You are here: / Civil Procedure
,

Case Against Non-Debtor Not Entitled to Automatic Stay

The Second Department, in reversing Supreme Court’s granting of a stay, explained the circumstances when cases by and against non-debtors can be stayed under the bankruptcy law (11 USC 362(a)):

“[T]he bankruptcy court can stay actions against any party, even a non-debtor, whenever the objective of the action is to obtain possession or exercise control over the debtor’s property. Unless a case involves unusual circumstances, however, the bankruptcy court cannot halt litigation by non-debtors, even if they are in a similar legal or factual nexus with the debtor.

“The unusual circumstances in which the bankruptcy court can stay cases against non-debtors are rare. They typically arise where there is such identity between the debtor and the third-party defendant that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment or finding against the debtor. In other words, the automatic stay will apply to non-debtors only when a claim against the non-debtor will have an immediate adverse economic consequence for the debtor’s estate” … . Bankdirect Captial Fin v Insurance Co of State of PA, 2014 NY Slip Op 05824, 2nd Dept 8-20-14

 

,

Sua Sponte Dismissal of Complaint Not Justified and Improperly Imposed

In reversing Supreme Court, the Second Department noted the “sua sponte” dismissal of a foreclosure-complaint with prejudice was not justified and was improperly imposed without affording the plaintiff an opportunity to be heard:

The Supreme Court … erred in, sua sponte, directing dismissal of the action in its entirety with prejudice … . “A court’s power to dismiss a complaint, sua sponte, is to be used sparingly and only when extraordinary circumstances exist to warrant dismissal” … . Furthermore, when a court exercises its power to impose a sanction sua sponte, it must afford the party to be sanctioned a reasonable opportunity to be heard … . Bank of NY v Castillo, 2014 NY Slip Op 05823, 2nd Dept 8-20-14

 

Supreme Court Erred by Making Dispositive Rulings on Grounds Not Raised in the Motion Papers

The Second Department determined Supreme Court should not have made dispositive rulings on grounds not raised in the motion papers. The court had granted plaintiff’s (Evans’) motion to discharge Citifinancial’s mortgage and cancel the notice of pendency:

Civil Practice Law and Rules § 2214(a) provides that “[a] notice of motion shall specify . . . the relief demanded and the grounds therefor.” However, the court “may grant relief that is warranted by the facts plainly appearing on the papers on both sides, if the relief granted is not too dramatically unlike the relief sought, the proof offered supports it, and there is no prejudice to any party” … . * * *

On grounds not raised or argued by the parties nor contained in the pleadings, the Supreme Court granted Evans’s motion, determining that Citifinancial never actually owned the mortgage. The Supreme Court determined that a prior assignment of the mortgage to Citifinancial’s predecessor had been defective on the grounds that the power of attorney needed to execute such assignment was not recorded and, as a result, the mortgage could not thereafter properly be assigned to Citifinancial. The Supreme Court erred in discharging the mortgage and cancelling the notice of pendency on such grounds since Evans failed to dispute or contest the validity of Citifinancial’s mortgage and actually affirmatively acknowledged the validity of the mortgage in his complaint and motion to the court … . Evans v Argent Mtge Co LLC, 2014 NY Slip Op 05835, 2nd Dept 8-20-14

 

,

Child’s Move To Connecticut Did Not Strip New York of Jurisdiction and Did Not Justify Finding that New York Was an Inconvenient Forum

The Second Department determined Family Court erred when it determined the child’s moving to Connecticut removed the child from its jurisdiction.  The court further noted that Family Court erred when it state that, even if it had jurisdiction, it would decline to exercise it.  The Second Department determined the analysis of the statutory factors favored New York’s continued jurisdiction:

Pursuant to the Uniform Child Custody Jurisdiction and Enforcement Act, codified in Article 5-A of the Domestic Relations Law (hereinafter UCCJEA), a court in this State that has made an initial custody determination has exclusive continuing jurisdiction over that determination until it finds, as is relevant here, that the child does not have a “significant connection” with New York, and “substantial evidence is no longer available in this state concerning the child’s care, protection, training, and personal relationships” (Domestic Relations Law § 76-a[1][a]…). Here, while the subject child moved to Connecticut to live with her father approximately eight months before the mother petitioned to modify a prior order of custody so as to award her sole custody of the child, the record reveals that the child retained a significant connection to New York, including attending school and having frequent visitation with her mother in New York, and that substantial evidence was available in this state concerning her present and future welfare … . The child’s significant connection to Connecticut does not diminish her significant connection to New York as well … .

