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THE BANK IN THIS FORECLOSURE ACTION DID NOT DEMONSTRATE IT WAS THE HOLDER OF THE NOTE AND DID NOT DEMONSTRATE POSSESSION OF THE NOTE AT THE TIME THE ACTION WAS BROUGHT BECAUSE THE NOTE ITSELF WAS NOT ATTACHED TO THE LOAN SERVICER’S AFFIDAVIT; THE BANK’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff bank should not have been awarded summary judgment in this foreclosure action because it did not demonstrate standing to foreclose:

… [T]here was no evidence that the plaintiff is the assignee of the note, and a triable issue of fact exists as to whether the plaintiff was the holder of the note at the time this action was commenced. A promissory note is a negotiable instrument within the meaning of the Uniform Commercial Code (see UCC 3-104[2][d] …) “holder” is “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession” (UCC 1-201[b] [21][A] …). In the present case, there is a triable issue of fact as to whether the note was properly specially endorsed by an allonge “so firmly affixed thereto as to become a part thereof” when it came into the possession of the plaintiff (UCC 3-202[2] …).

Further, the affidavit of Verdooren [loan servicer employee] and the accompanying business records were insufficient to establish the plaintiff’s standing … . Although the foundation for the admission of a business record may be provided by the testimony of the custodian, “it is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” ( … see CPLR 4518[a]). Here, although Verdooren stated that Wells Fargo had possession of the note on the plaintiff’s behalf at the time the action was commenced, the documents attached to Verdooren’s affidavit failed to establish this fact. Bank of N.Y. Mellon Trust Co., N.A. v Andersen, 2022 NY Slip Op 05827, Second Dept 10-19-22

Practice Point: If the defendant raises the lack-of-standing defense in a foreclosure action, the bank must demonstrate the plaintiff was the assignee of the note and the note was in its possession when the action was brought. Here the plaintiff did not show the note was properly endorsed by an attached allonge when it came into plaintiff’s possession and the note was not attached to the loan servicer’s affidavit, rendering the affidavit hearsay.

 

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IN THIS REAR-END TRAFFIC ACCIDENT CASE, WHERE PLAINTIFF WAS AN INNOCENT PASSENGER, DEFENDANTS’ FAILURE-TO-STATE-A-CAUSE-OF-ACTION AFFIRMATIVE DEFENSE SHOULD NOT HAVE BEEN STRUCK BECAUSE THE MOTION TO STRIKE AMOUNTED TO TESTING THE SUFFICIENCY OF PLAINTIFF’S OWN CLAIM (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the “failure to state a cause of action” affirmative defense in this traffic accident case should not have been struck. Plaintiff was a passenger in a car rear-ended by defendants. The court noted that any comparative negligence among defendant-drivers does not preclude summary judgment on liability in favor of a non-negligent passenger:

The right of an innocent passenger to summary judgment on the issue of whether he or she was at fault in the happening of an accident is not restricted by potential issues of comparative negligence as between two defendant drivers (see CPLR 3212[g] …). …

Supreme Court should have denied that branch of the plaintiff’s motion which was, in effect, pursuant to CPLR 3211(b) to dismiss the defendants’ first affirmative defense, alleging that the complaint fails to state a cause of action. “[N]o motion by the plaintiff lies under CPLR 3211(b) to strike the defense [of failure to state a cause of action], as this amounts to an endeavor by the plaintiff to test the sufficiency of his or her own claim” … . Ochoa v Townsend, 2022 NY Slip Op 05854, Second Dept 10-19-22

Practice Point: The plaintiff’s motion to strike defendants’ failure-to-state-a-cause-of-action affirmative defense should not have been granted because the motion amounts to plaintiff’s testing the sufficiency of his or her claim.

Practice Point: In a traffic-accident case, comparative negligence among defendant drivers does not preclude summary judgment on liability in favor of an innocent passenger.

