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QUESTION OF FACT WHETHER GENERAL RELEASE PROCURED BY FRAUD OR IN UNFAIR CIRCUMSTANCES.

The Second Department determined questions of fact whether a general release from liability was procured by fraud precluded summary judgment in favor of the defendant in this Labor Law (fall from scaffold) action:

“A release is a contract, and its construction is governed by contract law” … . In general, “a valid release constitutes a complete bar to an action on a claim which is the subject of the release” … . “A release may be invalidated, however, for any of the traditional bases for setting aside written agreements, namely, duress, illegality, fraud, or mutual mistake'” … . Moreover, there is a requirement that a release covering both known and unknown injuries be ” fairly and knowingly made'” … .

“A party may move for judgment dismissing one or more causes of action asserted against him [or her] on the ground that . . . the cause of action may not be maintained because of . . . [a] release” (CPLR 3211[a][5]). However, a motion pursuant to CPLR 3211(a)(5) to dismiss a complaint on the basis of a release “should be denied where fraud or duress in the procurement of the release is alleged” … .

Here, in support of their motion to dismiss the complaint, the defendants submitted a general release executed by the plaintiff, which, by its terms, barred the instant action against them … . However, the plaintiff’s allegations were nevertheless sufficient to support a possible finding that the defendants procured the release by means of fraud and that the release was signed by the plaintiff ” under circumstances which indicate unfairness'” … . Pacheco v 32-42 55th St. Realty, LLC, 2016 NY Slip Op 03727, 2nd Dept 5-11-16

LABOR LAW-CONSTRUCTION LAW (QUESTION OF FACT WHETHER GENERAL RELEASED PROCURED BY FRAUD OR IN UNFAIR CIRCUMSTANCES)/CONTRACT LAW (GENERAL RELEASE, QUESTION OF FACT WHETHER GENERAL RELEASED PROCURED BY FRAUD OR IN UNFAIR CIRCUMSTANCES)/RELEASES (GENERAL RELEASE, QUESTION OF FACT WHETHER GENERAL RELEASED PROCURED BY FRAUD OR IN UNFAIR CIRCUMSTANCES)/FRAUD (GENERAL RELEASE, QUESTION OF FACT WHETHER GENERAL RELEASED PROCURED BY FRAUD OR IN UNFAIR CIRCUMSTANCES)

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DEFENDANT, WHICH INSTALLED CHRISTMAS DISPLAYS AT A MALL, DID NOT OWE A DUTY TO PLAINTIFF STEMMING FROM ITS CONTRACT WITH THE MALL; SINCE PLAINTIFF ALLEGED ONLY ONE ESPINAL EXCEPTION TO SUPPORT LIABILITY STEMMING FROM THE CONTRACT, DEFENDANT NEED ONLY ADDRESS THAT ONE EXCEPTION IN ITS MOTION FOR SUMMARY JUDGMENT.

The Second Department, reversing Supreme Court, determined defendant American Christmas did not owe a duty to plaintiff in this trip and fall case. American Christmas contracted with a shopping mall to install Christmas displays. After the installation contract was completed, plaintiff allegedly tripped over electrical wires taped to the floor. There was evidence American Christmas put up stanchions to prevent people from crossing over the cords. Plaintiff alleged American Christmas was liable in tort arising from the contract with the mall because it launched an instrument of harm. The court noted that because plaintiff only alleged one of the three possible criteria for liability to third persons arising from a contract, the defendant was only required to address that single theory in its motion for summary judgment:

Here, American Christmas demonstrated its prima facie entitlement to judgment as a matter of law by offering proof that the plaintiff was not a party to its holiday display contracts with the Mall Owner, and that it thus owed no duty of care to the plaintiff. American Christmas also established, prima facie, that the one Espinal exception alleged by the plaintiff that would give rise to a duty of care does not apply in this case (see Espinal v Melville Snow Contrs., 98 NY2d at 141-142). …

Inasmuch as the plaintiff did not allege facts that would establish the possible applicability of the second or third [Espinal] exception, American Christmas was not required to affirmatively demonstrate that these exceptions did not apply in order to establish its prima facie entitlement to judgment as a matter of law … . Parrinello v Walt Whitman Mall, LLC, 2016 NY Slip Op 03481, 2nd Dept 3-4-16

