Contract Law Archives - New York Appellate Digest

PLAINTIFF’S ATTORNEY’S EMAIL WAS AN ENFORCEABLE STIPULATION OF SETTLEMENT; PLAINTIFF’S SUBSEQUENT REFUSAL TO EXECUTE THE DOCUMENTS WAS A BREACH OF THE SETTLEMENT AGREEMENT (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined an email sent by plaintiff’s attorney constituted an enforceable stipulation of settlement, despite the fact that plaintiff subsequently refused to execute the documents:

… [T]he requirements for a valid and enforceable settlement agreement are satisfied here. The email from plaintiff’s lawyer to defendant’s lawyer contained the only two material terms of the agreement, i.e., defendant’s payment of $32,500 to plaintiff in exchange for plaintiff’s release of defendant from further liability; the email plainly manifested the parties’ mutual accord, i.e., “[plaintiff] has informed me that he would like to accept the $32,500 settlement [offered by defendant]”; and the lawyer representing the party to be bound, i.e., plaintiff, explicitly typed his name at the end of the email in a manner akin to a hand-signed letter. Nothing more was required, and plaintiff’s “subsequent refusal to execute form releases and a stipulation of discontinuance did not invalidate the agreement” … . To the contrary, plaintiff’s subsequent refusal to execute the necessary releases and stipulation constituted a breach of the parties’ valid settlement agreement. The court thus erred in denying defendant’s cross motion to enforce the settlement agreement … . Field v Pet Haven, Inc., 2021 NY Slip Op 04450, Fourth Dept 7-16-21

July 16, 2021/0 Comments/by Bruce Freeman

Contract Law, Foreclosure

ONCE PLAINTIFF ACCELERATED THE DEBT BY COMMENCING FORECLOSURE DEFENDANTS COULD EXERCISE THE RIGHT TO REDEEM THE MORTGAGE WITHOUT TRIGGERING A CONTRACTUAL PREPAYMENT PENALTY (FOURTH DEPT).

The Fourth Department determined Supreme Court properly ruled defendants could exercise their right of redemption in this foreclosure action without triggering the plaintiff’s contractual right to withhold consent to prepayment:

… [D]efendants were not seeking to prepay the amount due under the note, rather plaintiff accelerated the remaining amount due by instituting a foreclosure action and sending the demand letter.

We … reject plaintiff’s contention that he is entitled to the remaining amount due on the note, including all unaccrued interest payments. It is well settled that, once a foreclosure proceeding is commenced, “[a] mortgagor or other owner of the equity of redemption of a property subject to a judgment of foreclosure and sale may redeem the mortgage at any time prior to the foreclosure sale” … . “An unconditional tender of the full amount due is all that is required” to exercise the right of redemption … . Thus, defendants’ tender of payment of the entire mortgage principal and the accrued interest was all that was required “in response to [plaintiff’s] acceleration of the debt upon default [and, as noted,] did not constitute a ‘prepayment’ of the debt within the meaning of the prepayment clause set forth in the mortgage” … . Inasmuch as “the accelerated payment here is the result of plaintiff[-]mortgagee[] having elected to bring this foreclosure action, [he] may not exact a prepayment penalty” … . Virkler v V.S. Virkler & Son, Inc., 2021 NY Slip Op 04434, Fourth Dept 7-16-21

July 16, 2021/0 Comments/by Bruce Freeman

Contract Law

IN THE CONTEXT OF A CONTRACT IMPOSING CAPS FOR “NONWILLFUL” AND “WILLFUL” BREACHES, THE FACT THAT THE BREACH MAY HAVE BEEN DELIBERATE DID NOT RENDER THE BREACH “WILLFUL,” WHICH SHOULD BE INTERPRETED TO REFER TO “TRULY HARMFUL, CULPABLE CONDUCT;” SUPREME COURT REVERSED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the term “willful” in the context of the damages provision of the contract should not be interpreted simply to mean “deliberate,” but rather to refer to “truly culpable, harmful conduct.” Therefore the damages cap for nonwillful breaches applied:

In the context of this contract, the term “willful” must be understood to be “truly culpable, harmful conduct” … and not … “merely intentional nonperformance” … . As the Court of Appeals noted … , “[g]enerally in the law of contract damages, as contrasted with damages in tort, whether the breaching party deliberately rather than inadvertently failed to perform contractual obligations should not affect the measure of damages” and “[t]he policy which runs through the fabric of the law of contracts is to bind a party by what he agrees to do whether or not he intends to do what he agrees” … . The last clause in the limitation-of-liability provision refers to special damages in the context of breaches caused willfully or by gross negligence. Thus,”[u]nder the interpretation tool of ejusdem generis applicable to contracts as well as statutes, the phrase ‘willful acts’ [or ’caused willfully’ … ] should be interpreted here as referring to conduct similar in nature to the . . . ‘gross negligence’ with which it was joined . . .” … . MUFG Union Bank, N.A. v Axos Bank, 2021 NY Slip Op 04414, First Dept 7-15-21

