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Town, Not the Town Board, Was the Proper Party/Town Could Not Use Article 78/Declaratory Judgment to Enforce a Contract/Town Entitled to Specific Performance of Contract

The Fourth Department, in the context of an action by the town for specific performance of a contract with a volunteer fire department, determined: (1) the town, not the town board, was the proper party to bring the action; (2) the hybrid Article 78/declaratory judgment action could not be brought by the town to enforce a contract; (3) the action should have been brought as one seeking specific performance; (4) the town was entitled to specific performance of the contract:

…[T]he Town Board lacks capacity to bring this proceeding/action.  As “artificial creatures of statute,” governmental entities such as the Town Board “have neither an inherent nor a common-law right to sue. Rather, their right to sue, if it exists at all, must be derived from the relevant enabling legislation or some other concrete statutory predicate” … . Here, Town Law § 65 (1) provides in relevant part that “[a]ny action or special proceeding for or against a town, or for its benefit, . . . shall be in the name of the town,” and that “[t]he town board of any town may authorize and direct any town officer or officers to institute, defend or appear, in any action or legal proceeding, in the name of the town, as in its judgment may be necessary, for the benefit or protection of the town” … . Under the circumstances of this case, we exercise our power pursuant to CPLR 2001 to correct that irregularity and to amend the caption by substituting the Town for the Town Board, “on behalf of” the Town … . …

… [A]lthough a CPLR article 78 proceeding may be brought against public or private corporations that “take on a quasi-governmental status” …, such “a . . . proceeding is not the proper vehicle to resolve contractual rights’ ” … . Moreover, a declaratory judgment action is also not a proper vehicle to resolve the contractual rights herein because ” a full and adequate remedy is already provided by another well-known form of action’ ” … . Pursuant to CPLR 103 (c), however, “[i]f a court has obtained jurisdiction over the parties, a civil judicial proceeding shall not be dismissed solely because it is not brought in the proper form, but the court shall make whatever order is required for its proper prosecution.” We thus exercise our discretion under CPLR 103 (c) and convert this hybrid CPLR article 78 proceeding/declaratory judgment action to an action for specific performance … .

“Specific performance is a discretionary remedy which is an alternative to the award of damages as a means of enforcing the contract’ . . . The right to specific performance is not automatic . . . The equitable remedy of specific performance is available in the court’s discretion when the remedy at law is inadequate . . . Finally, . . . the party seeking equity must do equity, i.e., he must come into court with clean hands” … . Here, the Town met its burden of proving that it “substantially performed [its] contractual obligations . . . within the time specified in the [2011 Contract, and] that [it] is ready, willing and able to perform those contractual obligations not yet performed and not waived by the [West Brighton Fire Department (WBFD)]” …, and the WBFD failed to raise a triable issue of fact in opposition thereto … . Matter of Town Bd. of Town of Brighton v West Brighton Fire Dept., Inc., 2015 NY Slip Op 02581, Fourth Dept 3-27-15

 

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Despite Broad General Language, the Release Applied Solely to the Property-Damage Claim Referenced In It and Not to Plaintiff’s Personal Injury Action

The Fourth Department determined Supreme Court should not have dismissed a complaint based upon a release signed by the plaintiff. The release related only to the particular property damage claims referenced in the document—despite broad prefatory language:

Plaintiff commenced this action seeking damages for injuries she allegedly sustained in a motor vehicle accident. She had previously commenced an action in Rochester City Court seeking $4,741.04 for property damage to her vehicle. In consideration of that sum, plaintiff signed a release in favor of, inter alia, defendant Zacharey A. Taylor (defendant), releasing him from “all actions, causes of action . . . claims and demands whatsoever” that plaintiff “ever had” against defendant “from the beginning of the world to the day of the date of this RELEASE. And more particularly for any and all property damage claims as a result of [the subject] motor vehicle accident.”

We conclude that Supreme Court erred in granting defendant’s motion to dismiss the complaint against him in the instant action pursuant to CPLR 3211 (a) (5) based upon the release. “The meaning and scope of a release must be determined within the context of the controversy being settled” … , and “a release may not be read to cover matters which the parties did not desire or intend to dispose of” … . “Moreover, it has long been the law that where a release contains a recital of a particular claim, obligation or controversy and there is nothing on the face of the instrument other than general words of release to show that anything more than the matters particularly specified was intended to be discharged, the general words of release are deemed to be limited thereby” … . Here, viewing the release in the context of the controversy being settled and in light of the specific reference to plaintiff’s property damage claims, we conclude that the parties intended that plaintiff release only such property damage claims … . Corzatt v Taylor, 2015 NY Slip Op 02621, 4th Dept 3-27-15

 