NEGLIGENCE (DEFENDANT, WHICH INSTALLED CHRISTMAS DISPLAYS AT A MALL, DID NOT OWE A DUTY TO PLAINTIFF STEMMING FROM ITS CONTRACT WITH MALL; SINCE PLAINTIFF ALLEGED ONLY ONE ESPINAL EXCEPTION TO SUPPORT LIABILITY STEMMING FROM THE CONTRACT, DEFENDANT NEED ONLY ADDRESS THAT ONE EXCEPTION IN ITS MOTION FOR SUMMARY JUDGMENT)/CONTRACT LAW (DEFENDANT, WHICH INSTALLED CHRISTMAS DISPLAYS AT A MALL, DID NOT OWE A DUTY TO PLAINTIFF STEMMING FROM ITS CONTRACT WITH MALL; SINCE PLAINTIFF ALLEGED ONLY ONE ESPINAL EXCEPTION TO SUPPORT LIABILITY STEMMING FROM THE CONTRACT, DEFENDANT NEED ONLY ADDRESS THAT ONE EXCEPTION IN ITS MOTION FOR SUMMARY JUDGMENT)/CIVIL PROCEDURE (DEFENDANT, WHICH INSTALLED CHRISTMAS DISPLAYS AT A MALL, DID NOT OWE A DUTY TO PLAINTIFF STEMMING FROM ITS CONTRACT WITH MALL; SINCE PLAINTIFF ALLEGED ONLY ONE ESPINAL EXCEPTION TO SUPPORT LIABILITY STEMMING FROM THE CONTRACT, DEFENDANT NEED ONLY ADDRESS THAT ONE EXCEPTION IN ITS MOTION FOR SUMMARY JUDGMENT)/ESPINAL EXCEPTIONS (DEFENDANT, WHICH INSTALLED CHRISTMAS DISPLAYS AT A MALL, DID NOT OWE A DUTY TO PLAINTIFF STEMMING FROM ITS CONTRACT WITH MALL; SINCE PLAINTIFF ALLEGED ONLY ONE ESPINAL EXCEPTION TO SUPPORT LIABILITY STEMMING FROM THE CONTRACT, DEFENDANT NEED ONLY ADDRESS THAT ONE EXCEPTION IN ITS MOTION FOR SUMMARY JUDGMENT)

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BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION.

The Court of Appeals, in a full-fledged opinion by Judge Stein, determined, pursuant to the language and provisions of the relevant excess insurance policies, (1) an “all sums,” as opposed to a “pro-rata,” allocation applies, and (2) vertical, as opposed to horizontal, exhaustion of available policies applies. The underlying claims relate to asbestos exposure over a period of years in the manufacture of pumps:

[The “all sums”] theory of allocation “permits the insured to ‘collect its total liability . . . under any policy in effect during’ the periods that the damage occurred,” up to the policy limits … . The burden is then on the insurer against whom the insured recovers to seek contribution from the insurers that issued the other triggered policies … . * * *

… [V]ertical exhaustion is more consistent than horizontal exhaustion with … language tying attachment of the excess policies specifically to identified policies that span the same policy period. Further, vertical exhaustion is conceptually consistent with an all sums allocation, permitting the Insured to seek coverage through the layers of insurance available for a specific year … . Matter of Viking Pump, Inc., 2016 NY Slip Op 03413, CtApp 5-3-16

 

INSURANCE LAW (BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION)/CONTRACT LAW (INSURANCE POLICIES, BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION)/ALL SUMS ALLOCATION (INSURANCE POLICIES, BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION)/VERTICAL EXHAUSTION  (INSURANCE POLICIES, BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION)/EXCESS INSURANCE (ASBESTOS INJURY, BASED UPON THE POLICY LANGUAGE, AN ALL SUMS ALLOCATION AND VERTICAL EXHAUSTION APPLY TO EXCESS INSURANCE POLICIES IN THIS ASBESTOS INJURY ACTION)

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DISABLED POLICE OFFICER SUFFICIENTLY ALLEGED BREACHES OF A DUTY OF CARE BY THE CITY AND BY HEALTH CARE MANAGERS WHICH CONTRACTED WITH THE CITY TO MANAGE PLAINTIFF’S HEALTH CARE.