A court of this State that has jurisdiction under the UCCJEA may decline to exercise it if it finds that New York is an inconvenient forum and that a court of another state is a more appropriate forum (see Domestic Relations Law § 76-f[1]…). However, the court is required to consider the factors set forth in Domestic Relations Law § 76-f(2)(a)-(h) before determining that New York is an inconvenient forum … . The Family Court failed to do so here. However, we need not remit the matter to the Family Court, Queens County, for consideration of the statutory factors because the record is sufficient for this Court to consider and evaluate those factors … . Consideration of the relevant statutory factors, including the nature and location of relevant evidence, and the Family Court’s greater familiarity than the courts of Connecticut with the facts and issues underlying the mother’s modification petition, supports a conclusion that New York is not an inconvenient forum … . Matter of Mojica v Denson, 2014 NY Slip Op 05882, 2nd Dept 8-20-14

 

,

Arbitrator Not Precluded from Considering Punitive Damages by Provision that the Agreement Is To Be “Construed and Enforced” in Accordance with New York Law

In a full-fledged opinion by Justice Manzanet-Daniels, over an extensive dissent, the First Department determined that the provision in an agreement covering arbitration of disputes stating that the agreement is to be “construed and enforced” in accordance with New York law did not necessarily preclude the arbitrator from considering punitive damages.  The court found the language in the agreement insufficiently specific to invoke the “Garrity rule. ” Under “Garrity,” arbitrators in New York are prohibited from considering punitive damages. But the Federal Arbitration Act, which may apply here because of the involvement of interstate commerce, does not. The court also noted that participation in arbitration precludes a party from seeking a stay of arbitration pursuant to CPLR 7503. The choice of law issue is framed by the following passages:

Merely stating, without further elaboration, that an agreement is to be construed and enforced in accordance with the law of New York does not suffice to invoke the Garrity rule. The Supreme Court has made clear that in order to remove the issue of punitive damages from the arbitrators, the agreement must “unequivocal[ly] exclu[de]” the claim … . The agreement in this case, which provided only that it was to be “construed and enforced” in accordance with the law of New York, did not unequivocally exclude claims for punitive damages from the consideration of the arbitrators

From the dissent:

The core issue in this case – an appeal from an order denying petitioners’ motion to stay arbitration of claims for punitive damages – relates to the tension between New York State policy against the privatization of punitive damages and the federal policy that there is no such prohibition. Specifically, under New York State law, as expressed by Garrity v Lyle Stuart, Inc. (40 NY2d 354 [1976]), the power to award punitive damages is limited to judicial tribunals, and is not within an arbitrator’s authority… . Conversely, the federal view, as reflected in the Federal Arbitration Act (FAA),… which applies to arbitration disputes concerning interstate commerce, generally empowers arbitrators to award punitive damages, absent a contractual intent to the contrary. Unlike the majority, I find that, while the agreement here evidences a transaction involving interstate commerce, the provision stating that the agreement is to be “construed and enforced” in accordance with the laws of New York suffices to invoke the Garrity rule. Therefore, I dissent and would grant petitioners’ motion to stay arbitration of the claims for punitive damages. Matter of Flintlock Constr Servs LLC v Weiss, 2014 NY Slip Op 05818, 8-14-14

 

, ,

The Requirements of Certificates of Conformity and Authenticity (Re: the Admissibility of Out-of-State Affidavits) Explained

The Second Department, in a full-fledged opinion by Justice Dillon, reversed Supreme Court finding that an out-of-state affidavit re: the assignment of a note and mortgage was in admissible form and could therefore be considered in support of plaintiff’s summary judgment motion.  The court explained that, because the document was notarized, no “certificate of authentication” was needed, and the “certificate of conformity” which was provided was adequate under New York law:

Here, the affidavit of Josh Mills was necessary for the plaintiff to establish the assignment to it of the subject mortgage and note and the defendants’ default in payment. The primary issue on this appeal is whether Mills’s out-of-state affidavit was sworn to and conformed in a manner rendering it admissible in this state under CPLR 2309(c). * * *

The “certificate” required by CPLR 2309(c), commonly referred to in case law as a “certificate of conformity,” must contain language attesting that the oath administered in the foreign state was taken in accordance with the laws of that jurisdiction or the law of New York (see Real Property Law § 299-a[1]). A “certificate of conformity” is separate and distinct from a “certificate of authentication,” which attests to the oathgiver’s authority under the foreign jurisdiction to administer oaths … .  * * *

A combined reading of CPLR 2309(c) and Real Property Law §§ 299 and 311(5) leads to the inescapable conclusion that where, as here, a document is acknowledged by a foreign state notary, a separate “certificate of authentication” is not required to attest to the notary’s authority to administer oaths … .  * * *

Nevertheless, CPLR 2309(c) requires that even when a notary is the foreign acknowledging officer, there must still be a “certificate of conformity” to assure that the oath was administered in a manner consistent with either the laws of New York or of the foreign state. In other words, a certificate of conformity is required whenever an oath is acknowledged in writing outside of New York by a non-New York notary, and the document is proffered for use in New York litigation. * * *

Here, the Supreme Court erred in concluding that the Mills affidavit was not accompanied by a certificate of conformity, as the “Uniform, All Purpose Certificate of Acknowledgment,” appended to the Mills affidavit, substantially conformed with the template requirement of Real Property Law § 309-b and constituted a certificate of conformity. * * * Midfirst Bank v Agho, 2014 NY Slip OP 05778, 2nd Dept 8-13-14

 

, ,

“Sua Sponte” Dismissal of Complaint Based on Lack of Standing Reversed

The Second Department, in a foreclosure action, determined Supreme Court abused its discretion in dismissing, sua sponte, the complaint on the ground the plaintiff lacked standing.  The court explained that sua sponte dismissal is warranted only in extraordinary circumstances, the defendants had not raised the “lack of standing” defense, and lack of standing is not a jurisdictional defect:

A court’s power to dismiss a complaint, sua sponte, is to be used sparingly and only when extraordinary circumstances exist to warrant dismissal … . Here, the Supreme Court was not presented with extraordinary circumstances warranting sua sponte dismissal of the complaint and cancellation of the notice of pendency. Since the defendants did not answer the complaint and did not make pre-answer motions to dismiss the complaint, they waived the defense of lack of standing … . Furthermore, a party’s lack of standing does not constitute a jurisdictional defect and does not warrant a sua sponte dismissal of the complaint by the court … . Bank of NY v Cepeda, 2014 NY Slip Op 05614, 2nd Dept 8-6-14

 

, ,

Distinction Between New York College Funds, Which Are Protected Against Creditors, and College Funds Established in Other States, Which Are Not Protected, Does Not Violate the Equal Protection Clause

The Second Department determined that a college fund established under the laws of New Hampshire, unlike a college fund established under the laws of New York, was not entitled to the protection from creditors afforded by CPLR 5205.  The distinction between New York funds and funds established in other states was deemed to be constitutional:

The parties do not dispute that the protection from creditors afforded by CPLR 5205(j)(2) to college tuition savings program accounts defined in 26 USC § 529 (hereinafter 529 savings plans) does not apply where, as here, the accounts are not qualified college savings program accounts established pursuant to the New York State College Choice Tuition Saving Program, as set forth in Education Law article 14-A. The Supreme Court correctly concluded that the distinction made in CPLR 5205(j) between 529 savings plans established under the laws of New York, and those established in other states, or under the laws of other states, does not violate the equal protection clause of the United States Constitution. Since the classification “is not based on an inherently suspect characteristic and does not impermissibly interfere with the exercise of a fundamental right, it need only rationally further a legitimate state interest to be upheld as constitutional” … . Applying this standard of rational basis review, the court properly determined that CPLR 5205(j) was not unconstitutional, as the disparate treatment is not ” so unrelated to the achievement of any combination of legitimate purposes'” as to be irrational … . County Bank v Broderick, 2014 NY Slip Op 05621, 2nd Dept 8-6-14