July 15, 2021/0 Comments/by Bruce Freeman

Civil Procedure, Contract Law, Debtor-Creditor

THE FULL AMOUNT OF THE NOTE WAS NOT RECOVERABLE BECAUSE THERE WAS NO ACCELERATION CLAUSE; CLAIMS FOR UNPAID INSTALLMENTS DUE MORE THAN SIX YEARS BEFORE FILING SUIT WERE TIME-BARRED (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined the full amount of the note could not be recovered because it did not include an acceleration clause. In addition, claims for unpaid installments due more than six years before the filing of the lawsuit were time-barred:

“As a general rule, in the absence of an acceleration clause providing for the entire amount of a note to be due upon the default of any one installment, [a plaintiff is] only entitled to recover past due installments and [can]not unilaterally declare the note[] accelerated” … . “Rather, each default on each installment gives rise to a separate cause of action” … . Here, the record is devoid of any evidence of an acceleration clause and, thus, plaintiff was entitled to recover “only the amount of the installments past due at the time of trial” … . … “Where, as here, ‘a loan secured by a mortgage is payable in installments, separate causes of action accrue for each unpaid installment, and the statute of limitations begins to run on the date that each installment becomes due’ ” … . As defendant correctly asserted as a defense, inasmuch as plaintiff commenced this action on July 13, 2017, any claims for missed installments that accrued prior to July 13, 2011 were time-barred by the applicable statute of limitations … . Estate of Kathryn Essig v Essig, 2021 NY Slip Op 04301, Fourth Dept 7-9-21

July 9, 2021/0 Comments/by Bruce Freeman

Attorneys, Civil Procedure, Contract Law

A SETTLEMENT EMAIL WILL BE DEEMED SIGNED BY THE SENDING ATTORNEY WITHOUT RETYPING THE ATTORNEY’S NAME IN THE EMAIL (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Moulton, overruling precedent, determined it is no longer necessary for an attorney to retype his or her name in an email stipulation of settlement. As long as the attorney’s name appears in the “prepopulated” area of the email it will be deemed to have been signed by the attorney:

We now hold that this distinction between prepopulated and retyped signatures in emails reflects a needless formality that does not reflect how law is commonly practiced today. It is not the signoff that indicates whether the parties intended to reach a settlement via email, but rather the fact that the email was sent. Since 1999, New York State has joined other states in allowing, in most contexts, parties to accept electronic signatures in place of “wet ink” signatures. Section 304(2) of New York’s Electronic Signatures and Records Act (ESRA) provides: “unless specifically provided otherwise by law, an electronic signature may be used by a person in lieu of a signature affixed by hand. The use of an electronic signature shall have the same validity and effect as the use of a signature affixed by hand.” Moreover, the statutory definition of what constitutes an “electronic signature” is extremely broad under the ESRA, and includes any “electronic sound, symbol, or process, attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the record” (State Technology Law § 302[a]). We find that if an attorney hits “send” with the intent of relaying a settlement offer or acceptance, and their email account is identified in some way as their own, then it is unnecessary for them to type their own signature. Matter of Philadelphia Ins. Indem. Co. v Kendall, 2021 NY Slip Op 04284, First Dept 7-8-21

July 8, 2021/0 Comments/by Bruce Freeman

Contract Law, Real Property Law

THE COMPLAINT STATED A CAUSE OF ACTION FOR BREACH OF CONTRACT; THE COMPLAINT ALLEGED THE AGREEMENT TO CONVEY A FARM TO A PARTNERSHIP WAS SUBJECT TO AN EXCEPTION TO THE STATUTE OF FRAUDS FOR PART PERFORMANCE (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined the complaint stated a cause of action for breach of contract. The complaint alleged the agreement to convey a farm to a partnership was subject to an exception to the statute of frauds for part performance:

“General Obligations Law § 5-703 (4) has carved out an exception to the statute of frauds to permit courts of equity to compel the specific performance of agreements in cases of part performance” … . “A party’s partial performance of an alleged oral contract will be deemed sufficient to take such contract out of the statute of frauds only if it can be demonstrated that the acts constituting partial performance are unequivocally referable to said contract” … .

