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Valid State Purpose (Conserving Drinking Water) Did Not Relieve State of Liability Re: Breach of an Agreement to Provide a Certain Amount of Water to a Hydroelectric Power Provider

The Third Department determined that a contract with a hydroelectric power provider requiring a certain amount of water to be released from a reservoir was unambiguous and therefore must be enforced.  The amount of water released was less than called for in the contract due to a drought and concerns about the drinking water supply:

The parties to the agreement intended to resolve a dispute after defendants took claimant’s predecessor’s land in eminent domain.  Claimant’s predecessor wanted to ensure that sufficient water would reach its hydroelectric generation facility and accepted a considerably smaller amount of money than it sought, in exchange for the rights associated with the water release rates from the reservoir.  These rights would be far less valuable if defendants could deviate from the operating diagram’s release rates, and avoid liability in doing so, as long as defendants supported their actions with any State purpose. Pursuant to the agreement, defendants could only avoid liability if they deviated from the operating diagram’s release rates for a State canal use or purpose.  Because defendants altered the release rate for the purpose of preserving safe drinking water during a drought – a legitimate public and State purpose (see ECL 15-0105 [5]) – and not for a canal-related purpose, defendants are liable for breaching the contract… .  Erie Boulevard Hydropower v State, 516510, 3rd Dept 1-9-14

 

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Federal Arbitration Act Applies When Interstate Commerce Involved

The Second Department determined the parties had entered an agreement to arbitrate and, because interstate commerce was involved, federal arbitration law applied.  A New York architectural firm was hired re: the renovation and construction of buildings in Connecticut:

As a threshold matter, the defendants are correct in asserting that this action is governed by the Federal Arbitration Act (hereinafter the FAA) (9 USC § 1 et seq.), which applies to any arbitration agreement evidencing a transaction involving interstate commerce (see 9 USC § 2). * * *

Through the FAA, Congress has declared “a strong federal policy favoring arbitration as an alternative means of dispute resolution” … . In accordance with this policy, doubts as to the arbitrability of a claim are to be resolved in favor of arbitrability … .

On the other hand, arbitration is “a matter of consent, not coercion” … and “a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit” … . Under the FAA, the determination as to whether the parties have entered into an agreement to arbitrate is made by applying ordinary state law principles governing the formation of contracts… . Highland HC, LLC v Scott, 2014 NY Slip Op 00089, 2nd Dept 1-8-14

 

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Conversion Cause of Action Cannot Be Based Solely Upon Allegations of Breach of Contract

In a detailed decision construing contract language, the Fourth Department noted that the conversion cause of action should be dismissed because no tortious conduct over and above the failure to fulfill the contract was alleged:

“[I]t is well established that a cause of action to recover damages for conversion cannot be predicated on a mere breach of contract” … .  Because plaintiff “failed to show . . . that [defendant] engaged in tortious conduct separate and apart from [its alleged] failure to fulfill its contractual obligations,” the cause of action for conversion must be dismissed… . Lehr, Inc v T-Mobile USA Inc…, 1085, 4th Dept 12-27-13

 

Part Performance Exception to the Statute of Frauds Does Not Apply to Contracts Which Cannot Be Performed Within One Year

The First Department, in a full-fledged opinion by Justice Saxe, determined that the part performance exception to the statute of frauds should not be applied to contracts that cannot be performed within one year.  The court first explained what “capable of performance within one year” means, and then looked at the controlling statute (General Obligations Law 5-701 (a)(1):

Before addressing the central issue of the applicability of a part performance exception for contracts that must be in writing under General Obligations Law § 5-701, I note … the oral contract alleged here was categorized as a contract incapable of performance within one year of its making (General Obligations Law § 5-701[a][1]). The application of § 5-701(a)(1) is limited to contracts that “have absolutely no possibility in fact and law of full performance within one year” … . “[T]he statute does not include an agreement which is simply not likely to be… performed, nor yet one which is simply not expected to be performed within the space of a year. Neither does it include an agreement which, fairly and reasonably interpreted, admits of a valid execution within that time, although it may not be probable that it will be” … . So, the determination of whether an alleged oral contract can possibly be performed within one year of its making is not conducted by looking back at the actual performance; it requires analysis of what was possible, looking forward from the day the contract was entered into. * * *

Analysis of the part performance exception must begin by emphasizing that General Obligations Law § 5-701 lacks any provision for a part performance exception such as that explicitly provided for by General Obligations Law § 5-703, which concerns contracts for the conveyance of an interest in real property. That is, while § 5-703(4) specifically provides, “Nothing contained in this section abridges the powers of courts of equity to compel the specific performance of agreements in cases of part performance,” the broader statute of frauds provision of § 5-701 contains nothing of the sort – although, notably, it contains other exceptions … .

