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Defendant, In Its Summary Judgment Motion, Properly Addressed Only the Theory of “Tort Liability Arising from Contract” Which Was Alleged in the Pleadings

The Second Department determined defendant was entitled to summary judgment in an action based upon the allegation defendant had “launched an instrument of harm,” thereby imposing liability in tort arising from a contract. Defendant demonstrated it did not launch and instrument of harm and plaintiff failed to raise a question of fact in response. The court explained the applicable law, noting that defendant need only address the specific theory of contract-based liability which was raised in the pleadings:

“Generally, a contractual obligation, standing alone, will not give rise to tort liability in favor of a third party” … . The Court of Appeals has recognized three exceptions to this general rule: (1) where the contracting party, in failing to exercise reasonable care in the performance of its duties, launches a force or instrument of harm, (2) where the plaintiff detrimentally relies on the continued performance of the contracting party’s duties, and (3) where the contracting party has entirely displaced the other party’s duty to maintain the premises safely … . Here, the only exception alleged in the pleadings with respect to the defendant Wiley Engineering, P.C. (hereinafter Wiley), was that Wiley launched a force or instrument of harm … . Therefore, in moving for summary judgment dismissing the complaint and all cross claims insofar as asserted against it, Wiley was only required to address this exception by demonstrating, prima facie, that it did not launch a force or instrument of harm creating or exacerbating any allegedly dangerous condition … . Here, Wiley met its prima facie burden and, in opposition, the plaintiff failed to raise a triable issue of fact. Reece v J.D. Posillico, Inc., 2015 NY Slip Op 06580, 2nd Dept 8-19-15

 

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The Purchasers’ Purported Retraction of an Earlier Repudiation of the Purchase Contract Was Not “Bona Fide” Because It Imposed a Condition for the Retraction Which Was Not Contemplated by the Purchase Contract—Sellers Entitled to Keep $365,000 Downpayment Based Upon Purchasers’ Failure to Close

The First Department, over an extensive dissent by Justice Saxe, determined that the defendants, who had entered an agreement to purchase plaintiffs’ condominium, were not justified in repudiating the agreement based upon on-going “firestopping” work in the condominium-building, and, even if the agreement had been effectively repudiated, the purported retraction of the repudiation was not “bona fide.”  Therefore, the plaintiffs-sellers were entitled to keep the purchasers’ $365,000 downpayment based upon purchasers’ failure to close. The issue on appeal came down to whether the plaintiffs-sellers breached a paragraph of the agreement which required them to clear the unit of any code violations of which the plaintiffs had been notified in writing by the condominium board of managers. The majority determined no such notice had been given to the plaintiffs-sellers. The majority further determined the defendants’ purported retraction of the repudiation was not “bona fide” because it was conditioned on proof of the completion of the firestopping work, thereby imposing a condition not contemplated by the contract:

… [D]efendants point to no provision in the contract that justifies their initial purported reason for canceling the contract, which was that it threatened the safety of themselves and their children. Nor do they claim that plaintiffs somehow prevented them from learning of the firestopping issue. To the contrary, the contract itself referred expressly to a … notice from the board of managers that discussed the status of the then ongoing firestopping project. This was sufficient to place defendants on notice of a potential issue that might have given them pause to execute an agreement in which they acknowledged they were accepting the unit as is.

Because defendants had no right to insist that the firestopping issue be resolved as a condition to closing, their “retraction” of the purported repudiation was ineffective. In order to be effective, a retraction of a contract repudiation must be bona fide … . Defendants’ acceptance of plaintiffs’ offer to schedule a closing was not bona fide, because it was conditioned on plaintiffs’ provision of documents and information establishing to defendants’ satisfaction that the firestopping had been completed. We disagree with the dissent that the letter from defendants’ counsel conditionally retracting the repudiation creates an issue of fact as to whether it was bona fide. That letter unquestionably adhered to defendants’ position, which had supported the initial repudiation, that plaintiffs had a contractual obligation to ensure proper firestopping in the apartment before delivering the deed. The clear implication of the letter was that, if plaintiffs could not establish to defendants’ complete satisfaction that the firestopping work had been performed, defendants would once again refuse to close. As stated above, this position was untenable, and clearly, contrary to the dissent’s view, sought to insert an additional material term or condition into the contract. Again, nothing in the contract required plaintiffs to perform any firestopping, and plaintiffs were entitled to view defendants’ continued insistence on proof that they had done so as an justified refusal to perform under the agreement. Beinstein v Navani, 2015 NY Slip Op 06403, 1st Dept 8-4-15

