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THE BANK DID NOT DEMONSTATE IT HAD STANDING TO FORECLOSE BECAUSE IT DID NOT ADEQUATELY EXPLAIN HOW IT CAME INTO POSSESSION OF THE NOTE (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that plaintiff did not demonstrate it had standing to bring the foreclosure action and its summary judgment motion should not have been granted:

A plaintiff demonstrates standing in a mortgage foreclosure action by establishing that “it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced” … . “With respect to the note, either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation” … . …

Other than alleging that he reviewed the electronic records that were kept in the normal course of business, [the affiant] failed to provide details with regard to how plaintiff came into possession of the note … . Wilmington Sav. Fund Socy., FSB v LaFrate, 2023 NY Slip Op 01824, Third Dept 4-6-23

Practice Point: When the defendant raises lack-of-standing as an affirmative defense in a foreclosure action, the bank must demonstrate it came into possession of the note before commencing the action. Here the proof of standing was conclusory and lacking in detail. The bank’s motion for summary judgment should not have been granted.

 

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THE ORIGINAL CUSTODY ORDER WAS ISSUED IN NEW JERSEY, WHERE FATHER RESIDES; THE NEW YORK CUSTODY ORDER MUST BE REVERSED BECAUSE FAMILY COURT DID NOT COMMUNICATE WITH THE NEW JERSEY COURT AND NO FINDING WAS MADE ON WHETHER NEW JERSEY HAD RELINQUISHED EXCLUSIVE JURISDICTION OR WHETHER NEW YORK WAS A MORE CONVENIENT FORUM; MATTER REMITTED (THIRD DEPT).

​The Third Department, reversing Family Court, determined Family Court lacked jurisdiction to issue the custody order on appeal because the court failed to communicate with the court in New Jersey, where father resides, which issued the original custody order:

… [P]rior to modifying a custody determination from another state, a court of this state must have jurisdiction to make the initial determination pursuant to Domestic Relations Law § 76, and “[t]he court of the other state [must] determine[ that] it no longer has exclusive, continuing jurisdiction under [Domestic Relations Law § 76-a] or that a court of this state would be a more convenient forum under [Domestic Relations Law § 76-f]” … . Inasmuch as the child has resided in this state since 2018, Family Court had jurisdiction to make an initial determination of custody (see Domestic Relations Law §§ 76 [1] [a]; 75-a [7]). However, the record is devoid of any indication that the New Jersey court relinquished its jurisdiction or that it determined that this state was a more convenient forum, and Family Court failed to communicate with the New Jersey court to make such inquiry. … Family Court lacked jurisdiction to issue the order on appeal … , and we must vacate said order and remit this matter to Family Court to conduct the required inquiry…. . Matter of Alda X. v Aurel X., 2023 NY Slip Op 01826, Third Dept 4-6-23

Practice Point: Here the original custody order was issued in New Jersey, where father resides. Family Court in Albany did not communicate with the New Jersey court before issuing an order modifying custody. Family Court did not have jurisdiction and the New York order was reversed.

 

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WHEN PURELY ECONOMIC INJURY IS ALLEGED, THE CAUSE OF ACTION ACCRUES WHERE THE PLAINTIFF RESIDES; HERE PLAINTIFF RESIDED IN FLORIDA AND, PURSUANT TO NEW YORK’S BORROWING STATUTE, THE FLORIDA STATUTE OF LIMITATIONS APPLIED, RENDERING THE FRAUDULENT-TRANSFER ACTION UNTIMELY (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the borrowing statute required that the Florida statute of limitations for an action alleging the fraudulent transfer of property be applied, rendering the action time-barred. Plaintiff, a Florida resident, alleged the transfer of property in New York, by defendant, a New York resident, was fraudulent in that it rendered the defendant judgment proof. The Third Department determined the injury occurred in Florida, not New York:

… [T]he parties dispute the applicability of CPLR 202, New York’s “borrowing” statute, which … provides that “[w]hen a nonresident sues on a claim that accrued outside of New York, the cause of action must be commenced within the time period provided by New York’s statute of limitations, as well as the statute of limitations in effect in the jurisdiction where the cause of action in fact accrued” … . “[A] cause of action accrues at the time and in the place of the injury . . . in tort cases involving the interpretation of CPLR 202” … . Relevant here, “[w]hen an alleged injury is purely economic, the place of injury usually is where the plaintiff resides and sustains the economic impact of the loss” … .

