the suit can be maintained against every member of the association.  The executive board of the union decided against taking plaintiff’s grievance to arbitration. Because only the executive board participated in the decision, plaintiff’s suit against the union was prohibited by statute:

In a 4-3 decision authored by Judge Desmond, this Court held in Martin that a voluntary unincorporated association “is neither a partnership nor a corporation. It is not an artificial person, and has no existence independent of its members” (303 NY at 280). The Court determined that “for better or worse, wisely or otherwise, the Legislature has limited . . . suits against association officers, whether for breaches of agreements or for tortious wrongs, to cases where the individual liability of every single member can be alleged and proven” (id. at 282). Although there were policy considerations that might suggest a different result, the Martin Court was “under the command of a plainly stated, plainly applicable statute, uniformly held by this court, for many years, to require pleading and proof of authorization or ratification by all the members of the group” (id. at 280). That statute, General Associations Law § 13, is entitled “Action or proceeding against unincorporated association” and provides:”An action or special proceeding may be maintained, against the president or treasurer of such an association, to recover any property, or upon any cause of action, for or upon which the plaintiff may maintain such an action or special proceeding, against all the associates, by reason of their interest or ownership, or claim of ownership therein, either jointly or in common, or their liability therefor, either jointly or severally. Any partnership, or other company of persons, which has a president or treasurer, is deemed an association within the meaning of this section.”The Martin Court also noted that McCabe v Longfellow (133 NY 89 [1892]), the leading case on the right to maintain an action against an unincorporated association, held that a plaintiff could not maintain an action against the officer of an unincorporated association “unless the debt which he seeks to recover is one upon which he could maintain an action against all the associates by reason of their liability therefor” (303 NY at 281…), and that there had been a “line of consistent decisions to that effect” since McCabe. Ultimately, the Martin Court concluded that, because a labor union is a voluntary unincorporated association, the plaintiff was required to plead and prove that each member of the union authorized or ratified the alleged wrongful conduct.  Palladino v CNY Centro Inc, 2014 NY Slip Po 02378, CtApp 4-8-14

 

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