 

 

IF THE NOTE OF ISSUE HAS BEEN VACATED, THE CPLR 3404 REQUIREMENTS FOR RESTORING THE ACTION TO THE CALENDAR DO NOT APPLY; THERFORE THE MOTION TO RESTORE NEED NOT BE MADE WITHIN A YEAR AND NEED NOT DEMONSTRATE A MERITIORIOUS CAUSE OF ACTION, REASONABLE EXCUSE, NO INTENT TO ABANDON, AND LACK OF PREJUDICE TO DEFENDANT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion to restore the action to the active calendar should have been granted. Although the action had been stricken from the trial calendar more than a year before, the requirements of CPLR 3404 (demonstration of a meritorious cause of action, reasonable excuse, no intent to abandon and lack of prejudice to defendant) did not apply because the note of issue had been vacated:

Supreme Court erred in denying the plaintiff’s renewed motion to restore the action to the active calendar. While a party moving to restore an action more than one year after it was stricken from the trial calendar pursuant to CPLR 3404 must demonstrate a meritorious cause of action, a reasonable excuse for the delay in prosecuting the action, a lack of intent to abandon the action, and a lack of prejudice to the defendant … , CPLR 3404 did not apply here because the case reverted to its pre-note of issue status once the note of issue was vacated … . “[S]ince this action could not properly be marked off pursuant to CPLR 3404, the plaintiff was not obligated to move to restore within any specified time frame,” or to establish his entitlement to restoration of the action under the standard applicable to automatic dismissals pursuant to CPLR 3404 … . Thus, in the absence of a 90-day demand pursuant to CPLR 3216, the plaintiff’s renewed motion should have been granted … . Insuasti v La Boom Disco, Inc., 2022 NY Slip Op 05684, Second Dept 10-12-22

Practice Point: Once an action has been stricken from the trial calendar, CPLR 3404 requires that a motion to restore be made within a year and demonstrate a meritorious cause of action, reasonable excuse, no intent to abandon, and lack of prejudice to defendant. However, CPLR 3404 does not apply where, as here, the note of issue has been vacated and no 90-day demand pursuant to CPLR 3216 has been made.

 

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THE JUDGE SHOULD HAVE GRANTED DEFENDANTS’ ATTORNEY’S REQUEST FOR AN INTERPRETER; A NEW HEARING TO DETERMINE THE VALIDITY OF SERVICE OF PROCESS IN THIS FORECLOSURE ACTION WAS REQUIRED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants’ attorney’s request for an interpreter should have been granted. Defendant Rowshan claimed she was never served in this foreclosure action and she testified at the hearing on the validity of the service of process:

Pursuant to 22 NYCRR 217.1(a), “[i]n all civil . . . cases, when a court determines that a party . . . is unable to understand and communicate in English to the extent that he or she cannot meaningfully participate in the court proceedings, the clerk of the court or another designated administrative officer shall schedule an interpreter . . . from an approved list maintained by the Office of Court Administration.” “‘The determination whether a court-appointed interpreter is necessary lies within the sound discretion of the trial court, which is in the best position to make the fact-intensive inquiries necessary to determine whether there exists a language barrier'” so as to require an interpreter … .

Here, the record reflects that Rowshan was unable to meaningfully participate in the hearing due to her limited capacity to understand and communicate in English … . In multiple instances throughout her testimony, Rowshan’s testimony was not responsive to the questions posed to her, Rowshan did not know the meaning of simple words, and she made confusing statements demonstrating her limitations in understanding English. * * *

Since the Supreme Court determined, after the hearing, that Rowshan’s testimony was lacking in credibility due to “contradictions, misstatements and inconsistencies,” the record reflects that the denial of the defendants’ application for an interpreter may have influenced the court’s determination. HSBC Bank USA, N.A. v Parvez, 2022 NY Slip Op 05683, Second Dept 10-12-22

Practice Point: Here the judge’s failure to grant defendants’ attorney’s request for an interpreter required reversal and a new hearing. The defendant’s testimony revealed her limited understanding of English and the court’s ruling was based upon a determination of her credibility.

 

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AN ORDER DISMISSING AN ACTION DOES NOT CONCLUDE THE ACTION WHICH CAN ONLY BE ACCOMPLISHED BY FINAL JUDGMENT ENTERED BY THE CLERK; HERE, ALTHOUGH THE ACTION HAD BEEN DISMISSED BY AN ORDER, ABSENT A JUDGMENT THE ACTION REMAINED VIABLE AND THE COURT SHOULD HAVE CONSIDERED PLAINTIFF’S POST-DISMISSAL MOTION ON THE MERITS (SECOND DEPT).

