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Statutory Requirements for Recovery and Limits Imposed by Subrogation Explained; ”Law of the Case” Doctrine in Appellate Context Explained

In a full-fledged opinion by Justice Chambers, the Second Department determined plaintiff could not rely on the doctrine of the law of the case (a decision in a prior appeal) to prove the amount owed on its mechanic’s liens. The court used the opportunity to explain the “law of the case” doctrine (re: prior appellate decisions) and “review the statutory requirements for recovery under the Lien Law, and the limits on recovery imposed by the principle of subrogation:”

In addition to a lienor’s right to recover being limited by the contract price or reasonable value of the materials provided, it is further limited by the principle of subrogation (see 8-92 Warren’s Weed New York Real Property § 92.11[1], [4]; 34 New York Practice: Mechanics Liens in New York § 2:3. Lien Law § 4(1) provides, “If labor is performed for, or materials furnished to, a contractor or subcontractor for an improvement, the lien shall not be for a sum greater than the sum earned and unpaid on the contract at the time of filing the notice of lien, and any sum subsequently earned thereon. In no case shall the owner be liable to pay by reason of all liens created pursuant to this article a sum greater than the value or agreed price of the labor and materials remaining unpaid, at the time of filing notices of such liens, except as hereinafter provided.” In other words, no individual mechanic’s lien can exceed the amount owed by the owner to the general contractor at the time of filing the lien … . Money still due and owing from the owner to the contractor at the time of the filing of the lien, plus any sums subsequently earned thereon, is known as the “lien fund”… .  The subcontractor’s right to recover is derivative or subrogated to the right of the general contractor to recover. Thus, if the general contractor is not owed any amount under its contract with the owner, then the subcontractor may not recover… .  Peri Formwork Sys Inc v Lumbermens Mut Cas Co, 2013 NY Slip Op 07461, 2nd Dept 11-13-13

 

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Statutory 9% Interest Rate, Not Contractual 18% Rate, Should Have Been Applied to Breach of Contract Damages (Even Though the Monthly Payments Were Deposited in an Escrow Account During Litigation)

The Second Department determined plaintiff should have been awarded prejudgment interest on the principal amount of the damages awarded for breach of contract at the statutory 9% rate, not the contractual 18% rate which was included in the agreed monthly installment payments:

…CPLR 5001(a) mandates an award of prejudgment interest on the principal amount of the damages awarded for its breach of contract even though the monthly payments due were deposited in an escrow account during the pendency of this action, and [defendant] received no benefit from the disputed payments while they were held in escrow … . However, the Surrogate’s Court improperly applied interest on the monthly payments due at the rate of 18% per annum. “When a claim is predicated on a breach of contract, the applicable rate of prejudgment interest varies depending on the nature and terms of the contract” … . The contract rate of interest will be “used to calculate interest on principal prior to loan maturity or a default in performance,” and in the absence of “a provision in the contract addressing the interest rate that governs after principal is due or in the event of a breach, New York’s statutory rate will be applied as the default rate” … . Under the terms of the agreement at issue here, each monthly payment includes interest at the rate of 18% per annum. Since the contract rate has already been applied to each monthly payment prior to its maturity, and the agreement does not include a provision addressing the interest rate that governs after each monthly payment is due or in the event of a breach, the Surrogate’s Court should have applied interest upon each monthly payment from the date it became due at the statutory rate of 9% per annum (see CPLR 5004…). Ross v Ross Metals Corp, 2013 NY Slip Op 07466, 2nd Dept 11-13-13

 

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Sheriff Entitled to Poundage Even If No Money Collected—Execution by Sheriff Triggered Settlement

The Fourth Department determined the sheriff was entitled to poundage even though no money was actually collected by the sheriff (the execution by the sheriff triggered a settlement):

The Sheriff …. moved for an order awarding the payment of poundage pursuant to CPLR 8012.  We conclude that the court erred in denying that motion.  “ ‘Poundage is a fee awarded to the Sheriff in the nature of a percentage commission upon moneys recovered pursuant to a levy or [an] execution of attachment’ . . . The Sheriff’s right to receive poundage fees is wholly statutory . . . , and the statute must be strictly construed . . . Under the statute, the Sheriff is entitled to poundage fees ‘for collecting money by virtue of an execution’ (CPLR 8012 [b] [1])” … .  Although it is undisputed that the Sheriff did not actually collect any money, an award of poundage may still be made where, inter alia, “a settlement is made after a levy by virtue of an execution” (…see CPLR 8012 [b] [2]; …). …[W]here, as here, “payment by the debtor is made directly to the creditor after a sheriff levies, the payment constitutes a settlement, and the sheriff will be entitled to poundage” … .  Pursuant to the unambiguous language of the statute, the Sheriff is entitled to $24,500 in poundage based on the settlement amount of $650,000 (see CPLR 8012 [b] [1], [2]). Foley v West-Herr Ford Inc…, 1040, 4th Dept 11-8-13

 

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Review of Action Brought Under General Municipal Law Section 4 (Re: Unlawful Use of Tax, Water and Sewer Funds) Must Be by Article 78, Not Appeal