 

, ,

Plaintiff Should Have Been Allowed to Add Doctor to Medical Malpractice Action After the Statute of Limitations Had Run—All the Relation-Back Criteria Were Met

The Second Department, reversing Supreme Court, found that the relation-back doctrine allowed the addition of a doctor (Persky) to a malpractice action after the statute of limitations had run.  Several notes in decedent’s medical records were signed by the doctor and the decedent died soon after she was discharged from the hospital, which plaintiff alleged was premature.  The court explained the relevant law:

“The relation-back doctrine, which is codified in CPLR 203(b), allows a claim asserted against a defendant in an amended complaint to relate back to claims previously asserted against a codefendant for statute of limitations purposes where the two defendants are united in interest'” … . In order for a claim asserted against a new defendant to relate back to the date the claim was filed against another defendant, the plaintiff must establish that (1) both claims arose out of the same conduct, transaction, or occurrence; (2) the new defendant is united in interest with the original defendant, and by reason of that relationship can be charged with notice of the institution of the action such that he or she will not be prejudiced in maintaining a defense on the merits; and (3) the new defendant knew or should have know that, but for a mistake by the plaintiff as to the identity of the proper parties, the action would have been brought against him or her as well … . “The linchpin’ of the relation-back doctrine is whether the new defendant had notice within the applicable limitations period” … .

it was not reasonable for Persky to conclude that the plaintiff intended to proceed only against the defendants named in the original summons and complaint, especially since the decedent died soon after she was discharged from the hospital, and the complaint asserted specific allegations of negligence relating to the decedent’s premature hospital discharge … . In addition, contrary to the conclusion of the Supreme Court, the plaintiff demonstrated that the failure to originally name Persky as a defendant was the result of a mistake, and there was no need to show that such mistake was excusable … . Roseman v Baranowski, 2014 NY Slip Op 05635, 2nd Dept 8-6-14

 

,

Advertising in New York and an Interactive Website Not Enough to Exercise Long-Arm Jurisdiction

The Second Department determined Supreme Court properly dismissed an action against a Vermont ski business (Killington) because plaintiffs failed demonstrate a basis for New York’s long-arm jurisdiction. The court noted that advertising in New York and the existence of an interactive website through which out-of-state residents make reservations for participation in the defendant’s ski camp was not sufficient to bring the defendant within the jurisdiction of New York courts:

Even assuming that Killington engaged in substantial advertising in New York, as the plaintiffs claim, the plaintiffs have not demonstrated that Killington also engaged in substantial activity within this State sufficient to satisfy the solicitation-plus standard. Contrary to the plaintiffs’ contention, this Court’s decision in Grimaldi v Guinn (72 AD3d 37, 49-50) does not stand for the principle that a business’s interactive website, accessible in New York, subjects it to suit in this State for all purposes. Instead, the Grimaldi decision stands only for the more limited principle that a website may support specific jurisdiction in New York where the claim asserted has some relationship to the business transacted via the website … . Here, even Killington’s alleged substantial solicitation in New York constitutes no more than solicitation … .

CPLR 302(a)(1), the section of New York’s long-arm statute at issue in this case, grants New York courts jurisdiction over nondomiciliaries when the action arises out of the nondomiciliaries’ “transact[ion of] any business within the state or contract [] . . . to supply goods or services in the state” (CPLR 302[a][1]). Pursuant to CPLR 302(a)(1), jurisdiction is proper “even though the defendant never enters New York, so long as the defendant’s activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted” … . “Purposeful activities are those with which a defendant, through volitional acts, avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws'” … . Mejia-Haffner v Killington, Ltd, 2014 NY Slip OP 05522, 2nd Dept 7-30-14