Two relevant principles of statutory construction apply here. The first is that “a court cannot amend a statute by inserting words that are not there, nor will a court read into a statute a provision which the Legislature did not see fit to enact” … . The second is that an “inference must be drawn that what is omitted or not included was intended to be omitted and excluded” … . Inferring that the Legislature authorized a part performance exception for an oral contract that is not capable of performance within one year violates these principles. Gural v Drasner, 2013 NY Slip Op 08391, 1st Dept 12-17-13

 

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Issuer of Excess Policy Was Required (by the Terms of the Policy) to Pay “All Sums,” Including Interest, Over and Above the Policy-Limit Paid Out Under the Primary Policy

In reversing the Appellate Division, the Court of Appeals determined that the issuer of the excess policy (HIC) was obligated to pay all sums, including interest, after the $1,000,000 policy limit was paid out under the primary policy.  The issuer of the primary was insolvent and the $1,000,000 primary policy limit was paid by the liquidator:

Applying the plain meaning of the primary and excess policies to the particular medical malpractice judgment against plaintiff at issue here, it is clear that the primary insurer’s liquidator fulfilled its obligations under the primary policy, thereby triggering HIC’s responsibility to pay the interest in excess of the primary policy’s $1,000,000 liability limit.  Upon entry of the initial judgment against plaintiff, the liquidator paid plaintiff $1,000,000 toward that judgment.  At that point, the liquidator was no longer required to pay interest under the “supplementary payments” provision of the primary policy because that further amount accrued only after the liquidator had already satisfied the liability limit of the primary policy in the manner specified by the “supplementary payments” provision.  Thus, the additional interest on the judgment, as amended, constituted a “sum[ ] in excess of the limits of liability of the Underlying Policy,” which is covered by the excess policy.  Accordingly, HIC had to pay the additional interest.  Ragins… v Hospitals Insurance Company, Inc, 234, CtApp 12-17-13

 

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Six-Year Breach of Contract Statute of Limitations Applied to Third Party Beneficiaries (Here the Plaintiff Villages and Towns) of Contracts Between the Counties and the Defendant Sewer-Construction Companies

The Court of Appeals, with two concurring judges, determined that the causes of action alleging the faulty construction of sewers resulting in settling of the roadways within the plaintiff villages and towns was time-barred. The plaintiff villages and towns were third-party beneficiaries to the sewer-construction contracts entered into by the counties encompassing the plaintiff villages and towns. The complaints alleged a “continuing nuisance.”  The court held that the actions were time-barred whether analyzed under a contract or nuisance theory (the continuing nuisance theory was rejected on the merits).  The court further held that the six-year breach of contract statute of limitations applied to third-party beneficiaries of the contracts (here the plaintiff villages and towns):

A breach of contract action must be commenced within six years from the accrual of the cause of action (see CPLR 203 [a]; 213 [2]).  “In cases against architects or contractors, the accrual date for Statute of Limitations purposes is completion of performance” (Newburgh, 85 NY2d at 538…).  This rule applies “no matter how a claim is characterized in the complaint” because “all liability” for defective construction “has its genesis in the contractual relationship of the parties” (Newburgh, 85 NY2d at 538 …). Even if the plaintiff is not a party to the underlying construction contract, the claim may accrue upon completion of the construction where the plaintiff is not a “stranger to the contract,” and the relationship between the plaintiff and the defendant is the “functional equivalent of privity” (Newburgh, 85 NY2d at 538-539 … ). * * *

The Appellate Division properly applied Newburgh to these actions commenced by third-party beneficiaries to the construction contracts.  Newburgh extended the completion of performance accrual rule to actions against architects or contractors brought by “intended beneficiar[ies]” of construction contracts (id.).  Here, the Counties contracted with defendants to install the sewer system for the benefit of municipalities like plaintiffs, a fact which was surely “known to all parties at the time the contracts were negotiated” (id.).  Town of Oyster Bay v Lizza Industries Inc …, 214, 215, 217, 217, 218, 219, 220, 221, 222, 223, CtApp 12-17-13

 

Writing Requirement of Statute of Frauds Met By a Number of Documents Associated With Absentee Bidding at a Public Auction

The Court of Appeals, in a full-fledged opinion by Judge Rivera, reversed the Appellate Division and determined the plaintiff had not failed to comply with the statutory (statute of frauds) requirement of a writing in support of its breach of contract claim.  The defendant, as an absentee bidder at a public auction held by the plaintiff, successfully bid over $400,000 on an item but subsequently refused to pay for it.  The Appellate Division determined that the name of the seller was not in any of the relevant documents and therefore there was no writing which could be enforced.  The Court of Appeals disagreed and held that, because it was clear the plaintiff was acting as the seller’s agent in the bidding process, the absence of the seller’s name from the documents was not fatal to the writing requirement:

…[T]he absentee bidder form, along with the clerking sheet, provide the necessary information to establish the name of Rabizadeh as the buyer.  …

In addition to the buyer’s name, the GOL requires disclosure of “the name of the person on whose account the sale was made”.    * * *

[T]he GOL does not reference the “seller”, making it clear that the seller’s name need not be provided in order to satisfy the requirement of “the name of the person on whose account the sale was made”.