In an action brought pursuant to General Municipal Law section 4 for an order directing a summary investigation into the financial affairs of the respondents (village, fire department and water board), the Third Department determined the respondents could not appeal Supreme Court’s ordering of the investigation. The petitioners alleged the tax, water and sewer moneys collected may have been corruptly and/or unlawfully expended. The petitioners’ only avenue for court review is an Article 78 prohibition proceeding:

This appeal must be dismissed as there is no appeal as of right from Supreme Court’s order in this statutory special proceeding directing a summary investigation (see CPLR 5701 [a]; see also CPLR art 4…).   Although certain respondents contend, seemingly persuasively, that Supreme Court is not authorized by General Municipal Law § 4 to direct an investigation against them as they are not a “village” or “town,” this Court cannot grant their requested relief in the absence of an appealable order.  We note that respondents could have moved in Supreme Court to dismiss on this ground within the time allowed for an answer; having properly raised this defense as an objection in point of law in their answer, respondents are entitled to pursue summary dismissal of this special proceeding in that court, in the first instance (see CPLR 404 [a]; see also CPLR 7804 [f]; Vincent C. Alexander, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 7804:7 at 673-675).  At this juncture, those claims could only be addressed by this Court in a special proceeding pursuant to CPLR article 78 in the nature of prohibition, instituted in this Court (see CPLR 506 [b] [1]; 7803 [2]…).  Matter of Village of Victory…, 515205, 3rd Dept 11-7-13

 

Amendment of Summons and Complaint to Fix Misnamed Party Allowed

In affirming the Supreme Court’s allowing a summons and complaint to be amended to include a misnamed party [Enigma Management] which shared the same address and counsel and provided the same services as the named defendant, the Third Department wrote:

The showing required by plaintiffs in support of their motion pursuant to CPLR 305 (c) included “that the intended but misnamed defendant was fairly apprised that it was the party the action was intended to affect [and that it] would not be prejudiced” … .  Here, plaintiffs’ proof established, among other things, that service occurred at the shared address of defendant and Enigma Management, defendant and Enigma Management essentially acted as one in asserting identical causes of action against plaintiffs, both claimed to have done laboratory work for plaintiffs, they had the same counsel and they used a variety of names in their billing and correspondence.  There is no prejudice to Enigma Management in permitting the amendment.  MVP Health Insurance Company v Enigma Diagnostic Corporation, 515660, 3rd Dept 11-7-13

 

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Affirmative Defense of Arbitration Waived by Participation in Judicial Process

The Third Department determined that defendant waived a contractual provision requiring arbitration by participating in the judicial process:

…[W]hile defendant asserted the contractual arbitration provision as an affirmative defense in its answer, it did not move to stay the action and compel arbitration (see CPLR 7503 [a]).  Instead, it aggressively participated in the discovery process and received the benefit of extensive discovery from plaintiff, which would not otherwise have been available in arbitration … . In doing so, defendant’s acceptance of the judicial forum “manifested a preference ‘clearly inconsistent with . . . [a] claim that the parties were obligated to settle their differences by arbitration'” … .  Thus, we agree with Supreme Court’s determination that defendant’s actions resulted in a waiver of its right to compel arbitration … . Masson v Wiggins & Masson LLP…, 515340, 515427, 3rd Dept 10-31-13

 

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Failure to File Retainer Agreement In Medical Malpractice Action Remedied Nunc Pro Tunc

The Second Department determined Supreme Court correctly granted leave to file a retainer agreement in a medical malpractice action, nunc pro tunc.  The attorney (Siegel) was the second attorney retained in the matter (to handle the trial).  After the case settled, the second attorney sued the first (Glassman) over the amount of the fee.  The second attorney (Siegel) , however, had not filed a retainer agreement and made a motion to file late:

Every attorney practicing law in the Second Judicial Department who is retained with respect to, inter alia, a medical malpractice action must file a retainer statement with the OCA within 30 days after being retained … . Additionally, every “attorney retained by another attorney, on a contingent fee basis, as trial or appeal counsel or to assist in the preparation, investigation, adjustment or settlement of any such action, claim or proceeding shall, within 15 days from the date of such retainer, sign personally and file with the [OCA] a written statement of such retainer” (22 NYCRR 691.20[a][3]). Filing a retainer statement with the OCA is a condition precedent to the receipt of a fee for any case to which 22 NYCRR 691.20 applies … . Attorneys failing to correctly file a retainer statement with the OCA pursuant to 22 NYCRR 691.20 are precluded from asserting breach of contract causes of action for outstanding fees, and are limited to suit in quantum meruit … . However, a late filing of a retainer statement is sufficient to preserve an attorney’s right to recover fees where that attorney first obtains leave of court to file the statement nunc pro tunc … .