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Felony Convictions in Other Jurisdictions Need Not Have a New-York-Felony Counterpart to Be Considered Under the Persistent Felony Offender Statute

The Court of Appeals, in a full-fledged opinion by Judge Read, determined the persistent-felony-offender statute does not require that felonies committed in other jurisdictions have a felony-counterpart in New York in order to be considered re:  persistent-felony-offender status:

New York’s persistent felony offender statute, by its plain terms, does not require that, in order to classify someone as a persistent felony offender, an out-of-state predicate felony must have a New York counterpart. Section 70.10’s silence with regard to New York equivalency is dispositive. As the Second Circuit explained in Griffin, when holding that section 70.10 was rational as applied to the defendant in that case, “[s]ection 70.10 (1) (b) does not distinguish among felony convictions that arise under federal, New York State, or out-of-state law. Thus, if the acts constitute a felony under federal or another state’s law, they will be deemed a felony for purposes of persistent offender status under [s]ection 70.10 even if there is no counterpart felony in New York law” (Griffin, 156 F3d at 290 [emphasis added]…). People v Jones, 2015 NY Slip Op 02553, CtApp 3-26-15

 

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The “Strict Compliance” Rule Re: Documents Required for a Drawdown from a Letter of Credit Explained

The First Department, in a full-fledged opinion by Justice Saxe, determined that minor discrepancies in the documents required by a letter of credit as a prerequisite for a drawdown did not violate the “strict compliance” rule.  Here a true copy of a document, rather than the original, was submitted.  The true copy was deemed to satisfy the “strict compliance” rule:

…[A]pplying the standard of strict compliance, plaintiff’s drawdown request should have been honored because, under these circumstances, the production of a true copy of amendment 2, instead of an original, was sufficient even to satisfy the strict compliance standard.

Strict compliance has been said to require that “the papers, documents and shipping directions . . . be followed as stated in the letter [of credit],” that “[n]o substitution and no equivalent, through interpretation or logic, will serve,” and that “[t]here is no room for documents which are almost the same, or which will do just as well” … . Even slight discrepancies in compliance with the terms of a letter of credit have been held to justify refusal to pay … .

“The [strict compliance] rule finds justification in the bank’s role in the transaction being ministerial . . . and to require it to determine the substantiality of discrepancies would be inconsistent with its function” … . The “reason for the strict [compliance] rule is to protect the issuer from having to know the commercial impact of a discrepancy in the documents” … .

However, as this Court has recently observed, “According to the official UCC commentary, the strict compliance standard does not require that the documents presented by the beneficiary be exact in every detail” (BasicNet S.P.A v CFP Servs., Ltd., __ AD3d __, __, 2015 NY Slip Op 02080, [1st Dept 2015]) [summarized directly below]. The doctrine of strict compliance “does not mean slavish conformity to the terms of the letter of credit . . . [and] does not demand oppressive perfectionism” (id., quoting Official Comment 1, reprinted in McKinney’s Cons Laws of NY, Book 62½, UCC 5-108 at 367). Ladenburg Thalmann & Co, Inc. v Signature Bank, 2015 NY Slip Op 02224, 1st Dept 3-19-15

 

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Stipulation of Settlement Not Enforceable/All Material Terms Not Included

The Second Department determined the purported stipulation of settlement did not meet the standards set forth in CPLR 2104:

Absent the formalities required by statute, a stipulation of settlement is not enforceable (see CPLR 2104…). Pursuant to CPLR 2104, “[a]n agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered.” The stipulation must be “definite and complete” … , and all material terms must be included … .

In this case, the alleged written stipulation of settlement …, entitled “Agreement in Principle,” was not signed by all the parties to the litigation, and the agreement did not state that the two signatories to the agreement intended to bind all the parties to the agreement’s terms. Further, as a material term of the agreement at issue was contingent upon the parties’ executing a formal agreement, the agreement constituted a mere agreement to agree, which is unenforceable … . De Well Container Shipping Corp. v Mingwei Guo, 2015 NY Slip Op 02090, 2nd Dept 3-18-15

 

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Invoices Together with Purchase Orders Created an Agreement to a Reduced Sales-Contract Statute of Limitations

The Second Department determined the sales-contract statute of limitations was validly reduced from four years to one year by the terms of invoices:

While UCC 2-725(1) generally provides that a cause of action alleging breach of a sales contract must be commenced within four years after it has accrued, that provision also allows the parties to a sales contract to “reduce the period of limitation to not less than one year” (UCC 2-725[1]…). Here, the defendants met their initial burden by demonstrating that their invoices containing the one-year limitation period constituted an acceptance that, together with the plaintiff’s purchase order, was effective in forming a contract, and that the one-year limitation period, an additional term set forth in the invoices, was presumed to have become part of this contract between the parties unless one of the three exceptions in UCC 2-207(2) applied (see UCC 2-207[1], [2]…). It is undisputed that the plaintiff’s action was not commenced within one year from the alleged breach, as required by the additional term. The burden then shifted to the plaintiff, as the party opposing the inclusion of the additional term, to raise a question of fact as to whether one of the three exceptions under UCC 2-207(2) was applicable … . The plaintiff failed to satisfy its burden.