While plaintiff asks that we draw a distinction between tort and contract matters as it pertains to the principle that locates his economic harm — and thus accrual of his various causes of action — in his state of residence, we find little support for that premise. Although the tortious act may have occurred when the property was transferred in this state, that does not establish that the accompanying injury to plaintiff was also felt in this state or that the cause of action accrued here … . Erdely v Estate of Airday, 2023 NY Slip Op 01827, Third Dept 4-6-23

Practice Point: Here plaintiff, a Florida resident, alleged defendant, a New York resident, fraudulently transferred New York property, making defendant judgment proof. Because plaintiff alleged purely economic injury (the inability to collect money judgments), the injury occurred where plaintiff resided. Therefore, pursuant to New York’s borrowing statute, the Florida statute of limitations applied, rendering the action untimely.

 

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COURTS HAVE ONLY A LIMITED POWER TO REVIEW AN ARBITRATOR’S RULING; HERE SUPREME COURT SHOULD NOT HAVE FOUND THE ARBITRATOR EXCEEDED HER AUTHORITY BY ORDERING BACK PAY FOR A REINSTATED COUNTY EMPLOYEE (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined the arbitrator in this employment dispute did not exceed her authority when she ordered that the employee be reinstated with back pay. The employee had been absent from work and the employer (the county) the absence a voluntary resignation. Supreme Court had affirmed the employee’s reinstatement but found the arbitrator had exceeded her authority by ordering the back pay:

… “[J]udicial review of arbitral awards is extremely limited. Pursuant to CPLR 7511 (b) (1), a court may vacate an award when it violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on an arbitrator’s power” … . “Outside of these narrowly circumscribed exceptions, courts lack authority to review arbitral decisions, even where an arbitrator has made an error of law or fact” … . “[I]t is well settled that an arbitrator has broad discretion to determine a dispute and fix a remedy, and that any contractual limitation on that discretion must be contained, either explicitly or incorporated by reference, in the arbitration clause itself” … .

We discern no basis to vacate the arbitrator’s award as to back pay and benefits. Notably, the CBA [collective bargaining agreement] does not contain “a specifically enumerated limitation on the arbitrator’s power” … . In fact, it does not explicitly limit the arbitrator’s authority in any way other than stating that the arbitrator does not have the power to “amend, modify or delete any provision of the CBA,” which does not set any limitations on the arbitrator’s power to order the remedy that he or she sees fit … . Matter of County of Albany (Civil Serv. Empls. Assn., Inc., Local 1000, AFSCME, AFL-CIO, Albany County Local 801), 2023 NY Slip Op 01828, Third Dept 4-6-23

Practice Point: Here the arbitrator ordered a county employee reinstated with back pay. Supreme Court held the arbitrator exceeded her powers by ordering back pay. The Third Department noted the courts’ limited review powers re: arbitration rulings and found no basis for concluding the arbitrator had exceeded her powers.

 

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THE EXTENDED STATUTE OF LIMITATIONS IN THE CHILD VICTIMS ACT DOES NOT APPLY TO CIVIL RIGHTS CAUSES OF ACTION PURSUANT TO 42 USC 1983; THE DUTY TO REPORT CHILD ABUSE UNDER THE SOCIAL SERVICES LAW APPLIES ONLY TO “PERSONS LEGALLY RESPONSIBLE” FOR THE CARE OF THE CHILD, WHICH DOES NOT INCLUDE TEACHERS (THIRD DEPT).

​The Third Department, in a full-fledged opinion by Justice Aarons, reversing (modifying) Supreme Court, determined the negligence and civil rights causes of action against the school district in this Child Victims Act suit were properly dismissed, and the Social Services Law causes of action should have been dismissed. The complaints alleged sexual abuse by a teacher. The Third Department followed the Fourth Department holding that the extended statute of limitations in the Child Victims Act did not apply to the 42 USC 1983 civil rights causes of action. The Third Department also determined the teacher was not a “person legally responsible” for the plaintiffs such that the abuse-reporting requirement in the Social Services Law applied to the school district:

It is true that CPLR 214-g contains broad language. The statute nonetheless limits the types of causes of action — i.e., claims involving child sexual abuse — that are revived and then given a new limitations period. … 42 USC § 1983 does not create any independent, substantive rights but merely provides a vehicle to enforce such rights … . As the Fourth Department reasoned, to determine whether CPLR 214-g was a related revival statute would require a court to impermissibly consider the particular facts or particular legal theory advanced by a plaintiff in a section 1983 claim (see BL Doe 3 v Female Academy of the Sacred Heart, 199 AD3d at 1422). Accordingly, we decline plaintiffs’ invitation to reject the Fourth Department’s approach as articulated in BL Doe 3 v Female Academy of the Sacred Heart … . * * *