In his complaint, plaintiff alleges that he drastically changed his behavior after the agreement, including leaving his studies at Cornell University to devote his full attention to the partnership. Plaintiff also claims that he moved onto the subject premises, that he contributed financially to the business, which was struggling under burdensome mortgage payments, and that defendant referred to him as his business partner and co-owner of the farm. Plaintiff also made substantial improvements to both his residence on the farm, in which he resided full time, and to the farm itself. Given that all of these actions are unequivocally referable to the alleged oral agreement, we find that dismissal of the complaint under CPLR 3211 (a) (5) based upon the statute of frauds was improper … . Leonard v Cummins, 2021 NY Slip Op 04269, Third Dept 7-8-21

July 8, 2021/0 Comments/by Bruce Freeman

Contract Law, Family Law

THE SEPARATION AGREEMENT WAS NOT UNCONSCIONABLE, BUT THERE WAS A QUESTION WHETHER THE AGREEMENT WAS THE PRODUCT OF OVERREACHING, HEARING ORDERED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that, although the separation agreement was not unconscionable, there were questions of fact whether the agreement was the product of overreaching requiring a hearing:

While the defendant waived the right to maintenance, this provision, by itself, is insufficient to render the agreement unconscionable … .

Nevertheless, the Supreme Court should have held a hearing on the issue of whether the agreement should be set aside on the ground of overreaching. “Although courts may examine the terms of the agreement as well as the surrounding circumstances to ascertain whether there has been overreaching, the general rule is that if the execution of the agreement is fair, no further inquiry will be made” … . No actual fraud needs to be shown in order to set aside an agreement, but “the challenging party must show overreaching in the execution, such as the concealment of facts, misrepresentation, cunning, cheating, sharp practice, or some other form of deception” … .

Here, the agreement reflects a vast disparity between the parties’ assets at the time of its execution. Moreover, the defendant’s submissions suggest that the plaintiff may have unilaterally selected and paid the defendant’s attorney, and that negotiations between the parties’ attorneys went on for approximately six weeks prior to the defendant’s initial consultation with her attorney. Marinakis v Marinakis, 2021 NY Slip Op 04218, Second Dept 7-7-21

July 7, 2021/0 Comments/by Bruce Freeman

Contract Law, Trusts and Estates

DIFFERENCES BETWEEN AN ACTION TO IMPOSE A CONSTRUCTIVE TRUST AND AN ACTION ALLEGING UNJUST ENRICHMENT EXPLAINED (THIRD DEPT).

The Third Department explained the differences between an action to impose a constructive trust and an action alleging unjust enrichment, here in the context of a couple’s investment in building a new house and the allegation one party put in 800 hours of unpaid labor which benefitted the other party. The court held the constructive trust action was properly dismissed, but the unjust enrichment action should not have been dismissed:

Although the equitable claims of constructive trust and unjust enrichment are elementally related and involve overlapping proof, certain essential elements differ. “[A] constructive trust may be imposed when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest” … . “The elements of a constructive trust are a confidential relationship, a promise, a transfer in reliance on that promise and unjust enrichment” … .As relevant here, with respect to the promise element, it may be express or implied, as determined by the circumstances … . “Finally, a person . . . is unjustly enriched when retention of the benefit received would be unjust considering the circumstances of the transfer and the relationship of the parties” … .

Importantly, and as relevant here, “the constructive trust doctrine serves as a fraud-rectifying remedy rather than an intent-enforcing one” … . By contrast, an action based on unjust enrichment, which would only result in a money judgment rather than a judicially imposed lien, requires the plaintiff to establish that “(1) the other party was enriched, (2) at [the plaintiff’s] expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered” … . Clark v Locey, 2021 NY Slip Op 04176, Third Dept 7-1-21

July 1, 2021/0 Comments/by Bruce Freeman

Attorneys, Contract Law, Legal Malpractice, Negligence

THE LEGAL MALPRACTICE CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED ON THE GROUND THERE WAS NO WRITTEN RETAINER AGREEMENT AND THEREFORE NO ATTORNEY-CLIENT RELATIONSHIP; THE COMPLAINT ALLEGED WORDS AND ACTIONS SUFFICIENT TO ASSERT THE EXISTENCE OF AN ATTORNEY-CLIENT RELATIONSHIP (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the legal malpractice action should not have been dismissed on the ground there was no retainer agreement and therefore no attorney-client relationship:

As to the legal malpractice cause of action, the … defendants contend that they had no attorney-client relationship with the plaintiff. An attorney-client relationship may arise even in the absence of a written retainer agreement, and a court must look to the words and actions of the parties to determine whether such a relationship exists … . Here, according the plaintiff the benefit of every favorable inference, she sufficiently alleged the existence of an attorney-client relationship … . Edelman v Berman, 2021 NY Slip Op 04120, Second Dept 6-30-21