* * * It is well settled that an auctioneer serves as a consignor’s agent … . … Here, the clerking sheet lists Jenack [plaintiff] as the auctioneer, and as such it served as the agent of the seller. The clerking sheet, therefore, provides “the name of the person on whose account the sale was made” and satisfies GOL § 5701(a)(6).    …

It bears repeating in such a case as this that:

‘The Statute of Frauds was not enacted to afford persons a means of evading just obligations; nor was it intended to supply a cloak of immunity to hedging litigants lacking integrity; nor was it adopted to enable defendants to interpose the Statute as a bar to a contract fairly, and admittedly, made’ … .

Using the Statute of Frauds as a “means of evading” a “just obligation” is precisely what Rabizadeh attempts to do here, but the law and the facts foreclose him from doing so.  Rabizadeh took affirmative steps to participate in Jenack’s auction, including executing an absentee bidder form with the required personal information.  He then successfully won the bidding for item 193, closing out other interested bidders, with his $400,000 bid.  He cannot seek to avoid the consequences of his actions by ignoring the existence of a documentary trail leading to him.  Willam J Jenack Estate Appraisers and Auctioneers, Inc v Rabizadeh, 229, CtApp 12-17-13

 

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Snow Removal Contractor May Be Liable to Plaintiff in Slip and Fall Action/Question of Fact Whether Failure to Use Low-Temperature Salt Created a Dangerous Condition

The Third Department determined there was a question of fact whether a contractor hired to clear snow and ice created a dangerous condition by not using salt designed for low temperatures:

While a snow removal contractor is generally not liable to injured persons who were not parties to the contract …, plaintiffs argue the recognized exception that extends a duty to noncontracting third parties where the contractor fails to exercise reasonable care in the performance of duties such that he or she “‘launche[s] a force or instrument of harm'” … .

In opposition to the motion for summary judgment, plaintiffs submitted affidavits from experts who opined that, among other things, [defendant’s] application of plain, untreated rock salt to the parking lot on the morning in question was negligent because temperatures, which were below 20 degrees Fahrenheit, were too cold for plain rock salt to be effective.  According to plaintiffs’ experts, by using untreated salt instead of treated, low temperature salt, [defendant] caused snow shoveled from the sidewalk to the parking lot … to melt and then quickly refreeze, creating a layer of ice beneath the snow. There is no dispute that [defendant] had the option of using untreated or treated salt pursuant to the contract and that he had both kinds available.  There was also evidence that [defendant] was aware that snow would be shoveled from the sidewalk onto the parking lot, and [a witness] testified that he had observed salt in the area where plaintiff fell.  This evidence sufficiently raises a question of fact as to whether [defendant] “‘negligently create[d] or exacerbate[d] a dangerous condition'” by using untreated salt, resulting in the formation of the ice on which plaintiff allegedly slipped… .  Belmonte v Guilderland Associates LLC…, 516830, 3rd Dept 12-12-13

 

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Language of Collective Bargaining Agreements Entitled Retirees to the Same Health Benefits As Were In Effect at the Time of Retirement

In a full-fledged opinion by Judge Lippman, the Court of Appeals determined the language used in successive collective bargaining agreements established a vested right to a continuation of the same health coverage in effect at the time of an employee’s retirement:

We hold that the contracts establish a vested right to a continuation of the same health coverage under which plaintiffs retired, until they reach age 70, and that the Insurance Moratorium Law does not provide a basis for abrogating retirees’ vested contractual rights.  However, because issues of fact remain as to the intended scope of plaintiffs’ right, remittal for further factual development is required to determine whether the challenged increases in co-pays for prescription drugs amount to a breach of contract. Kolbe… v Tibbetts…, 235, CtApp 12-12-13

 

 

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Defendant’s Snow Removal Practices May Have Caused Icy Condition in Parking Lot

In a slip and fall case, the Third Department determined there was a question of fact about whether the snow removal practices of defendant’s contractor created the dangerous icy condition:

…[T]here are factual issues posed as to whether defendant’s snow removal procedures created the dangerous condition.  Defendant had hired an outside contractor to plow the snow into piles.  Plaintiff alleges that some of the piles were located on the parking lot’s perimeter, as well as between her parking spot and the sidewalk adjacent to the building.  There is a slight grade extending from these areas, encompassing the area of her fall.  Thus, there are factual issues as to whether the snow removal techniques caused the dangerous icy condition when the snow piles melted in the warm weekend weather and then refroze in the night before plaintiff’s accident… . Riozzi v 30 Kingston Realty Corporation, 516533, 3rd Dept 12-5-13

 

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