The Fourth Department, reversing Supreme Court, determined plaintiff, a disabled police officer, had sufficiently alleged breaches of a duty of care by the city and by the health care providers who contracted with the city to manage plaintiff's health care. With respect to the contracting health care managers, the court wrote:

It is well established that there are situations in which “a party who enters into a contract to render services may be said to have assumed a duty of care—and thus be potentially liable in tort—to third persons: [i.e.,] where the contracting party, in failing to exercise reasonable care in the performance of [the party's] duties, launche[s] a force or instrument of harm' ” … , and thereby “creates an unreasonable risk of harm to others, or increases that risk” … . Indeed, “[t]his principle recognizes that the duty to avoid harm to others is distinct from the contractual duty of performance” … . Accepting plaintiff's allegations as true … , we conclude that the amended complaint alleges that those defendants assumed a duty of care to plaintiff and that, in failing to exercise reasonable care in the performance of their duties, they increased the risk of harm to plaintiff. Vassenelli v City of Syracuse, 2016 NY Slip Op 03344, 4th Dept 4-29-16


REFORMATION OF CONTRACT TO CORRECT THE NAMING OF THE WRONG PARTY TO BE INDEMNIFIED, A MUTUAL MISTAKE, SHOULD HAVE BEEN ALLOWED.

The First Department, reversing Supreme Court, determined an indemnification agreement could be reformed on the grounds of mutual mistake. The wrong party was named as the “owner” and, therefore, the true owner was not named in the hold harmless clause of the indemnification agreement:

“A claim for reformation of a written agreement must be grounded upon either mutual mistake or fraudulently induced unilateral mistake” … . To succeed, the party asserting mutual mistake must establish by “clear, positive and convincing evidence” that the agreement does not accurately express the parties' intentions or previous oral agreement … .

Parol evidence may be used … , and reformation is an appropriate remedy where the wrong party was named in the contract … . On the record before us, plaintiffs clearly and convincingly established that K & K intended to indemnify the true owner, 313 West, and that, as a result of mutual mistake, the agreement misidentified Solil, the managing agent, rather than 313 West itself, as the “Owner” of the property where the work was to be performed. 313-315 W. 125th St. L.L.C. v Arch Specialty Ins. Co., 2016 NY Slip Op 03105, 1st Dept 4-26-16


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ARBITRABLE CLAIMS WHICH ARE INEXTRICABLY TIED TO CLAIMS ALREADY IN COURT SHOULD BE LITIGATED IN COURT.

The First Department, over a two-justice dissent, reversing Supreme Court, determined the contract disputes should be litigated, despite arbitration clauses in some of the related agreements. One of the agreements, the Quennington Agreement, included a forum selection clause which designated the courts as the sole forum for dispute resolution. The First Department held that the forum selection clause demonstrated the intent of the parties, and the fact the Quennington Agreement had been terminated by a subsequent agreement did not contradict that intent. The issues which were arguably subject to arbitration under the other agreements were deemed to be intertwined with the issues which were already in court pursuant to the Quennington Agreement:

Although this Court does not appear to have directly addressed the issue, the other Departments have held that, where some of a group of claims are covered by an arbitration agreement, it is appropriate to litigate the entire group in court if all of the claims were already asserted in court and the claims not subject to arbitration would be “inextricably bound together” with the claims that are subject to arbitration … .

Here, one could argue that all of the claims in the complaint arose under the Quennington Agreement … . … [E]ven if some of the claims could be said to arise out of the Quennington Agreement, and others out of [another agreement], they are cut from the same cloth, and are, unquestionably, inextricably bound together and therefore should be litigated in court. Garthon Bus. Inc. v Stein, 2016 NY Slip Op 03102, 1st Dept 4-26-16


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MOTION TO AMEND PLEADINGS BASED ON TRIAL EVIDENCE OF MUTUAL MISTAKE PROPERLY GRANTED, CRITERIA EXPLAINED.

