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CPLR 3408, Which Requires a Settlement Conference in a Foreclosure Action Involving a Primary Residence, Does Not Apply Where the Mortgage Collateralizes a Personal Guaranty of a Commercial Loan to a Corporation

In a full-fledged opinion by Justice Cohen, the Second Department determined a statute designed to assist homeowners faced with foreclosure on their primary residence (calling for a settlement conference) did not apply where the mortgage collateralizes a personal guaranty of a commercial loan to a corporation:

CPLR 3408 (requiring a settlement conference) is certainly applicable to many residential foreclosure actions. However, CPLR 3408 does not apply to every residential foreclosure action. Indeed, CPLR 3408 is limited to residential foreclosure actions involving home loans as the term “home loan” is defined by RPAPL 1304. As so defined, home loans are those which are made to a natural person and in which the debt incurred is primarily for personal, family, or household purposes (see RPAPL 1304[5][a][ii], [iii]).

The borrower, as defined under the instant term loan agreement and the note, and the entity that is recognized in the guaranty, was [a corporation]. … The borrower …was not a natural person (see RPAPL 1304[5][a][ii]).

Further, the debt incurred was the $230,000 loan given to [the corporation]. The Supreme Court correctly determined that since the purpose of the loan was to purchase machinery and equipment, and to fund other various start-up, closing, and construction costs associated with fashioning a … store, it was clearly not primarily incurred for personal, family, or household purposes (see RPAPL 1304[5][a][ii]…).  Independence Bank v Valentine, 2013 NY Slip Op 07937, 2nd Dept 11-27-13

 

Supreme Court Should Not Have Treated Pre-Answer Motion to Dismiss as Motion for Summary Judgment

The Third Department determined Supreme Court erred in treating respondents’ pre-answer motion to dismiss as a motion for summary judgment:

Generally, a summary judgment motion is premature prior to the service of an answer … .  However, a court may treat a pre-answer motion as one for summary judgment if it “give[s] prior notice to the parties or, through their submissions, the parties themselves . . . demonstrate an intent to ‘deliberately chart[] a summary judgment course'” … .  There is no indication in the record before us – nor do the parties assert – that Supreme Court provided any notice of its intention to treat the motion as one for summary judgment. Thus, the question before us distills to whether the parties charted a summary judgment course by laying bare their proof…. .  [P]etitioners clearly did not lay bare all of their proof … .  … Under these circumstances, Supreme Court erred in treating respondents’ motion as one for summary judgment.  Dashmaw v Town of Peru, 516581, 3rd Dept 11-27-13

 

Motion to Resettle Not Proper Vehicle for Substantive Change to Order

In determining a motion to resettle pursuant to CPLR 5019(a) was not the proper vehicle for seeking the reinstatement of a cause of action the court had dismissed, the Second Department explained:

“CPLR 5019(a) provides a court with the discretion to correct a technical defect or a ministerial error, and may not be employed as a vehicle to alter the substantive rights of a party” … . Where a movant seeks to change an order or judgment in a substantive manner, rather than correcting a mere clerical error, CPLR 5019(a) is not the proper procedural mechanism to be employed, and relief should be sought through a direct appeal or by motion to vacate pursuant to CPLR 5015(a) … . Chmelovsky v Country Club Homes, Inc, 2013 NY Slip Op 07927, 2nd Dept 11-27-13

 

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CPLR 5015 Power to Vacate a Final Judgment after Reversal of a Companion Case Is Discretionary

The Court of Appeals, in a full-fledged opinion by Judge Pigott (with a dissent), determined that Supreme Court had the discretion to vacate a final $4.4 million judgment against Port Authority based upon the subsequent Court of Appeals reversal of a companion case (Ruiz) holding Port Authority immune from lawsuits stemming from the 1993 bombing of the World Trade Center.  Supreme Court had vacated the judgment, but appeared to do so under the assumption the vacation was mandated by statute (CPLR 5015).  The Court of Appeals sent the matter back to Supreme Court, explaining that the court had the power to exercise its discretion:

Although a court determination from which an appeal has not been taken should “remain inviolate,” that rule applies “[a]bsent the sort of circumstances mentioned in CPLR 5015” ….  Moreover, as Professor Siegel has observed, “[i]f a judgment for which preclusive effect is sought is itself based on an earlier judgment . . ., and the earlier one has been vacated or reversed or otherwise undone, it is of course divested of its finality and the remedy to cancel the second judgment is a motion to vacate it on the ground of the undoing of the first” (Siegel, NY Prac § 444 at 776 [5th ed 2011] [emphasis supplied], citing CPLR 5015 [a] [5]).  Subdivision 5 of section 5015 (a) is applicable where the reversed, modified or vacated judgment or order is the basis for a later judgment – not where it merely compelled the result as a matter of collateral estoppel or stare decisis, but where it was actually entered in the same lawsuit as, and led directly to, the later judgment.  Thus, section 5015 (a) (5) applies in a case like this one where a joint trial on liability results in a single order entered in two cases, and where, after a separate trial on damages in one of the cases, that order is reversed on appeal.  * * *

Here, Supreme Court’s only finding was that this Court’s decision in Ruiz “eviscerate[d] any judgment, holding or finding of tortious liability on behalf of the Port Authority,” and therefore “require[d]” Supreme Court to find the Port Authority insulated from tortious liability pursuant to CPLR 5015 (a) (5).  It also appeared to believe that once the Port Authority had demonstrated that the Ruiz holding reversed the earlier liability determination to which Nash was a party, Supreme Court had no choice but to grant the Port Authority’s vacatur motion.  That was error. Nash v Port Authority, 238, CtApp 11-26-13

 

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No Private Right of Action Against Bank for Failure to Comply with Exempt Income Protection Act (CPLR Article 52)

In answering certified questions from the Second Circuit, the Court of Appeals, in a full-fledged opinion by Judge Graffeo, determined a judgment debtor does not have a private right of action against a bank which, when served with a restraining notice by a judgment creditor, fails to forward the appropriate forms to the judgment debtor as required by the Exempt Income Protection Act (EIPA).  The forms alert the judgment debtor to the restraining notice, describe funds which are exempt from restraint, and provide information about seeking vacatur of the money judgment.  The court wrote:

…[A] private right to bring a plenary action for injunctive relief and money damages cannot be implied from the EIPA — and we therefore answer the first certified question in the negative.  As for the second certified question, a judgment debtor can secure relief from a bank arising from a violation of the EIPA in a CPLR Article 52 special proceeding… .  And our determination that the legislation created no private right of action compels the conclusion that the statutory mechanisms for relief are exclusive.  Banks had no obligation under the common law to forward notices of exemption and exemption claim forms to judgment debtors.  It therefore follows that any right debtors have to enforce that obligation, among others imposed under CPLR 5222-a, arises from the statute and, since the EIPA does not give rise to a private right of action, the only relief available is that provided in CPLR Article 52 … . Cruz v TD Bank NA…, 191, CtApp 11-21-13

 

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Cause of Action for Legal Malpractice Accrues When Malpractice Is Committed, Not When Client Learns of It

A cause of action for legal malpractice accrues when the malpractice is committed, not when the client learns of it.  In this case the alleged malpractice was advice that selling property would not have adverse tax consequences.  The IRS disagreed and the client and his attorney fought the determination. After the unsuccessful fight, the client sued the attorney for malpractice. The action was deemed time-barred (the continuous representation doctrine did not apply):

“A legal malpractice claim accrues when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court’” … . Here, the defendants met their prima facie burden by establishing that the cause of action alleging legal malpractice accrued on March 5, 2003, the date they allegedly issued the opinion letter advising the plaintiff that the proposed sale would not result in the loss of his tax deferment status … . Although the plaintiff did not discover that his attorneys’ alleged advice was incorrect until years later, “ [w]hat is important is when the malpractice was committed, not when the client discovered it’” … . Therefore, since the defendants demonstrated that the plaintiff did not commence this action until December 29, 2011, more than three years after his claim for legal malpractice accrued, the defendants established, prima facie, that the claim was time-barred.  Landow v Snow Becker Krauss PC, 2013 NY Slip Op 07710, 2nd Dept 11-20-13

 

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Criteria for Exercising Jurisdiction Over Foreign Corporation Based On Presence of Subsidiary Within Jurisdiction—the “Department Doctrine”

The Second Department explained when the presence of a subsidiary within the jurisdiction of the court can be sufficient to exercise jurisdiction over the foreign parent under the so-called “department doctrine” (the subsidiary must be a virtual “department” of the parent):

If control exercised by the domestic corporation over the foreign corporation … . Such control may be manifested in numerous ways and, thus, the method by which such control may be demonstrated will necessarily depend on the attendant facts … . Although the Court of Appeals has noted that it “has never held a foreign corporation present on the basis of control, unless there was in existence at least a parent-subsidiary relationship,” it has nevertheless indicated that this factor is not dispositive … . “The control over [a] subsidiary’s activities . . . must be so complete that the subsidiary is, in fact, merely a department of the parent” … . It is only when the two corporations are “in fact, if not in name . . . one and the same corporation, [that] there is realistically no basis for distinguishing between them” for jurisdictional purposes … .  Goel v Ramachandran, 2013 NY Slip Op 07708, 2nd Dept 11-20-13