 

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correspondence which was intended to lead to a settlement agreement (re: real property taxes) did not create a binding agreement

The Third Department determined correspondence which was intended to lead to a settlement agreement (re: real property taxes) did not create a binding agreement. Subsequent to the correspondence, proposed stipulations had been circulated but were not executed. The Court explained the relevant analytical criteria:

… [A]n out-of-court settlement agreement “is not binding upon a party unless it is in a writing subscribed by [that party] or [that party’s] attorney” (CPLR 2104). Writings between parties to an action or proceeding that discuss the possibility of settlement will be considered to constitute a binding agreement if “the settlement agreement was adequately described in [such] writings, namely, the agreement was clear, the product of mutual accord and contained all material terms” … . Settlement-related writings may be deemed to have contained sufficiently detailed terms to give rise to a binding agreement when, for example, these writings explicitly incorporate the terms of other documents prepared in anticipation of settlement … . In contrast, settlement-related writings will not be found to have created a binding agreement if they expressly anticipate a subsequent writing that is to officially memorialize the existence of a settlement agreement and set forth all of its material terms … . Matter of George W. & Dacie Clements Agric. Research Inst., Inc. v Green, 2015 NY Slip Op 06399, 3rd Dept 7-30-15

 

“No Damages for Delay” and “Mandatory Notice” Clauses Precluded Suit

The Third Department affirmed the dismissal of plaintiff’s breach of contract complaint, finding that the exceptions to the enforceability of a “no damages for delay” clause did not apply, and the “mandatory notice” clause precluded suit for “extra work.” Plaintiff was engaged by defendant to install heating, ventilation and air conditioning equipment:

As a general rule, “contract clauses exculpating the contractee from liability to the contractor for damages resulting from delays in performance of the contract work” are valid and enforceable … . However, even where the contract contains such a clause, there are several recognized exceptions. As relevant here, a contractor may still recover for “delays caused by the contractee’s bad faith or its willful, malicious, or grossly negligent conduct” … . A defendant seeking summary judgment dismissing a claim for delay damages “bears the initial burden of demonstrating prima facie that none of the exceptions to the ‘damages for delay’ clause are present” … .  * * *

… [P]laintiff attempts to claim compensation for tasks that allegedly constituted “extra work” beyond the scope of the parties’ contract. However, a provision in the contract required plaintiff to notify defendant that it considered a task to constitute extra work within 15 working days after being ordered to undertake the task or beginning to perform it. Here, plaintiff concedes that it did not notify defendant of this claim until five months after it began performance of the disputed task. Thus, “[d]efendant established its entitlement to summary judgment by submitting proof that [plaintiff] did not comply with the condition precedent” by providing timely notice … . Tougher Indus., Inc. v Dormitory Auth. of the State of N.Y., 2015 NY Slip Op 06388, 3rd Dept 7-30-15

 

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Purchase Contract Properly Converted to a “Time Is of the Essence” Contract

In affirming the judgment awarded plaintiff in this breach of contract action, the Third Department noted that a “non time of the essence” real estate purchase contract can be converted to a “time of the essence” contract by giving the buyer clear, unequivocal notice and a reasonable time to perform, as was done by the seller here. 12 Baker Hill Rd., Inc. v Miranti, 2015 NY Slip Op 06400, 3rd Dept 7-30-15

 

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Judge’s Failure to Recuse Himself Was an Abuse of Discretion/Plaintiffs’ Failure to Comply with a Condition Precedent Mandated Summary Judgment to Defendants

The Third Department determined the judge hearing a case concerning the construction of a casino and resort should have recused himself. The judge’s wife was in the county legislature and had voiced support of defendants’ position. In his decision granting summary judgment to the defendants, the judge stated to do otherwise would “violate public policy,” an issue which was not properly part of the case before him. However, the Third Department went on to consider the merits of the case. Plaintiffs’ failure to meet a condition precedent (concerning the financing of the project) by the specified date was an unambiguous breach of the contract, mandating summary judgment in favor of the defendants:

Considering the irrelevancy of [the judge’s] comments to the issues before the court and the parallels between them and the public comments of [his wife] in support of [defendants’] casino proposal, [the judge’s] inclusion of such inherently legislative and policy considerations as a basis for his order displays a striking lack of “sensitivity to the aroma of favoritism [that] such a favorable disposition could engender” … . Under the circumstances, it seems to us that [the judge] should have recognized that this was a situation in which his “impartiality might reasonably be questioned” (22 NYCRR 100.3 [E] [1]), and, therefore, we must conclude that his failure to recuse himself constituted a clear abuse of discretion … . Concord Assoc., L.P. v EPT Concord, LLC, 2015 NY Slip Op 06393, 3rd Dept 7-30-15

 

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Parent Corporation Not Entitled to Qualified Empire Zone Enterprise (QEZE) Property Tax Credits Because a Related But Separate Entity Did Not Make Payments Required by Its “Payment In Lieu of Taxes” (PILOT) Agreement

With regard to a building in the City of Rochester, the Third Department determined a parent corporation was not entitled to Qualified Empire Zone Enterprise (QEZE) tax credits because a related but separate limited partnership, Rochwil, did not make payments required by its “payment in lieu of taxes” (PILOT) agreement.

The primary issue presented in this proceeding is whether petitioner could claim a refund for unused QEZE real property tax credits that were reported by its subsidiary based on its partnership interest in Rochwil for PILOT payments that were not made. As the taxpayer seeking a tax credit, petitioner “bears the burden of establishing that such credit is unambiguously set forth in the statute” … . To meet this burden, petitioner must show that its “interpretation of the statute is not only plausible, but also that it is the only reasonable construction” … .

We cannot conclude that petitioner met its burden here. As a QEZE, Rochwil was entitled to a credit for eligible real property taxes (see Tax Law former § 15 [a]), and it is not disputed that petitioner was entitled to seek such credit against its corporate franchise taxes during the years at issue (see Tax Law former § 210 [27]). As relevant to this dispute, the term “eligible real property taxes” includes both “taxes imposed on real property which is owned by the QEZE . . . provided such taxes become a lien on the real property” and “[PILOT payments] made by the QEZE to . . . a public benefit corporation” (Tax Law former § 15 [e]). Contrary to petitioner’s claim, the plain and unambiguous language of the statute provides that real property taxes imposed are distinct from PILOT payments made, and where, as here, a QEZE does not own the property but is instead subject to a PILOT agreement with the property owner, the PILOT payments must be made in order to qualify for the credit provided by Tax Law former § 15 … . Matter of Wilmorite, Inc. v Tax Appeals Trib. of the State of N.Y., 2015 NY Slip Op 06386, 3rd Dept 7-30-15

 

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Flaws in Causes of Action Stemming from the Alleged Breach of a Joint Venture Agreement Explained

In an action stemming from the alleged breach of a joint venture agreement, the Second Department, in the context of a motion to dismiss for failure to state a cause of action, went through each cause of action and, where dismissal was appropriate, noted the pleading failure. The joint venture cause of action did not allege a mutual promise to share the losses. The constructive trust cause of action did not allege a confidential or fiduciary relationship. The fraud allegations were not collateral to the terms of the alleged joint venture and no out-of-pocket losses were alleged. The tortious interference with contract cause of action did not allege the intentional procurement of a breach of the joint venture agreement. The accounting cause of action did not allege that a demand for an accounting was made. The Second Department noted that the motion to amend the complaint to cure some of the defects should have been granted. With respect to the criteria for determining a motion to dismiss for failure to state a cause of action where documentary evidence supporting the motion is submitted, the court explained:

“A motion pursuant to CPLR 3211(a)(1) to dismiss the complaint on the ground that the action is barred by documentary evidence may be granted only where the documentary evidence utterly refutes the plaintiff’s factual allegations, thereby conclusively establishing a defense as a matter of law” … .