… [C]ertain individuals must report cases of suspected abuse when reasonable cause exists that a child coming before them is an abused child (see Social Services Law § 413). Civil liability may be imposed upon these individuals who knowingly and willfully fail to make the requisite report (see Social Services Law § 420 [2]). … [F]or purposes of Social Services Law § 413, an “abused child” is one who is abused by a “parent or other person legally responsible for [a child’s] care” (Family Ct Act § 1012 [e]; see Social Services Law § 412 [1]).

The School District maintains that plaintiffs’ statutory claim should have been dismissed because Wales [defendant teacher] was not a “person legally responsible” for plaintiffs’ care at the time of the alleged abuse. … [W]hether an individual constitutes a “person legally responsible” for a child within the meaning of Family Ct Act § 1012 (e) entails the examination of various factors … . The Court of Appeals cautioned … that “persons who assume fleeting or temporary care of a child . . . or those persons who provide extended daily care of children in institutional settings, such as teachers,” should not be interpreted as a “person legally responsible” for a child’s care … . … [T]he School District cannot be liable for any alleged failure to report any abuse by Wales … . Dolgas v Wales, 2023 NY Slip Op 01830, Third Dept 4-6-23

Practice Point: Here the school district was sued under the Child Victims Act alleging sexual abuse by a teacher. The civil rights causes of action pursuant to 42 USC 1983 are not subject to the extended statute of limitations in the Child Victims Act and, therefore, those causes of action were properly dismissed.

Practice Point: A teacher is not a “person legally responsible” for the care of a child within the meaning of the Family Court Act. Therefore the causes of action under the Social Services Law alleging the school district failed to report abuse by a teacher should have been dismissed.

 

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ALTHOUGH DEFENDANT CORPORATION WAS NOT SERVED WITH THE SUMMONS AND COMPLAINT, THE CORPORATE DEFENDANT “APPEARED INFORMALLY” THROUGH THE CEO’S AFFIDAVIT; PLAINTIFFS WERE ENTITLED TO A DEFAULT JUDGMENT AGAINST THE CORPORATION (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined that, although the defendant corporation was not served with the summons and complaint, it “appeared informally” in the action and, therefore, plaintiffs’ motion for a default judgment should have been granted. The “informal appearance” was in the form of the corporate CEO’s affidavit:

… “‘[I]n addition to the formal appearances listed in CPLR 320(a), the law continues to recognize the so-called “informal” appearance'” .. . An informal appearance “‘comes about when the defendant, although not having taken any of the steps that would officially constitute an appearance under CPLR 320(a), nevertheless participates in the case in some way relating to the merits'” … . “When a defendant participates in a lawsuit on the merits, he or she indicates an intention to submit to the court’s jurisdiction over the action, and by appearing informally in this manner, the defendant confers in personam jurisdiction on the court” … . “[A]n appearance of the defendant is equivalent to personal service of the summons upon him [or her], unless an objection to jurisdiction under [CPLR 3211(a)(8)] is asserted by motion or in the answer as provided in rule 3211” (CPLR 320[b]).

“The occasion for [an informal] appearance [is] an infrequent thing” … . However, an informal appearance may occur even where the defendant is not served with process , where an individual defendant affirmatively states that he or she is only acting in his or her capacity as an officer of a corporate defendant … . Travelon, Inc. v Maekitan, 2023 NY Slip Op 01816, Second Dept 4-5-23

Practice Point: Although infrequent, New York still recognizes an “informal appearance” in an action, here through an affidavit submitted by the CEO of a corporate defendant. Because of the informal appearance, plaintiffs were entitled to a default judgment, even though the defendant was never served with a summons and complaint.