Contrary to the plaintiff’s contention, the abbreviated period of limitation was not against public policy (see CPLR 201; UCC 2-725[1]…). ” Absent proof that the contract is one of adhesion or the product of overreaching, or that [the] altered period is unreasonably short, the abbreviated period of limitation will be enforced'” … . ” Where the party against which an abbreviated Statute of Limitations is sought to be enforced does not demonstrate duress, fraud, or misrepresentations in regard to its agreement to the shortened period, it is assumed that the term was voluntarily agreed to'” … . State of Narrow Fabric, Inc. v UNIFI, Inc., 2015 NY Slip Op 02110, 2nd Dept 3-18-15

 

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(1) The Effect of Minor Discrepancies Re: the Submissions Required by a Standby Letter of Credit (SLC) (2) The Criteria for Interpreting an SLC (3) the Nature of an SLC and (4) the “Independence Principle” as Applied to an SLC Discussed in Some Depth

The First Department, in a full-fledged opinion by Justice Andrias, reversed Supreme Court and determined the issuer of standby letters of credit (SLC) was required to honor them.  The opinion is detailed and fact-based.  Among the legal issues discussed are: (1) minor discrepancies re: the documents required to be submitted (for a drawdown) by the terms of an SLC do not violate the “strict compliance” rule; (2) how to interpret an SLC; (3) the nature of an SLC  (versus a guaranty); and (4) the “Independence Principle” which requires that an SLC be deemed separate and distinct from the other contractual agreements underlying the transaction:

Under New York law, in order to recover on its claim that the issuer wrongfully refused to honor its request to draw down on a letter of credit, the beneficiary must prove that it strictly complied with the terms of the letter of credit … . “The corollary to the rule of strict compliance is that the requirements in letters of credit must be explicit, and that all ambiguities are construed against the [issuer]” … . The reasoning is that “[s]ince the beneficiary must comply strictly with the requirements of the letter, it must know precisely and unequivocally what those requirements are” … . “Where a letter of credit is fairly susceptible of two constructions, one of which makes fair, customary and one which prudent men would naturally enter into, while the other makes it inequitable, the former interpretation must be preferred to the latter, and a construction rendering the contract possible of performance will be preferred to one which renders its performance impossible or meaningless” … . * * *

There are three parties to an SLC: the applicant who requests the SLC; the beneficiary to whom payment is due upon the presentation of the documents required by the SLC; and the issuer which obligates itself to honor the SLC and make payment when presented with the documents the SLC requires. In turn, there are three corresponding agreements: the agreement between the applicant and the beneficiary, which creates the basis for the SLC; the agreement between the issuer and the applicant; and the SLC itself … .

“[A] fundamental principle governing these transactions is the doctrine of independent contracts, [which] provides that the issuing bank’s obligation to honor drafts drawn on a letter of credit by the beneficiary is separate and independent from any obligation of its customer to the beneficiary under the … contract and separate as well from any obligation of the issuer to its customer under their agreement” … .

From the beneficiary’s perspective, the independence principle makes a letter of credit superior to a normal surety bond or guaranty because the issuer is primarily liable and is precluded from asserting defenses that an ordinary guarantor could assert. Indeed, “a letter of credit would lose its commercial vitality if before honoring drafts the issuer could look beyond the terms of the credit to the underlying contractual controversy or performance between its customer and the beneficiary”… . BasicNet S.P.A. v CFP Servs. Ltd., 2015 NY Slip Op 02080, 1st Dept 3-17-15

 

Subcontractor’s Breach of Contract Cause of Action Should Not Have Been Dismissed Despite Absence of Privity

The Second Department determined the motion for dismissal (CPLR 3211(a)(7)) of a breach of contract/quantum meruit cause of action brought by a subcontractor should not have been granted. The documents submitted by the defendant did not eliminate the possibility that the defendant’s dealings with the subcontractor could have given rise to a breach of contract action in the absence of privity:

Generally, a subcontractor may not assert a cause of action to recover damages for breach of contract against a party with whom it is not in privity … . Nevertheless, “a subcontractor can sometimes state a cause of action [alleging] breach of contract or unjust enrichment against the owner where direct dealing between the owner and the subcontractor justify imposing an obligation upon the owner despite the initial lack of privity between them” … . Vertical Progression, Inc. v Canyon Johnson Urban Funds, 2015 NY Slip Op 01939, 2nd Dept 3-11-15