The Second Department, reversing Supreme Court, in a full-fledged opinion by Justice Dillon, determined: (1) an order dismissing an action does not terminate the action which can only be accomplished by a judgment; and (2) here, although the action had been dismissed, the action was still viable in the absence of a judgment and plaintiff’s motion for the appointment of a receiver should have been considered on the merits:

… [A]n order of dismissal is not the same as a judgment under CPLR 5011. CPLR 5011 is routinely utilized by practitioners and courts without controversy, as its mechanics are well-understood and not particularly complicated. A judgment is a paper that reflects the resolution of an action or proceeding … . A judgment may be either interlocutory or final. It “shall refer to, and state the result of, the verdict or decision, or recite the default upon which it is based” (CPLR 5011 …). A judgment is entered by the clerk at the conclusion of an action or proceeding (see CPLR 5016[a]). An action is not actually concluded until a final judgment is entered … . HSBC Bank USA, N.A. v Rubin, 2022 NY Slip Op 05682, Second Dept 10-12-22

Practice Point: An order dismissing an action does not conclude the action. Only a final judgment entered by the clerk terminates an action. Here there was an order dismissing the action but no judgment had been entered. Therefore, plaintiff’s post-dismissal motion should have been considered on the merits.

 

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A QUESTION OF FACT WHETHER THE PARTIES AGREED TO ARBITRATE THE DISPUTE REQUIRES A FRAMED-ISSUE HEARING; THE PROPER PROCEDURE IF ARBITRATION IS REQUIRED IS TO STAY THE UNDERLYING SUIT, NOT DISMISS IT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined: (1)  there was a question of fact whether the parties agreed to arbitrate the dispute, requiring a framed-issue hearing; and (2) arbitration is not a defense to an action; so where arbitration is required the underlying action is stayed, not dismissed:

… [Q]uestions of fact exist as to whether the parties agreed to arbitrate the instant dispute, which questions require a hearing (see CPLR 7503[a] …). We therefore remit the matter … for a framed-issue hearing, and thereafter, a new determination of that branch of [the] motion which was pursuant to CPLR 7503 to compel arbitration.

… Supreme Court should have denied [the] motion which was pursuant to CPLR 3211(a)(1) to dismiss the … complaint based upon the arbitration agreement. “An agreement to arbitrate is not a defense to an action,” and “[t]hus, it may not be the basis for a motion to dismiss” … . The proper remedy, should a valid agreement to arbitrate exist, is an order compelling arbitration, which operates to stay the action (see CPLR 7503[a] …). Ferarro v East Coast Dormer, Inc., 2022 NY Slip Op 05679, Second Dept 10-12-22

Practice Point: If there is a question of fact whether the parties agreed to arbitrate a dispute, a framed-issue hearing is required. If there is a valid agreement to arbitrate, the underlying action should be stayed pending the arbitration, not dismissed.

 

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THE COMPLAINT DID NOT STATE A CAUSE OF ACTION FOR FRAUDULENT INDUCEMENT BECAUSE IT DID NOT ADEQUATELY ALLEGE “OUT OF POCKET” DAMAGES (FIRST DEPT).

The First Department, reversing Supreme Court, determined the complaint did not state a cause of action for fraudulent inducement because it did not allege “out of pocket” damages:

… [T]he complaint fails to plead a cause of action for fraudulent inducement because it does not adequately allege that plaintiff suffered any ascertainable out-of-pocket pecuniary damages resulting from the alleged fraud … . Although plaintiff alleges unspecified reputational damages and lost revenue or profits, these allegations are not sufficient to sustain a cause of action based on fraud … . Similarly, plaintiff fails to allege that it paid any particular amount to acquire the G&P law practice or name, alleging only the value of G&P’s practice when plaintiff acquired it; this allegation is insufficient to measure plaintiff’s damages … . Furthermore, although plaintiff states that G&P “carried undisclosed liabilities,” it does not elaborate on what those might be…. . CKR Law LLP v Dipaolo, 2022 NY Slip Op 05587, First Dept 10-6-22

Practice Point: A complaint alleging fraudulent inducement does not state a cause of action unless it adequately alleges “out of pocket” damages.