June 30, 2021/0 Comments/by Bruce Freeman

Attorneys, Contract Law, Legal Malpractice, Negligence

THE BREACH OF CONTRACT CAUSE OF ACTION ALLEGING DEFENDANT ATTORNEY OVERBILLED SHOULD HAVE SURVIVED THE MOTION TO DISMISS DESPITE THE DISMISSAL OF THE LEGAL MALPRACTICE CAUSE OF ACTION (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the cause of action for breach of contract alleging overbilling by defendant attorney (Drexel) should have survived the motion to dismiss, even though the legal malpractice cause of action was properly dismissed:

… [T]he Supreme Court should have denied that branch of [defendant-attorney] Drexel’s motion which was to dismiss so much of the first breach of contract cause of action as alleged that Drexel overbilled and charged the plaintiff for unnecessary legal services … . In opposition to that branch of Drexel’s motion which was to dismiss the first breach of contract cause of action, the plaintiff submitted an affidavit in which he averred that Drexel double-billed him for legal services in the sum of $291,000 and charged him at least $70,000 for unnecessary legal services. Contrary to Drexel’s contention, the plaintiff’s claim that Drexel overbilled and charged him for unnecessary legal services is distinct from a legal malpractice cause of action, as the plaintiff’s claim does not challenge the quality of Drexel’s work … . Dubon v Drexel, 2021 NY Slip Op 04119, Second Dept 6-30-21

June 30, 2021/0 Comments/by Bruce Freeman

PLAINTIFF’S ATTORNEY’S EMAIL WAS AN ENFORCEABLE STIPULATION OF SETTLEMENT; PLAINTIFF’S SUBSEQUENT REFUSAL TO EXECUTE THE DOCUMENTS WAS A BREACH OF THE SETTLEMENT AGREEMENT (FOURTH DEPT).

ONCE PLAINTIFF ACCELERATED THE DEBT BY COMMENCING FORECLOSURE DEFENDANTS COULD EXERCISE THE RIGHT TO REDEEM THE MORTGAGE WITHOUT TRIGGERING A CONTRACTUAL PREPAYMENT PENALTY (FOURTH DEPT).

IN THE CONTEXT OF A CONTRACT IMPOSING CAPS FOR “NONWILLFUL” AND “WILLFUL” BREACHES, THE FACT THAT THE BREACH MAY HAVE BEEN DELIBERATE DID NOT RENDER THE BREACH “WILLFUL,” WHICH SHOULD BE INTERPRETED TO REFER TO “TRULY HARMFUL, CULPABLE CONDUCT;” SUPREME COURT REVERSED (FIRST DEPT).

THE FULL AMOUNT OF THE NOTE WAS NOT RECOVERABLE BECAUSE THERE WAS NO ACCELERATION CLAUSE; CLAIMS FOR UNPAID INSTALLMENTS DUE MORE THAN SIX YEARS BEFORE FILING SUIT WERE TIME-BARRED (FOURTH DEPT).

A SETTLEMENT EMAIL WILL BE DEEMED SIGNED BY THE SENDING ATTORNEY WITHOUT RETYPING THE ATTORNEY’S NAME IN THE EMAIL (FIRST DEPT).

THE COMPLAINT STATED A CAUSE OF ACTION FOR BREACH OF CONTRACT; THE COMPLAINT ALLEGED THE AGREEMENT TO CONVEY A FARM TO A PARTNERSHIP WAS SUBJECT TO AN EXCEPTION TO THE STATUTE OF FRAUDS FOR PART PERFORMANCE (THIRD DEPT).

THE SEPARATION AGREEMENT WAS NOT UNCONSCIONABLE, BUT THERE WAS A QUESTION WHETHER THE AGREEMENT WAS THE PRODUCT OF OVERREACHING, HEARING ORDERED (SECOND DEPT).

DIFFERENCES BETWEEN AN ACTION TO IMPOSE A CONSTRUCTIVE TRUST AND AN ACTION ALLEGING UNJUST ENRICHMENT EXPLAINED (THIRD DEPT).

THE LEGAL MALPRACTICE CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED ON THE GROUND THERE WAS NO WRITTEN RETAINER AGREEMENT AND THEREFORE NO ATTORNEY-CLIENT RELATIONSHIP; THE COMPLAINT ALLEGED WORDS AND ACTIONS SUFFICIENT TO ASSERT THE EXISTENCE OF AN ATTORNEY-CLIENT RELATIONSHIP (SECOND DEPT).

THE BREACH OF CONTRACT CAUSE OF ACTION ALLEGING DEFENDANT ATTORNEY OVERBILLED SHOULD HAVE SURVIVED THE MOTION TO DISMISS DESPITE THE DISMISSAL OF THE LEGAL MALPRACTICE CAUSE OF ACTION (SECOND DEPT).

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