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Consent Order Not Appealable; Open Court Stipulation Valid

The Second Department noted that an order made on consent is not appealable and affirmed Family Court’s determination that a stipulation entered into in open court was valid:

Stipulations of settlement are favored by the courts and a stipulation made on the record in open court will not be set aside absent a showing that it was the result of fraud, overreaching, mistake, or duress”…. Here, the Family Court conducted a proper allocution of the mother, determining that she understood the terms of the stipulation, that she had sufficient time to consult with her attorney, and that she consented to the terms of the stipulation, and thus properly determined that she voluntarily and knowingly accepted the terms of the stipulation…. The mother’s contentions in support of her motion that she felt “forced into settling” and “misle[]d” by her attorney, and that she “did not fully understand what [she] was agreeing to” are insufficient to establish a claim of mistake or duress so as to warrant setting aside the stipulation of settlement… . Matter of Strang v Rathbone, 2013 NY Slip Op 05088, 2nd Dept 7-3-18

 

 

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Contractual Relationship Did Not Preclude Causes of Action Sounding in Tort

In affirming most of Supreme Court’s denial of a defendant’s motion for summary judgment, the Fourth Department explained why the economic loss doctrine did not preclude plaintiff’s recovery in tort, in spite of the contractual relationship between plaintiff and defendant and the contract-based causes of action in the complaint.  Pursuant to two contracts, the defendant supplied electronics and fluorescent-tube recycling systems which allegedly failed resulting in mercury contamination:

…[T]he economic loss doctrine does not preclude plaintiff from recovering in tort as a matter of law.“ Pursuant to that doctrine, a plaintiff may not recover in tort against a manufacturer for economic loss that is contractually based, ‘whether due to injury to the product itself or consequential losses flowing therefrom’ ”…. Where, however, there is harm to persons or property other than the property that is the subject of the contract, a plaintiff is entitled to recover in tort… .  The factors to consider are “the nature of the defect, the injury, the manner in which the injury occurred, and the damages sought”…. We conclude that defendant failed to meet its initial burden on the motion with respect to the causes of action sounding in tort because the evidence submitted by defendant establishes that the mercury contamination of plaintiff’s facility, which was allegedly caused by defendant’s products, caused damage to persons and property other than the property that was the subject of the contracts.   Electrical Waste Recycling Group, Limited v Andela Tool & Machine, Inc…, 626, 4th Dept 6-28-13

 

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The Term “Casualty” In Lease Covered Flooding Due to Malfunctioning HVAC System

The First Department determined Supreme Court should have denied plaintiff’s motion for summary judgment. Plaintiff was the owner and landlord of a building and defendant was a commercial tenant.  Section 7.04 of the lease stated: “each party releases the other with respect to any claim (including a claim for negligence) which it might otherwise have against the other party for loss, damage or destruction with respect to its property by fire or other casualty . . . occurring during the terms of this Lease” … .  A gauge in the HVAC system burst, causing flooding. Plaintiff sued defendant for the cost of repair, alleging defendant failed to maintain the HVAC system.  The issue was whether the word “casualty” in the lease meant “act of god” only, or included damage from human error.  The First Department (reversing Supreme Court) determined human error was included in the meaning of “casualty:”

[W]here a clause is unambiguous, contract language and terms are to be given their plain and ordinary meaning…. Here, the lease provides that the parties agreed on mutual releases in case of damage “by fire or other casualty.” In light of this phrasing, in which “other casualty” is placed in the same category as “fire,” it cannot be said that the word “casualty” excludes events resulting from human error. On the contrary, a fire might have myriad causes, many of which do result from human error. However, the parties did not restrict the types of fires that would fall under the release — for example, by stating that only fires caused by severe weather or other natural causes would trigger a release from liability. Accordingly, the phrase “fire or other casualty,” as construed by an ordinary business person, would describe an event, rather than the cause of that event. 45 Broadway Owner LLC v NYSA-ILA Pension Trust Fund, 2013 NY Slip Op 04895, 1st Dept 6-27-13

