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Court’s Sua Sponte Dismissal of Complaint Reversed

The Second Department reversed the trial court’s sua sponte dismissal of plaintiff’s mortgage foreclosure complaint.  The trial court dismissed the complaint on the ground that the plaintiff lacked standing and imposed sanctions based on plaintiff’s alleged reliance upon a “robosigner” (according to the trial court’s own Internet research).  On the issues of “sua sponte” dismissal and standing, the Second Department wrote:

The Supreme Court abused its discretion in, sua sponte, directing dismissal of the complaint with prejudice and cancellation of the notice of pendency … . “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 any extraordinary circumstances warranting sua sponte dismissal of the complaint. Moreover, as the defendants failed to 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 sua sponte dismissal of a complaint by the court … .  HSBC Bank USA, NA v Taher, 2013 NY Slip Op 01806, 2011-06455, 2012-00841, Index No 9320/09, 2nd Dept. 3-20-13

 

Amendment of Reply to Add Statute of Limitations Defense Allowed

In affirming the grant of a motion to amend a reply to add the “statute of limitations” defense, the Second Department wrote:

“Leave to amend a pleading should be freely given (see CPLR 3025[b]), provided that the amendment is not palpably insufficient, does not prejudice or surprise the opposing party, and is not patently devoid of merit” … . “A determination whether to grant such leave is within the Supreme Court’s broad discretion, and the exercise of that discretion will not be lightly disturbed” … . “Mere lateness is not a barrier to the amendment. It must be lateness coupled with significant prejudice to the other side” … .The plaintiff waived its statute of limitations defense by failing to assert it as an affirmative defense in its initial reply to the appellants’ counterclaims (see CPLR 3211[e]). However, defenses waived under CPLR 3211(e) 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 … . Aurora Loan Services, LLC v Dimura, et al, 2013 NY Slip Op 01797, 2012-04739,Index No 2455/09, 2nd Dept. 3-20-13

 

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Alternative Holding in Prior Appeal Did Not Have Preclusive Effect

In a case involving a contract of sale for a painting (for 2 million euros), the First Department noted that a prior decision of that same court which stated the standing issue was not preserved for appellate review, and that if the issue were to be considered it would be rejected, was not binding for res judicata/collateral estoppel purposes:

[Defendant] was not barred by either res judicata or collateral estoppel from arguing the issue of standing in his motion to vacate the July 8, 2009 order. In particular, this Court’s holding on the prior appeal in this case (79 AD3d 534) cannot be considered binding for collateral estoppel purposes because this Court’s initial holding as to the issue of standing was that it had not been preserved for review. It was only as an alternate holding that this Court stated that the standing argument, if it were to be considered, would be rejected … .  Van Damme v Gelber, 2013 NY Slip Op 01782, 601995/07, 590203/08, 9553B, 1st Dept. 3-19-13

 

 

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Flaws in Fraud and Negligent Misrepresentation Allegations in Complaint Explained

The First Department, in affirming the dismissal of fraud and negligent misrepresentation claims in a contract action, described the flaws in the complaint as follows:

The court properly dismissed the fraud claim for failure to plead fraud with the particularity required by CPLR 3016(b) and for failure to plead loss causation … .

The court properly dismissed the negligent misrepresentation claim for failure to plead a special relationship. An arm’s length business relationship, as existed here, is not generally considered to be the sort of confidential or fiduciary relationship that would support a cause of action for negligent misrepresentation … . Nor did [defendants] “possess unique or specialized expertise” … .  Greentech Reasearch LLC v Wissman, 2013 NY Slip Op 01787, 9561, 602477/09, 1st Dept. 3-19-13

 

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Deliberate Avoidance of Service of Process 

The First Department determined the defendants, who deliberately attempted to avoid notice of the summons and complaint, did not raise an issue of fact in the face of the affidavits of the process server:

Relief under CPLR 317 is not warranted where, as here, defendants’ failure to obtain proper notice was the result of a deliberate attempt to avoid such notice … . The individual defendant averred that neither he nor the corporate defendant received actual service of the summons and complaint, or of the supplemental summons and amended complaint, or of any of the notices served by plaintiff following commencement of the action. However, this conclusory denial of receipt is insufficient to raise an issue of fact as to proper service in the face of plaintiff’s submission of affidavits from a process server, which constitute prima facie evidence of proper service … .  Pina v Jobar, USA, LLC, 2013 NY Slip Op 01794, 9570N, 300756/08, 1st Dept. 3-19-13

 

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Sanctions for Discovery Noncompliance and Spoliation

The First Department concluded preclusion and an adverse inference charge were appropriate discovery sanctions for defendant’s failure to produce documents and the apparent destruction of evidence:

Having been conditionally ordered to produce all correspondence …, and the transcripts of the audio tapes of meetings …, in order to successfully oppose plaintiff’s motion for discovery sanctions, defendant had to demonstrate (1) a reasonable excuse for the failure to produce the requested items and (2) the existence of a meritorious claim or defense in order to relieve itself from the dictates of that order … . Defendant did not satisfy these requirements. Defendant’s history of noncompliance with the court’s prior discovery orders supports the motion court’s finding that defendant’s actions were willful and contumacious …. The court providently granted plaintiffs’ motion for an order precluding defendant from offering any evidentiary proof with respect to the transcription of committee meetings and/or correspondence … and defendant in defense and/or opposition to plaintiffs’ prosecution of their bad faith claim at trial … .