In exercising its discretion to extend the time to file the subject retainer statement pursuant to CPLR 2004, a court may consider such factors as the length of the delay, the reason or excuse for the delay, and any prejudice to the person opposing the motion … . Here, the reason for the delay, in effect, Siegel’s law office failure, was an isolated, inadvertent mistake … and there is no prejudice to Glassman… . Siracusa v Fitterman, 2013 NY slip Op 07025, 2nd Dept 10-30-13

 

Vacation of a Note of Issue Does Not Constitute Marking Off the Calendar/One Year Automatic Dismissal Did Not Apply

In affirming Supreme Court’s granting of plaintiff’s motion to restore a Labor Law action, the Second Department explained that vacating a note of issue does not constitute “marking off” or “striking” from the calendar under CPLR 3404:

CPLR 3404 states, in relevant part:

“[a] case . . . marked off’ or struck from the calendar or unanswered [*2]on a clerk’s calendar call, and not restored within one year thereafter, shall be deemed abandoned and shall be dismissed without costs for neglect to prosecute. The clerk shall make an appropriate entry without the necessity of an order.”

The vacatur of a note of issue, as was done in this case on September 11, 2008, returns the case to pre-note of issue status. It does not constitute a marking “off” or striking the case from the court’s calendar within the meaning of CPLR 3404 … . Thus, contrary to the defendant’s contention, the one-year period under CPLR 3404 for automatic dismissal did not start to run on September 11, 2008, when the note of issue was vacated, and the case was not properly dismissed on that date under CPLR 3404. Accordingly, the plaintiff was not required to establish his entitlement to restoration of the action under that statute… . Montalvo v Mumpus Restorations, Inc, 2013 NY Slip Op 07017, 2nd Dept 10-30-13

 

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Affirmative Defense Waived by Absence from Initial Answer May Be Included in Amended Answer.

he Second Department determined a “lack of standing” defense to a mortgage foreclosure action, although initially waived by its absence from the pleadings, could be added in an amended answer:

Leave to amend a pleading “shall be freely given” (CPLR 3025[b]), provided that the amendment is not palpably insufficient as a matter of law, does not prejudice or surprise the opposing party, and is not patently devoid of merit … . The decision of whether to allow an amendment is committed “almost entirely to the [motion] court’s discretion” … . “Mere lateness is not a barrier to the amendment. It must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine” … .

Although …the homeowner defendants…waived the defense of lack of standing by failing to assert it as an affirmative defense in their initial answer (see CPLR 3211[e]), this defense can nevertheless be interposed by leave of court pursuant to CPLR 3025(b) so long as the amendment does not cause the other party prejudice or surprise resulting directly from the delay… .  HSBC Bank v Picarello, 2013 NY Slip Op 07011, 2nd Dept 10-30-13

 

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Grant of Writ of Prohibition Reversed—Criteria for Writ Explained

Supreme Court granted a writ of prohibition finding the state police did not have the legal authority to seize cigarettes purchased by a Nebraska Indian tribe from a manufacturer located on the St. Regis Mohawk Indian Reservation in St. Lawrence County.  The cigarettes did not have state tax stamps.  The Third Department reversed describing the relevant analysis as follows:

Pursuant to well-established law, a CPLR article 78 proceeding for a writ of prohibition is an extraordinary remedy … that “lies only where there is a clear legal right to such relief, and only when [the body or officer involved] acts or threatens to act without jurisdiction in a matter . . . over which it has no power over the subject matter or where it exceeds its authorized powers in a proceeding over which it has jurisdiction” (…see also CPLR 7803 [2]).  Even where such a proceeding is permissible, the court has the discretion to deny the issuance of a writ of prohibition after considering such factors as “‘the gravity of the harm caused by the excess of power, the availability or unavailability of an adequate remedy on appeal or at law or in equity and the remedial effectiveness of prohibition if such an adequate remedy does not exist'”… .

…[P]etitioner failed to prove the absence of other avenues of relief that would adequately address the challenged seizure of the cigarettes… . * * *

…[P]etitioner failed to establish a clear entitlement to a writ of prohibition.  As relevant here, Tax Law § 471 (1) imposes “a tax on all cigarettes possessed in the state by any person for sale,” except under circumstances where “this state is without power to impose such tax” (Tax Law § 471 [1]; see 20 NYCRR 74.1 [a] [1]).4  All cigarettes within the state are presumed to be subject to tax unless “the contrary is established,” with the burden of proof of nontaxibility falling upon the person in possession of the cigarettes (Tax Law § 471 [1]).  In claiming that the sale here was not a taxable event, petitioner relies upon regulations which provide that no tax may be imposed on cigarettes sold to an out-of-state purchaser (see 20 NYCRR 74.1 [c] [4]; 76.1 [a] [1]). However, the same regulations that establish such exemption also require that all out-of-state sales be made by a duly licensed cigarette agent and that a certificate be obtained from the out-of-state purchaser showing that the cigarettes “will be immediately removed from the State to an identified location for such purposes and that such cigarettes shall not be returned to the State for sale or use herein” (20 NYCRR 76.3 [b] [emphasis added]).

…[P]etitioner has produced no evidence that the cigarettes would not be reintroduced into the state.   In fact, respondents submitted evidence in the form of, among other things, petitioner’s corporate shipment records and a statement by the driver of the truck, which suggest that petitioner regularly transports back into the state cigarettes purchased from the same manufacturer involved here.  HCI Distribution, Inc v NYS Police…, 516040, 3rd Dept 10-24-13

 

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