The Third Department determined Supreme Court properly allowed the pleadings to be amended to conform to the evidence at trial. The trial evidence indicated the contract at issue was based upon mutual mistake rather than deliberate misrepresentation. The motion to amend the pleadings to allege mutual mistake was properly granted and the contract was properly rescinded on that ground:

 

The burden was upon defendant, as the party opposing plaintiff's motion, to establish that it was “hindered in the preparation of [its] case or . . . prevented from taking some measure in support of [its] position” … . That burden cannot be met when the difference between the original pleading and the evidence results from “proof admitted at the instance or with the acquiescence of [the opposing] party” .. . Here, the proof upon which plaintiff's motion was based was the testimony of defendant's president that she acted mistakenly in providing the wrong sales figures … . Given this testimony, defendant cannot have been surprised or unduly prejudiced by plaintiff's assertion of the theory of mutual mistake; thus, leave to conform the pleadings to the proof was properly granted … . Lakshmi Grocery & Gas, Inc. v GRJH, Inc., 2016 NY Slip Op 02891, 3rd Dept 4-14-16


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CONSTRUCTION CONTRACT PROVISION MAKING LITIGATION THE SOLE METHOD FOR RESOLVING A DISPUTE RENDERED VOID BY GENERAL BUSINESS LAW. 

The Third Department determined the General Business Law rendered void a provision in a construction subcontract mandating litigation as the sole method for resolving a dispute:

… General Business Law § 757 (3) … unambiguously voids and renders unenforceable any contractual provision that makes expedited arbitration unavailable to one or both parties. … [T]he obvious function of section 6.2 of the subcontract is to establish litigation as the sole legal option for the resolution of disputes under the subcontract, which, in turn, denies both parties the opportunity to arbitrate such claims. Inasmuch as General Business Law § 757 (3) clearly operates to void and render unenforceable the subcontract's dispute resolution provision, we find that Supreme Court properly denied petitioner's application to stay arbitration. Matter of Capital Siding & Constr., LLC (Alltek Energy Sys., Inc.), 2016 NY Slip Op 02878, 3rd Dept 4-14-16


DEFENDANTS LIABLE UNDER A GRATUITOUS BAILMENT THEORY FOR DESTROYED GOODS; PROPER WAY TO CALCULATE DAMAGES FOR THE DESTROYED GOODS UNDER A CONTRACT THEORY EXPLAINED.

The Second Department determined the verdict in this bailment/contract action should not have been set aside as a matter of law under a gratuitous bailment theory, but was properly set aside because the damages amount was not supported by the evidence. A new trial was ordered on damages only. The plaintiff is a horse breeder and defendants were storing frozen semen from plaintiff's stallion free of charge. Somehow the semen thawed and was therefore destroyed. The Second Department held the defendants were liable under a gratuitous bailment theory because the failure to return the stored goods is evidence of gross negligence. The court went on to find that the market value of the portion of the stored semen which was not under contract for sale had not been proven:

In a gratuitous bailment, the bailee is only liable to the bailor for the bailee's gross negligence. However, “the failure to return the object bailed establishes a prima facie case of gross negligence, requiring the bailee to come forward with an explanation” … . Here, the defendants failed to return the plaintiff's property, which was destroyed while in their possession, and further failed to come forward with an explanation to negate the resulting prima facie case of gross negligence. * * *

…[P]laintiff submitted evidence of executed contracts for the sale of 16 of the destroyed straws of semen to various breeders at the price of $1,000 per straw. Since the amount of lost profits associated with these contracted sales was certain and definite, the plaintiff was entitled to an award of $16,000 for the loss of these 16 straws … . However, with respect to the remaining 194 straws that were destroyed, for which no contracts to purchase had been executed, the proper measure of market value is the price at which they could be replaced with a product of similar quality and characteristics in the market that existed immediately before their loss … . Reed v Cornell Univ., 2016 NY Slip Op 02797, 2nd Dept 4-13-16


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PLAINTIFF-CONTRACTOR’S FAILURE TO PROVE THE VALUE OF THE WORK PRECLUDED RECOVERY UNDER THE LIEN LAW AND UNDER A QUANTUM MERUIT THEORY; CRITERIA FOR AMENDMENT OF A COMPLAINT TO CONFORM TO TRIAL PROOF DESCRIBED.