 

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PLAINTIFFS OBTAINED A NEW JERSEY DEFAULT JUDGMENT IN A BREACH OF CONTRACT ACTION AGAINST THREE DEFENDANTS WHO ARE JOINTLY AND SEVERALLY LIABLE; PLANTIFFS NEED ONLY SERVE ONE OF THE DEFENDANTS TO ENFORCE THE FOREIGN JUDGMENT AGAINST THAT DEFENDANT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiffs, who obtained a New Jersey default judgment against three defendants, need only serve one of the defendants in this action to enforce the foreign judgment:

In October 2013, the plaintiffs contracted with the defendant Tirepool, LLC … for the purchase of a used car. The contract was negotiated by the defendants Jeff Massicott and Vivian Wallace, the owners/managers of Tirepool. The defendants breached the contract and retained the plaintiffs’ down payment. … [T]he plaintiffs commenced an action against the defendants in the Superior Court of New Jersey (hereinafter the New Jersey action). The defendants failed to answer the complaint, and the plaintiffs obtained a default judgment against the defendants in the principal sum of $26,548.32. …

CPLR 1501 provides: “Where less than all of the named defendants in an action based upon a joint obligation, contract or liability are served with the summons, the plaintiff may proceed against the defendants served, unless the court otherwise directs, and if the judgment is for the plaintiff it may be taken against all the defendants.” Here, the defendants are jointly and severally liable for the judgment in the New Jersey action and, therefore, the plaintiffs are permitted to proceed against Wallace without effectuating service on the other defendants.

Accordingly, the Supreme Court should have granted that branch of the plaintiffs’ motion which was for summary judgment in lieu of complaint insofar as asserted against Wallace. Obed v Tirepool, LLC, 2023 NY Slip Op 01802, Second Dept 4-5-23

Practice Point: Here there was a foreign default judgment against three defendants who are jointly and severally liable. Plaintiffs only served one of the defendants with a summons in lieu of complaint to enforce the foreign judgment. Plaintiffs did not need to serve the other two defendants and could proceed against the defendant who was served.

 

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PLAINTIFF FAILED TO SHOW UP FOR THE SETTLEMENT CONFERENCE IN THIS FORECLOSURE ACTION AND A DEFAULT JUDGMENT WAS GRANTED; IN MOVING TO VACATE THE DEFAULT, PLAINTIFF DID NOT PRESENT SUFFICIENT PROOF OF LAW OFFICE FAILURE AND DID NOT EXPLAIN ITS DELAY IN SEEKING TO VACATE THE DEFAULT JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined plaintiff did not demonstrate an adequate excuse (law office failure) for not attending the settlement conference and plaintiff’s motion to vacate the default judgment should not have been granted:

… [T]he plaintiff’s allegation of law office failure was conclusory and unsubstantiated. In an affirmation in support of the motion … to vacate the order of dismissal, the plaintiff’s counsel described her office’s standard practices and procedures for receiving and processing notices and orders, and posited that her office had not received notice of the scheduled conference because there were “no notes, scanned images, or calendar steps” in the files that she reviewed. The plaintiff … failed to provide an affidavit from anyone with personal knowledge of the purported law office failure, provide any details regarding such failure, or provide any other evidence of the system’s purported breakdown that led to counsel’s nonappearance at the conference … . Moreover, the plaintiff failed to provide a reasonable excuse for its delay in moving to vacate the order of dismissal … . Since the plaintiff failed to proffer a reasonable excuse its default, it is unnecessary to determine whether the plaintiff demonstrated the existence of a potentially meritorious cause of action (see CPLR 5015[a][1] …). HSBC Bank USA, N.A. v Hutchinson, 2023 NY Slip Op 01782, Second Dept 4-5-23

Practice Point: Here the claim that plaintiff missed the settlement conference due to law office failure was not supported by proof from a person with first hand knowledge. The motion to vacate the default judgment should not have been granted.

 

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RE: DETERMINING THE CORRECT JURISDICTION FOR STATUTE-OF-LIMITATIONS PURPOSES, THE ACCRUAL OF A BREACH OF CONTRACT ACTION ALLEGING PURELY ECONOMIC INJURY IS USUALLY IN THE “PLACE OF INJURY,” WHICH IS USUALLY WHERE THE PLAINTIFF RESIDES (FIRST DEPT).

The First Department, in a decision too complex to fairly summarize here, noted that for breach of contract actions alleging purely economic injury the claims accrue in the “place of injury,” usually plaintiff’s residence:

… Supreme Court should not have found that the claims accrued in New York and were timely under New York’s six-year statute of limitations. In contract cases involving a purely economic injury, accrual is determined by the “place of injury,” which usually is determined by applying the “plaintiff-residence” rule; this rule asks where the plaintiff resides and where it feels the economic impact of the loss … . MLRN LLC v U.S. Bank, N.A., 2023 NY Slip Op 01748, First Dept 3-30-23

Practice Point: A breach of contract action alleging purely economic injury usually accrues in the “place of injury” which is usually where plaintiff resides.

 

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