Plaintiffs also made a prima facie showing that defendant had either intentionally or negligently disposed of the transcript of the … meeting and that the spoliation of this critical evidence compromised its ability to prosecute their bad faith action against defendant … . The motion court did not abuse its discretion in finding that certain evidence may have existed, but was not produced by defendant either because it was destroyed or withheld. Although plaintiffs moved to strike the answer, the court imposed the reasonable lesser sanction of an adverse inference charge, which will prevent defendant from using the absence of these documents at trial to its tactical advantage … .  General Motors Acceptance Corp. v New York Cent. Mut. Fire Ins. Co., 2013 NY Slip Op 01774, 109668/06, 9272, 1st Dept. 3-19-13

 

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Acknowledgment of Debt in Bankruptcy Proceeding Restarted Statute of Limitations 

The First Department, in a full-fledged opinion by Justice Roman, determined the defendant’s acknowledgment of a debt in his bankruptcy petition restarted the 20 statute of limitations for the enforcement of a judgment:

Contrary to defendant’s contention, enforcement of the judgment issued against him is not barred by CPLR 211(b). While [plaintiff] first sought to enforce the judgment in 2011, more than 20 years after the judgment could have first been enforced, defendant acknowledged the judgment in 2005 within his bankruptcy petition, thereby recommencing the statute of limitations from that date. Based on the 2005 acknowledgment, the statute of limitations to enforce the judgment ran anew in 2005 and [plaintiff] has until 2025 to enforce the judgment … . Since a debtor sufficiently acknowledges a debt pursuant to a judgment simply by admitting to the creditor in writing that a debt is owed, here, defendant’s listing of the judgment within his bankruptcy petition constitutes such an admission and is thus, an acknowledgment under the statute. Moreover, insofar as an acknowledgment need not specify the amount nor the character of the debt owed …, defendant’s failure to list the correct amount of the judgment or the court in which it was obtained does not constitute a shortcoming which avails defendant. First NY Bank for Bus. v Alexander, 2013 NY Slip Op 01796, 4800/90, 9377, 1st Dept. 3-19-13

 

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Relation Back Doctrine Allowed Adding Doctor as Defendant in Medical Malpractice Action after Expiration of Statute of Limitations.

The relation back doctrine was applied in a medical malpractice action to allow the addition of a doctor as a defendant after the statute of limitations expired. The doctrine applies where “(1) both claims arose out of the same conduct, transaction, or occurrence, (2) the additional party is united in interest with the original party, 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 additional 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 the additional party as well.”  The fact that the omission of the party may have been “negligent,” as opposed to a “mistake,” did not prevent the application of the doctrine. Kirk, et al, v University Ob-Gyn Associates, Inc., et al, 159, CA 12-01405, Fourth Dept. 3-15-13

 

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Prior Court Ruling Can Not Be Altered Even If Erroneous

In reversing the trial court’s termination of the plaintiff-husband’s obligation to provide defendant-wife with medical coverage, the Fourth Department explained that it must apply the doctrine of res judicata, even where  the prior ruling had been erroneously decided:

We agree with defendant that the court erred in terminating plaintiff’s obligation to provide her with medical insurance coverage inasmuch as our prior order requires plaintiff to provide her with that coverage. As a general rule, the doctrine of res judicata bars relitigation of previously adjudicated disputes “even where further investigation of the law or facts indicates that the controversy has been erroneously decided, whether due to oversight by the parties or error by the courts” … .As relevant here, “a final judgment of divorce settles the parties’ rights pertaining not only to those issues that were actually litigated, but also to those that could have been litigated” … .“[A]bsent unusual circumstances or explicit statutory authorization, the provisions of [such a] judgment are final and binding on the parties, and may be modified only upon direct challenge” … .Here, plaintiff did not take an appeal from our prior order, seek reargument of that order, or make a proper application to modify it. He is therefore foreclosed from collaterally attacking it in the context of this action … . Lomaglio v Lomaglio, 142, CA 12-01317, 4th Dept. 3-15-13

 

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Counsel for Nonparty Witness Cannot Participate in Deposition

The Fourth Department determined that counsel for a nonparty witness cannot object, i.e., participate, in a deposition of that witness.  The Court wrote:

…“[C]ounsel for a nonparty witness does not have a right to object during or otherwise to participate in a pretrial deposition.CPLR 3113 (c) provides that the examination and cross-examination of deposition witnesses ‘shall proceed as permitted in the trial of actions in open court’ ” (id. [emphasis added]), and it is axiomatic that counsel for a nonparty witness is not permitted to object or otherwise participate in a trial (see e.g. id.).We recognize that 22 NYCRR 221.2 and 221.3 may be viewed as being in conflict with CPLR 3113 (c) inasmuch as sections 221.2 and 221.3 provide that an “attorney” may not interrupt a deposition except in specified circumstances.Nevertheless, it is well established that, in the event of a conflict between a statute and a regulation, the statute controls (seeMatter of Hellner v Board of Educ. of Wilson Cent. School Dist., 78 AD3d 1649, 1651).  Justices Fahey and Martoche dissented in a memorandum. Sciara v Surgical Associates of Western New York, P.C., et al, 1466, CA 12-00809, 4th Dept. 3-15-13

 

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