 

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THE FRAUD CAUSES OF ACTION SHOULD HAVE BEEN DISMISSED BECAUSE “OUT OF POCKET” DAMAGES WERE NOT DEMONSTRATED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the fraud causes of action should have been dismissed because plaintiffs failed to demonstrate “out of pocket” damages:

Defendants are entitled to summary judgment because plaintiffs failed to show the “out of pocket” damages required for a fraud claim (see e.g. Kumiva Group, LLC v Garda USA Inc., 146 AD3d 504, 506 [1st Dept 2017]). Plaintiffs failed to submit evidence of the value of the … stock they received … . Danco Enters., LLC v Livexlive Media, Inc., 2022 NY Slip Op 05589, First Dept 10-5-22

Practice Point: Here the fraud causes of action were dismissed because plaintiffs did not demonstrate “out of pocket” damages. Decisions relied upon by the plaintiffs concerning exceptions to the “out-of-pocket” damages rule were deemed inapplicable.

 

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THE HOSTILE WORK ENVIRONMENT ALLEGATIONS STATED CLAIMS UNDER THE STATE AND CITY HUMAN RIGHTS LAW (HRL); THE SEXUAL HARASSMENT ALLEGATIONS STATED A CLAIM UNDER ONLY THE CITY HRL; THE CONTINUING VIOLATION DOCTRINE DID NOT APPLY TO ISOLATED STATEMENTS MADE OUTSIDE THE STATUTE OF LIMITATIONS (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined plaintiff stated a hostile work environment claim under the state and city Human Rights Law (HRL) and sexual harassment claim under the city, but not the state, HRL: The isolated statement made outside the statute of limitations were not subject to the continuing violation doctrine:

Plaintiff’s allegations, that several times a week over a period of at least two years, plaintiff’s coworker spoke to him in a mock Chinese accent, told plaintiff to “open your eyes,” and tormented him about his mandatory drug testing in a sexually and racially charged manner, are sufficient to state a hostile work environment claim based on national origin discrimination under both the State and City HRLs … .

… [T]he allegations that his coworker regularly made statements about plaintiff’s penis size when plaintiff took bathroom breaks or reported for drug testing “fall within the broad range of conduct that falls between ‘severe and pervasive’ on the one hand and a ‘petty slight or trivial inconvenience’ on the other,” such that they are sufficient under the City HRL but not under the State HRL … . The continuing violation doctrine does not apply to the isolated statements made outside the limitations period because they do not form part of “a single continuing pattern of unlawful conduct extending into the [limitations] period . . . , but rather discrete events, involving different actors, occurring months to years apart” … . Lum v Consolidated Edison Co. of N.Y., Inc., 2022 NY Slip Op 05594, First Dept 10-6-22

Practice Point: The allegations that a coworker spoke using a mock Chinese accent and told plaintiff “open your eyes” stated hostile work environment claims under the state and city Human Rights Law (HRL). The allegations that a coworker made comments about the size of plaintiff’s penis stated a sexual harassment claim under the city, but not the state, HRL. Isolated statements made outside the statute of limitations were not subject to the continuing violation doctrine.

 

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THE PARTIES HAD ALREADY STIPULATED TO RESTORE THE ACTION TO THE CALENDAR; THE JUDGE SHOULD HAVE GRANTED PLAINTIFF’S MOTION TO VACATE THE DISMISSAL OF THE ACTION FOR FAILURE TO APPEAR AT CONFERENCES OR OUTLINE REMAINING DISCOVERY (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff’s motion to vacate the order dismissing the action based on plaintiff’s failure to appear at conferences or file a stipulation outlining discovery should have been granted. The parties had already stipulated to restore the action to the calendar and the court should have enforced the stipulation:

The motion court improvidently exercised its discretion when it denied plaintiff’s motion to vacate the order for failure to appear at conferences or to file a stipulation outlining the remaining discovery … . Defendants had already stipulated to restore the matter to the calendar, and stipulations between the parties are binding on the parties and generally enforced by the courts … . Moreover, the assertion by plaintiff’s counsel that two of the court’s notices were inadvertently routed to counsel’s spam folder constitutes an excusable law office failure … . Nor is there evidence in the record that counsel has engaged in a pattern of dilatory behavior … . Finally, plaintiff’s pleadings, along with the depositions of the witnesses, established a potentially meritorious cause of action … . Navarro v Joy Constr. Corp., 2022 NY Slip Op 05602, First Dept 10-6-22

Practice Point: Here excusable law office failure explained plaintiff’s failure to appear at conferences or outline remaining discovery. The parties had already stipulated to restore the action to the calendar. Plaintiff’s motion to vacate the dismissal of the action should have been granted. The parties’ stipulation should have been enforced, not ignored, by the judge.

 

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