In considering a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), “the court must accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory” … . A court may consider evidentiary material submitted by a defendant in support of a motion to dismiss pursuant to CPLR 3211(a)(7) … . When evidentiary material is considered on a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), and the motion has not been converted to one for summary judgment, “the criterion is whether the [plaintiff] has a cause of action, not whether he [or she] has stated one, and, unless it has been shown that a material fact as claimed by the [plaintiff] to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it . . . dismissal should not eventuate”… . Mawere v Landau, 2015 NY Slip Op 06317, 2nd Dept 7-29-15

 

Criteria for an Intended Third-Party Beneficiary of a Contract Explained

The Second Department determined the documents submitted by defendant power companies did not utterly refute plaintiff school-district’s allegation that it was an intended (not “incidental”) third-party beneficiary of a Power Supply Agreement (PSA) in which the defendants agreed not to bring any further tax certiorari proceedings to challenge property tax assessments. The school district brought the breach of contract action when the defendants started a tax certiorari proceeding. Defendants’ motion to dismiss based upon documentary evidence was properly denied. The court explained the criteria for a third-party beneficiary of a contract:

” A non-party [to a contract] may sue for breach of contract only if it is an intended, and not a mere incidental, beneficiary'” … . However, ” the identity of a third-party beneficiary need not be set forth in the contract or, for that matter, even be known as of the time of its execution'” … . “A party asserting rights as a third-party beneficiary must establish (1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for [its] benefit and (3) that the benefit to [it] is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate [it] if the benefit is lost” … . ” In determining third-party beneficiary status it is permissible for the court to look at the surrounding circumstances as well as the agreement,'” and ” the obligation to perform to the third party beneficiary need not be expressly stated in the contract'” … . Board of Educ. of Northport-E. Northport Union Free Sch. Dist. v Long Is. Power Auth., 2015 NY Slip Op 06304, 2nd Dept 7-29-15

Same issue and result in: Town of Huntington v Long Is. Power Auth., 2015 NY Slip Op 06332, 2nd Dept 7-29-15

 

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Security at Homeless Shelter Is a Governmental Function–City Immune from Suit by Plaintiff Who Was Assaulted at the Shelter/Private Security Company Not Immune/Plaintiff Was a Third-Party Beneficiary of the Contract Between the Department of Homeless Services and the Security Company/Security Company Did Not Demonstrate It Was Free from Negligence and the Assault Was Not Foreseeable

The Second Department determined the city and the Department of Homeless Services (DHS) were immune from suit by plaintiff, who was assaulted in a city homeless shelter. The city’s obligation to provide security is a governmental function for which it cannot be held liable absent a special relationship with the plaintiff (not the case here).  However, the private security company, FJC  was not immune from suit. Plaintiff was a third-party beneficiary of the contract between DHS and FJC. FJC was not entitled to summary judgment because it failed to demonstrate it was not negligent and the attack was not foreseeable:

The plaintiff’s theory of recovery was premised upon the alleged failure of the municipal defendants to provide an adequate and proper security force to prevent attacks by third parties at the homeless shelter where the subject incident occurred. Such a claim, however, implicates a governmental function, liability for the performance of which is barred absent the breach of a special duty owed to the injured party … . Here, the municipal defendants demonstrated, prima facie, that they owed no special duty of care to the plaintiff, and the plaintiff failed to raise a triable issue of fact in opposition. Therefore, that branch of the municipal defendants’ motion which was for summary judgment dismissing the complaint insofar as asserted against them was properly granted … . …

However, the Supreme Court erred in granting that branch of the motion of the defendant FJC Security Services, Inc. (hereinafter FJC), which was for summary judgment dismissing the complaint insofar as asserted against it. Contrary to its contention, FJC, a private, for-profit contractor of security services, is not entitled to governmental immunity … . In addition, the plaintiff is a third-party beneficiary of the contract between FJC and DHS. The provisions of the contract between FJC and DHS unequivocally express an intent to confer a direct benefit on the homeless clients in residence at the City shelter, such as the plaintiff, to protect them from physical injury. Thus, in order to prevail on its motion for summary judgment, FJC was required to demonstrate, prima facie, that there were no triable issues of fact as to whether it was negligent in the performance of its duties, or that the assault on the plaintiff was not a reasonably foreseeable consequence of any breach of its duties … .  FJC failed to demonstrate either. Clark v City of New York, 2015 NY Slip Op 06307, 2nd Dept 7-29-15

 

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