 

Exceptions to “No-Damage-for-Delay” Clause in Construction Contract Explained

The defendant library was sued by the plaintiff contractor which claimed the library caused a delay in the performance of a contract by failing to secure access to an adjacent property which was necessary before plaintiff could complete the work.   In affirming the denial of summary judgment to the defendant library, the Second Department listed the exceptions to the enforceability of a “no-damage-for-delay” clause:

“A clause which exculpates a contractee from liability to a contractor for damages resulting from delays in the performance of the latter’s work is valid and enforceable and is not contrary to public policy if the clause and the contract of which it is a part satisfy the requirements for the validity of contracts generally”…. However, “even with such a clause, damages may be recovered for: (1) delays caused by the contractee’s bad faith or its willful, malicious, or grossly negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee, and (4) delays resulting from the contractee’s breach of a fundamental obligation of the contract”….  Aurora Contrs Inc v West Babylon Pub Lib, 2013 NY Slip Op 04762, 2nd Dept 6-26-13

 

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Company Hired on On-Call Basis for Elevator Repair Not Liable for Allegedly Faulty Elevator Door Interlock Where Last Repair Made 13 Months Before Accident

Plaintiff’s decedent fell down an elevator shaft, allegedly due to the condition of a door interlock.  The First Department determined the wrongful death complaint against New York Elevator and Electrical Corporation (NYE) should have been dismissed because the company was retained only on an on-call basis for repairs and there was no evidence NYE was negligent when it inspected the elevator 13 months before the accident:

The amended complaint should have been dismissed as against defendant/third-party plaintiff NYE in its entirety. NYE did not have an exclusive agreement with Broadway to maintain or service the freight elevator…. It was merely retained on an on-call basis to make specific repairs and inspections and, therefore, did not have a duty to inspect or repair unrelated defects…. Indeed, NYE may only be held liable if it failed to exercise reasonable care in making any requested repairs or inspections….  Casey v New York El & Elec Corp, 2013 NY Slip Op 04745, 1st Dept 6-25-13

 

Procedure for Applying to be a “Defender” in America’s Cup Regatta, as Alleged in Complaint, Constitutes an “Offer” and “Acceptance”

The First Department, in a full-fledged opinion by Justice Acosta, in the context of whether the complaint stated a cause of action sufficient to withstand a motion to dismiss, determined that the procedures in a Deed of Gift and Protocol for the America’s Cup sailing regatta constituted and “offer” and “acceptance” resulting in an enforceable contract with the plaintiff which had applied to be a “Defender Candidate” in the regatta.  A lengthy and well-reasoned dissent by Justice Tom argued that the procedures did not amount to an offer because the defendant was free to accept or reject any applicant in the exercise of judgment.  The opinion and dissent discuss the most basic “offer” and “acceptance” criteria for an enforceable contract.  African Diaspora Mar Corp v Golden Gate Yacht Club, 2013 NY Slip Op 04752, 1st Dept 6-25-13

 

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Cause of Action for Fraud Based Upon Alleged Misrepresentation of Insurance Coverage Not Stated

The First Department determined plaintiff had not stated a cause of action for fraud.  The fraud cause of action was based upon defendant’s alleged misrepresentation that it had procured insurance to protect plaintiff against default by the largest subcontractor on the construction project.  It was not disputed that no such insurance was procured:

…[P]laintiff’s fraud claim fails, because “merely alleging that the breach of a contract duty arose from a lack of due care will not transform a simple breach of contract into a tort”…. Plaintiff’s “subjective claims of reliance on defendants’ expertise” do not give rise to a “confidential relationship” whose “requisite high degree of dominance and reliance” existed prior to the alleged fraud…. Defendants had no advisory capacity as to plaintiff, and a special relationship of trust and confidence does not arise merely from an arm’s-length business transaction…. In any event, to maintain a claim for fraud, plaintiff must show that its reliance on an alleged misrepresentation was justifiable or reasonable…. Here, plaintiff neither inquired of the subcontractor nor of the subguard provider if the subcontractor was covered… .Moreover, “[a]n actionable fraud claim requires proof that defendant made a misrepresentation of fact which was false and known to be false”…. A defendant’s knowledge of an allegedly false representation ….must be established…, and plaintiff’s affidavit stating that “it is inconceivable that [defendants] were unaware …was insufficient to establish scienter in this case. Waterscape Resort LLC v McGovern, 2013 NY Slip Op 04709, 1st Dept, 6-20-13

 

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Allegation Release Procured by Fraud Precluded Dismissal of Complaint

In reversing Supreme Court’s dismissal of a slip and fall complaint which was founded on plaintiff’s signing a release, the First Department determined plaintiff had sufficiently alleged the release was procured by fraud:

Under the particular facts of this case, dismissal of the causes of action against the owners at the pleading stage was premature because plaintiff has alleged facts showing that her release may have been fraudulently obtained. To make out the basic elements of a fraudulent inducement claim, a plaintiff must establish that the reliance on the false representation was justified…. Whether the plaintiff could justifiably rely on the false representation is an issue of fact…. “The question of what constitutes reasonable reliance is always nettlesome because it is so fact-intensive”…. Moreover, “[w]here fraud . . . in the procurement of a release is alleged, a motion to dismiss should be denied”….  A plaintiff’s reliance on a misrepresentation may be justified even if the plaintiff is represented by counsel … .  Gonzalez v 40 W Burnside Ave, LLC, 2013 NY Slip Op 04685, 1st Dept, 6-20-13

 

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Conversion Action Can Not Be Based Upon Funds Which Came Into Party’s Possession Lawfully (Down Payment)

In a breach of (purchase) contract action, the Second Department explained that a conversion cause of action could not be based upon the down payment in seller’s possession, and an unjust enrichment cause of action could not be based on the same facts as the breach of contract cause of action:

The Supreme Court properly granted that branch of Smith’s motion which was for summary judgment dismissing the cause of action alleging conversion, since he was rightfully in possession of the down payment …. “Where one is rightfully in possession of property, one’s continued custody of the property and refusal to deliver it on demand of the owner until the owner proves his [or her] right to it does not constitute a conversion”…. The Supreme Court also properly granted that branch of the motion which was for summary judgment dismissing the cause of action alleging unjust enrichment as duplicative of the breach of contract cause of action….  Green Complex, Inc v Smith, 2013 NY Slip Op 04575, 2nd Dept, 6-19-13

 

Ambiguity Precluded Summary Judgment Based Upon Guarantee

In determining the motion for summary judgment based upon a guarantee was properly denied because of ambiguity about which obligations were guaranteed, the Second Department explained:

A written agreement that is complete, clear, and unambiguous on its face must be enforced so as to give effect to the meaning of its terms and the reasonable expectations of the parties, and the court should determine the intent of the parties from within the four corners of the contract without looking to extrinsic evidence to create ambiguities…. An agreement “is unambiguous if the language it uses has a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion'”…  Furthermore, “[a] guaranty is a contract, and in interpreting it we look first to the words the parties used”…. “A guaranty must be construed in the strictest manner’”…, and a guarantor should be bound to the express terms of the written guaranty….  The document at issue, prepared by the plaintiff, is entitled “Personal Guaranty.” The “Guarantor” is defined as “Tony Melillo.” There is language in the body of the document indicating that the Guarantor is personally guaranteeing the payment and performance of the obligations of the “Importer.” The “Importer” is variously defined in the document as either “Tony Melillo, LLC,” or as “Tony Melillo.” Thus, there is an ambiguity in the document as to whose obligations Melillo was guaranteeing.  Wider Consl, Inc v Tony Melillo, LLC, 2013 NY Slip Op 04597, 2nd Dept, 6-19-13

 

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