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Failure to Demonstrate When Plaintiff Should Have First Become Aware of Fraudulent Conveyance Precluded Dismissal on Statute of Limitations Grounds​

The Second Department determined that causes of action alleging fraudulent conveyances pursuant to Debtor & Creditor Law 276 should not have been dismissed on statute of limitations grounds because the defendants failed to establish when plaintiff should have first become aware of the alleged fraud:

“A cause of action based upon actual fraud under Debtor and Creditor Law § 276 must be brought within six years of the date that the fraud or conveyance occurs, or within two years of the date the fraud should have been discovered, whichever is longer” …. Here, it is undisputed that the verified complaint did not allege the occurrence of any fraudulent conveyances within six years prior to the commencement of the action. However, since it is unclear when the plaintiff should have first been aware of the alleged fraud, the defendants failed to establish that the causes of action alleging actual fraud under Debtor and Creditor Law § 276 should be dismissed as time-barred ….  Felshman v Yamali, 2013 NY Slip Op 03632, 2nd Dept, 5-22-13

 

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Terms of Appellate Court’s Remittitur Must Be Strictly Followed

In a breach of contract action that had been remitted to Supreme Court, the Second Department determined Supreme Court failed adhere to the terms of the remittitur by failing to calculate interest and express the amount due and owing in accordance with the remittitur. In sending the case back to Supreme Court, the Second Department wrote:

“A trial court, upon remittitur, lacks the power to deviate from the mandate of the higher court” …. “An order or judgment entered by the lower court on a remittitur must conform strictly to the remittitur'” …. Berry v Williams, 2013 NY Slip Op 03625, 2nd Dept, 5-22-13

 

No Proof of Service of Notice of Entry of Default Judgment; One Year Deadline Never Triggered​

The First Department noted that the one-year deadline for a motion to vacate a default judgment (CPLR 5015) was never triggered because the record included no proof that the notice of entry of the default judgment was served.  Gottlieb v Northriver Trading Co, LLC, 2013 NY Slip Op 03618, 1st Dept, 5-21-13

 

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UCC Four-Year Statute of Limitations Applied to Breach of Warranty Cause of Action​

The Second Department affirmed Supreme Court’s determination that a guarantee which stated “if any defects in manufacturing, materials or workmanship occurred within 10 years the product would be repaired, replaced or purchase price refunded” was not a warranty which extended to future performance within the meaning of UCC 2-725[2]. The four-year UCC statute of limitations therefore applied to the warranty cause of action.  In addition, the Second Department affirmed the dismissal of the “fraudulent concealment” cause of action.  The Court’s discussion of the law concerning those two issues follows:

A cause of action alleging breach of warranty is governed by a four-year statute of limitations (see UCC 2-725[1]…). Generally, a breach of warranty action accrues “when tender of delivery is made” (UCC 2-725[2];…). As an exception to this general rule, the UCC provides that “where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance,” then “the cause of action accrues when the breach is or should have been discovered” (UCC 2-725[2];…). “A warranty of future performance is one that guarantees that the product will work for a specified period of time”… . However, “[w]arranties to repair or replace [a] product in the event that it fails to perform, without any promise of performance, do not constitute warranties of future performance” … . * * *

In pleading a cause of action to recover damages for fraud, “the circumstances constituting the wrong shall be stated in detail” (CPLR 3016[b];…) A cause of action sounding in fraud must allege that the defendant knowingly misrepresented or concealed a material fact for the purpose of inducing another party to rely upon it, and that the other party justifiably relied upon such misrepresentation or concealment to his or her own detriment…. “A cause of action to recover damages for fraudulent concealment requires, in addition to allegations of scienter, reliance, and damages, an allegation that the defendant had a duty to disclose material information and that it failed to do so”… Schwatka v Super Millwork, Inc, 2013 NY Slip Op 03470, 2nd Dept, 5-15-13

 

 

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Action for Fraud Cannot Be Based on Same Facts as Breach of Contract; Fraud Must Be Pled in Detail

After noting that a cause of action for fraud does not lie when it is based on the same allegations stated in a breach of contract cause of action, the Second Department explained the pleading requirements in a fraud action, including the need for “detail,” as follows:

A cause of action to recover damages for fraud requires allegations of (1) a false representation of fact, (2) knowledge of the falsity, (3) intent to induce reliance, (4) justifiable reliance, and (5) damages…. Moreover, CPLR 3016(b) requires that the circumstances underlying a cause of action based on fraud be stated “in detail” (CPLR 3016[b];…). Here, the allegations of fraud against the remaining defendants either were bare and conclusory or do not rise to the level of fraud. Consequently, the Supreme Court properly granted those branches of the separate motions of the remaining defendants which were pursuant to CPLR 3211(a)(7) to dismiss the third cause of action insofar as asserted against each of them. Genovese v State Farm Mut Auto Ins Co, 2013 NY Slip Op 03453, 2nd Dept, 5-15-13

 

 

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Bank Account in Name “Ann … or Thomas…” Could Be Turned Over to Pay Debt Owed by Thomas 

In finding that the funds held in a bank account in the name of “Ann Sledjeski or Thomas Sledjeski” should have been turned over to pay Thomas Sledjeski’s debt, the Second Department wrote:

The Supreme Court should have granted the unopposed petition pursuant to CPLR 5225(b) to direct Hudson City Savings Bank to turn over the funds of an account it held in the name of “Ann Sledjeski or Thomas Sledjeski,” to partially satisfy a judgment entered in favor of the petitioner and against Thomas C. Sledjeski. ” [T]he opening of a joint bank account creates a rebuttable presumption that each named tenant is possessed of the whole of the account so as to make the account vulnerable to levy of a money judgment by the judgment creditor of one of the joint tenants'” (…see Banking Law § 675[b]). Therefore, the petitioner was not required to establish that the judgment debtor was the sole contributor of funds to the account. Moreover, since none of the respondents appeared or answered the proceeding, they failed to rebut the presumption …  Matter of JRP Old Riverhead, Ltd v Hudson City Sav Bank, 2013 NY Slip Op 03484, 2nd Dept, 5-15-13

 

 

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Statutorily-Mandated Venue Is Not Jurisdictional and Is Waivable

In a full-fledged opinion by Justice Dillon, the Second Department discussed, in great detail, the relevant statutes and case law concerning the venue provisions in the CPLR and venue as mandated in the New York City Health & Hospitals Corporation (NYCHHC) Act. The Second Department determined NYCHHC Act’s statutorily-mandated venue is not jurisdictional and can be waived:

In sum, since the NYCHHC chose to waive the venue provision contained in section 7401(3) of the New York City Health and Hospitals Corporation Act for actions brought against it upon the consolidation of the plaintiffs’ two actions, and absent a showing of any special circumstances demonstrating that venue be placed in Bronx County [the statutorily-mandated venue], we conclude that the Supreme Court providently exercised its discretion in placing venue in Westchester County, where the first of the related actions was commenced. Wager v Pelham Union Free Sch Dist, 2013 NY Slip Op 03475, 2nd Dept, 5-15-13

 

 

Criteria for Motion to Amend a Complaint and for the “Relation Back” Doctrine Explained

In affirming the denial of a motion to amend a complaint the Second Department described the law concerning amendment (CPLR 305) and “relation back” (CPLR 203):

CPLR 305(c) authorizes the court, in its discretion, to “allow any summons or proof of service of a summons to be amended, if a substantial right of a party against whom the summons issued is not prejudiced” (CPLR 305[c]). Where the motion is to cure “a misnomer in the description of a party defendant,” it should be granted even after the statute of limitations has run where “(1) there is evidence that the correct defendant (misnamed in the original process) has in fact been properly served, and (2) the correct defendant would not be prejudiced by granting the amendment sought”…. CPLR 305(c) does not apply in this case, where the plaintiff’s mistake in failing to commence the action against Keyspan-Ravenswood within the statute of limitations period had nothing to do with the misnomer… . * * *

As codified in CPLR 203(c), “what is commonly referred to as the relation back doctrine allows a claim asserted against a defendant in an amended filing to relate back to claims previously asserted against a codefendant for Statute of Limitations purposes where the two defendants are united in interest’ (CPLR 203[b])” ….. For the rule allowing relation back to the original date of filing under CPLR 203(c) to apply, a plaintiff is required to prove that: “(1) both claims arose out of the same conduct, transaction, or occurrence, (2) the new party is united in interest with the original defendant, and by reason of that relationship can be charged with such notice of the institution of the action that the new party will not be prejudiced in maintaining its defense on the merits by the delayed, otherwise stale, commencement, and (3) the new party knew or should have known that, but for a mistake by the plaintiff as to the identity of the proper parties, the action would have been brought against that party as well” … .  Sally v Keyspan Energy Corp, 2013 NY Slip Op 03469, 2nd Dept, 5-15-13

 

 

 

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Hybrid Article 78 and Declaratory Judgment Proceeding Requires Separate Treatment of Both

In a hybrid proceeding— an Article 78 proceeding to review a Town Board’s stop work order for a quarry acting without a permit, and a related declaratory judgment action—the Second Department determined Supreme Court could not dismiss the declaratory judgment action as if it were part of the Article 78 proceeding.  The two actions must be treated as separate proceedings:

…[I]n the absence of a dispositive motion addressed to the causes of action which sought declaratory relief, the Supreme Court improperly, in effect, dismissed those causes of action …. In a hybrid proceeding and action, separate procedural rules apply to those causes of action which are asserted pursuant to CPLR article 78, on the one hand, and those which seek declaratory relief, on the other hand (see id. at 1008). “The Supreme Court may not employ the summary procedure applicable to a CPLR article 78 cause of action to dispose of causes of action to recover damages or seeking a declaratory judgment”…. “Thus, where no party makes a request for a summary determination of the causes of action which seek damages or declaratory relief, it is error for the Supreme Court to summarily dispose of those causes of action”…. Here, since no party made such a motion, the Supreme Court should not have summarily disposed of the causes of action which sought declaratory relief, and the matter must be remitted … .  Matter of Lake St Granite Quarry, Inc v Town/Village of Harrison, 2013 NY Slip Op 03487, 2nd Dept, 5-15-13

 

 

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Two Options to Recover on Note and Mortgage; One in Law (Note); One in Equity (Foreclosure)

In finding that CPLR 5236(b) did not apply in the case, the Second Department described the two options a mortgagee has with respect to recovery based on a note and mortgage:

CPLR 5236(b) provides, in relevant part, that “[r]eal property mortgaged shall not be sold pursuant to an execution issued upon a judgment recovered for all or part of the mortgage debt.” Typically, a mortgagee has the choice of “two remedies: one at law in a suit on the debt as evidenced by the note, the other in equity to foreclose the mortgage” …. A mortgagee who elects to proceed on the note becomes “subject to the statutory restrictions which direct that when a judgment is recovered for all or part of the mortgage debt, the execution shall direct that no part of the mortgage[d] property shall be levied upon or sold thereunder” (Goddard v Johnson, 96 Misc 2d 230, 231). Matter of Ivy Hill Commodities Corp v Beekharry, 2013 NY Slip Op 03483, 2nd Dept, 5-15-13

 

 

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