 

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Longevity-Pay Grievance Not Arbitrable Under Terms of Collective Bargaining Agreement/Analytical Criteria Explained

The Second Department determined that, under the terms of the collective bargaining agreement (CBA), the grievance (re: longevity pay) was not arbitrable.  The court outlined the analytical criteria:

“The determination of whether a dispute between a public sector employer and employee is arbitrable is subject to [a] two-prong test” … . “Initially, the court must determine whether there is any statutory, constitutional, or public policy prohibition against arbitrating the grievance” … . “If there is no prohibition against arbitrating, the court must examine the parties’ collective bargaining agreement and determine if they in fact agreed to arbitrate the particular dispute” … .

Here, the County did not contend that arbitration of the subject matter of the dispute was prohibited by law or public policy. Thus, the only issue is whether the parties agreed to arbitrate the particular dispute … .

“Unlike general labor disputes in the private sector involving arbitration, the intent to arbitrate of parties to a collective bargaining agreement in the field of public employment may not be presumed” … . “Indeed . . . it must be taken, in the absence of clear, unequivocal agreement to the contrary, that the [parties to a collective bargaining agreement] did not intend to refer differences which might arise to the arbitration forum” … .

Here, contrary to the Union’s contention, the CBA did not broadly provide for the arbitration of any grievance that may arise under the CBA … . Rather, as the Supreme Court correctly concluded, the CBA limited the availability of arbitration to specifically enumerated matters … .  Matter of County of Rockland v Corr. Officers Benevolent Assn. of Rockland County, Inc. 2015 NY Slip Op 01798, 2nd Dept 3-4-15

 

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Merger Doctrine and “As Is” Clause Did Not Bar Suit/Fraud-Based Causes of Action Did Not Duplicate Breach of Contract Cause of Action

The First Department, in a full-fledged opinion by Justice Mazzarelli, over a dissent, determined, in the context of a motion to dismiss for failure to state a cause of action, the merger doctrine did not apply to a contract for the sale of an apartment building, the fraud and fraudulent misrepresentations causes of action were not duplicative of the breach of contract cause of action (which was time-barred), and sufficient allegations for piercing the corporate veil had been pled.  The opinion is detailed because of the complicated facts and cannot fairly be summarized here.  With respect to the merger doctrine and the fraud-based causes of action, the court wrote:

The merger doctrine in a real estate transaction provides that once the deed is delivered, its terms are all that survive and the purchaser is barred from prosecuting any claims arising out of the contract … . The only exception to this rule is where the parties clearly intended that the particular provision of the contract supporting the claim would survive the delivery of the deed … . Further, an “as is” clause in a contract to sell real property will ordinarily bar a claim for breach of contract … . Plaintiff argues that the merger doctrine does not apply here because of the latent nature of the defects at issue. It further contends that its allegations of deceptive behavior on Seller’s part to mask the true condition of the building render the “as is” clause inoperable.

Although plaintiff cites trial court opinions identifying a latency exception to the merger doctrine, the concept has not been adopted by any of the Appellate Divisions or by the Court of Appeals … , and we are not adopting it here. Nevertheless, the merger doctrine is inapplicable in this case. Although the crux of the action is undoubtedly that plaintiff took title to a seriously defective building, the specific allegations in the complaint are that Seller breached the contract by failing to abide by those provisions designed to permit plaintiff to gain a true understanding of the condition of the property. …[E]ach of those representations was explicitly intended by the parties not to merge into the deed.

Further, since the breach of contract cause of action is addressed to these representations, and not to the condition of the building itself, the presence of the “as is” clause is no bar to the claim. Additionally, while the “as is” clause states that Seller has made no representations as to “any other matter or thing affecting or relating to the property,” it carries the caveat that this is “except as specifically set forth to the contrary in this agreement” (emphasis omitted). Thus, the three specific representations which plaintiff alleges were breached trump the “as is” clause. To the extent that plaintiff asserts fraud claims not directly related to the three surviving representations, the merger doctrine still does not apply (West 90th Owners Corp. v Schlechter, 137 AD2d 456, 459 [1st Dept 1988] [“fraud is a recognized exception to the merger doctrine”). * * *

Where “allegations of intentional fraud, though parallel in many respects to the breach of contract claim, include claims of fraudulent misrepresentations made by defendants which induced them to enter into the contract and close on the property, they are not merely redundant of the breach of contract claim . . . [and a] fraud cause of action is sustainable” … . TIAA Global Invs., LLC v One Astoria Sq. LLC, 2015 NY Slip Op 01768, 1st Dept 3-3-15

 

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