In an action to foreclose a mechanic’s lien, the Second Department determined Supreme Court properly allowed amendment of the pleadings to conform with the proof, which was consistent with an action for quantum meruit. Plaintiff contractor was unable to show the value of the work performed, so plaintiff’s Lien Law and quantum meruit actions failed. Similarly, the defendants failed to prove they ended up paying more than the original agreed price for the work. So defendants’ counterclaims for breach of contract and damages failed. With respect to the amendment of the complaint to conform to the proof, and the flaws in plaintiff’s proof of the value of plaintiff’s work, the court wrote:

Pursuant to Lien Law § 3, a contractor who performs labor or furnishes materials for the improvement of real property with the consent, or at the request of, the owner “shall have a lien for the principal and interest, of the value, or the agreed price, of such labor . . . or materials upon the real property improved or to be improved and upon such improvement.” “A lienor may seek amounts due from both written contracts and from change orders for extras, depending on whether the owner gave his consent for the extra work” … . The lienor’s right to recover is limited by the contract price or the reasonable value of the labor and materials provided … . The lienor has the burden of establishing the amount of the outstanding debt by proffering proof either of the price of the contract or the value of labor and materials supplied … .

… [P]laintiff failed to offer bills, invoices, receipts, time sheets, checks, or any other evidence which would establish the cost of materials, work done by subcontractors, or the number of hours he worked on the job and proffered no explanation for his failure to present this evidence. He likewise failed to provide any detailed description of the work performed, the cost of any portion of the work, or the hourly rate at which he valued his labor. Indeed, at trial, the plaintiff admitted that the sum asserted in his lien was only an estimate. … .

Pursuant to CPLR 3025(c), a trial court may permit the amendment of pleadings before or after judgment to conform them to the evidence “upon such terms as may be just” … .Here, although the complaint sought recovery in the form of foreclosure on his mechanic’s lien, at trial, the plaintiff sought to conform the pleadings to the proof and assert a cause of action for recovery in quantum meruit. The Supreme Court granted that motion, and therefore, contrary to the defendants’ contention, that theory of recovery was properly before the court. * * *

Here, although the plaintiff presented evidence satisfying … three elements [of quntum meruit], this cause of action must fail for the same reason that the cause of action to foreclose his mechanic’s lien must fail; namely, his failure to present any evidence of the value of the materials supplied or services rendered. DiSario v Rynston, 2016 NY Slip Op 02611, 2nd Dept 4-6-16

CONTRACT LAW (PLAINTIFF-CONTRACTOR’S FAILURE TO PROVE THE VALUE OF THE WORK PRECLUDED RECOVERY UNDER THE LIEN LAW AND UNDER A QUANTUM MERUIT THEORY)/QUANTUM MERUIT (PLAINTIFF-CONTRACTOR’S FAILURE TO PROVE THE VALUE OF THE WORK PRECLUDED RECOVERY UNDER THE LIEN LAW AND UNDER A QUANTUM MERUIT THEORY)/MECHANIC’S LIEN (PLAINTIFF-CONTRACTOR’S FAILURE TO PROVE THE VALUE OF THE WORK PRECLUDED RECOVERY UNDER THE LIEN LAW AND UNDER A QUANTUM MERUIT THEORY)/LIEN LAW (PLAINTIFF-CONTRACTOR’S FAILURE TO PROVE THE VALUE OF THE WORK PRECLUDED RECOVERY UNDER THE LIEN LAW AND UNDER A QUANTUM MERUIT THEORY)/EVIDENCE (PLAINTIFF-CONTRACTOR’S FAILURE TO PROVE THE VALUE OF THE WORK PRECLUDED RECOVERY UNDER THE LIEN LAW AND UNDER A QUANTUM MERUIT THEORY)/CIVIL PROCEDURE (CRITERIA FOR AMENDMENT OF A COMPLAINT TO CONFORM TO TRIAL PROOF DESCRIBED)/COMPLAINT, AMENDMENT OF (CRITERIA FOR AMENDMENT OF A COMPLAINT TO CONFORM TO TRIAL PROOF DESCRIBED)

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