 

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Supreme Court Did Not Have Subject Matter Jurisdiction In an Action Seeking Compensation for an Alleged Unconstitutional Taking of Land Based Upon the Denial of a Subdivision Application—the Court of Claims Has Exclusive Jurisdiction

The plaintiff landowner wished to subdivide a 16 acre parcel and build homes with septic systems.  The land is in a watershed.  The town rejected the subdivision because the septic systems would violate the watershed regulations. The plaintiff then sued in Supreme Court seeking $1,000,000 as compensation for the alleged unconstitutional taking of his property.  In concluding that Supreme Court did not have subject matter jurisdiction, the Second Department wrote:

The plaintiff acknowledges that the instant action for a judgment declaring an unconstitutional taking is a precursor to the commencement of an action to recover damages in the Court of Claims based on that taking. The plaintiff, in effect, seeks to bifurcate its claim: to establish the State’s liability in the Supreme Court, and then to establish damages in the Court of Claims. The State Constitution, however, vests the Court of Claims with exclusive subject matter jurisdiction over claims against the State for appropriation of real property (see NY Const, art VI, § 9; Court of Claims Act § 9[2]). The plaintiff’s action runs afoul of this exclusive grant. Therefore, we agree with the Supreme Court that it lacks subject matter jurisdiction over the plaintiff’s claim… . Monroe Equities LLC v New York State, 2013 NY Slip Op 07715, 2nd Dept 11-20-13

 

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Admissibility of Medical Records as Business Records Does Not Preclude Evidentiary Objections to Admission

In the context of a personal injury case, the Fourth Department noted that the failure to object to the admissibility of medical records within 10 days (CPLR 3122-a [c]) did not render the documents automatically admissible:

Defendants contend that the court erred in denying their request at the commencement of trial to admit all of plaintiff’s medical records in evidence pursuant to CPLR 3122-a (c).  According to defendants, the records were automatically admissible because plaintiff raised no objection within 10 days of trial (see id.).  We reject that contention.  Plaintiff’s failure to object within 10 days before the trial waived any objection plaintiff had to the admissibility of the records as business records (see CPLR 3122-a [c]; 4518 [a]), but he did not waive any objection to their admissibility based on other rules of evidence … .  Indeed, plaintiff properly objected at trial on relevancy grounds with respect to the admissibility of some of the records… . Siemucha v Garrison…, 1145, 4th Dept 11-15-13

 

Plaintiff Entitled to Summary Judgment Against Third-Party Defendant Under Doctrine of Collateral Estoppel

The Fourth Department determined plaintiff was entitled to summary judgment against a third-party defendant under the doctrine of collateral estoppel.  Plaintiff was injured in a snowmobile collision.  Plaintiff sued one snowmobile driver and the other snowmobile driver was brought into the case as a third-party defendant. The jury found each driver 50% liable:

…[W]e agree that plaintiff is entitled to summary judgment in the amount sought in the complaint based on the doctrine of collateral estoppel.  We therefore modify the order accordingly.  “The doctrine of collateral estoppel precludes a party from relitigating ‘an issue which has previously been decided against him in a proceeding in which he had a fair opportunity to fully litigate the point’ ” … .  “The party seeking the benefit of collateral estoppel has the burden of demonstrating the identity of the issues in the present litigation and the prior determination, whereas the party attempting to defeat its application has the burden of establishing the absence of a full and fair opportunity to litigate the issue in the prior action” … .  Here, the issues are identical because in the prior action defendant was required to defend against the claim that he was negligent in the operation of his snowmobile and that his negligence was a proximate cause of this accident.  Moreover, he had a full and fair opportunity to litigate those issues in the prior action and was in no way limited by virtue of the fact that he was a third-party defendant as opposed to a direct defendant.  Specifically, CPLR 1008 grants to a third-party defendant all of the rights a direct defendant has to defend against a plaintiff’s claims, including the full rights of discovery afforded by CPLR article 31… .  Given that defendant had a full and fair opportunity to litigate the negligence claim against him in the prior action as well as to contest the value of plaintiff’s injuries, plaintiff is entitled to summary judgment… . Ackman v Haberer, 1059, 4th Dept 11-15-13

 

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