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Contribution and Indemnification Unavailable in Breach of Contract Action; Notice of Claim Requirement Under Education Law Never Triggered by Denial of Payment

In a complicated breach of contract action arising out of construction projects for defendant school district, the Second Department determined contribution and indemnification were unavailable for purely economic loss from breach of contractual obligations (CPLR 1401, 1403, 3019).  In addition, the Second Department determined that the need to file a notice of claim pursuant to Education Law 3813 was never triggered by a denial of payment.  On the notice of claim issue, the Second Department wrote:

Education Law § 3813(1) requires a party to serve a notice of claim upon a school district within three months after the accrual of such claim as a condition precedent to the commencement of an action …. Claims arising out of a breach of contract accrue when “payment for the amount claimed was denied” (Education Law § 3813[1]). A denial of payment is only deemed to occur “upon an explicit refusal to pay” or when a party should have viewed its claim as having been constructively rejected …. Where no express or constructive denial of payment has been made, the obligation to serve a notice of claim is not triggered…. Here, the District failed to demonstrate that it expressly or constructively denied payment to PGA for its continued work on the projects. Thus, the District did not establish its prima facie entitlement to judgment …based upon PGA’s failure to serve a notice of claim in accordance with Education Law § 3813(1)… .  Capstone Enters of Port Chester, Inc v Board of Educ Irvington Union Free Sch Dist, 2013 NY Slip Op 03448, 2nd Dept, 5-15-13

 

 

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Review Criteria for Arbitration Award Explained; Contract Entered Into by Unlicensed Interior and Architectural Design Business Did Not Violate Public Policy

In a full-fledged opinion by Justice Mazzarelli, the First Department upheld an arbitrator’s award which had been confirmed by Supreme Court.  The issue at the heart of the case was whether the fact that the petitioner’s interior and architectural design business did not have a license to practice architecture warranted a finding that a contract entered into by the petitioner with the respondents violated public policy (such that the respondents did not have to pay for services rendered).  Justice Mazzarelli, after collecting relevant cases, determined there was no violation of public policy. The petitioner employed a licensed architect and periodically used a licensed and registered architect as an outside consultant.  In explaining the court’s role in reviewing an arbitrator’s award, the First Department wrote:

Because of the great degree of deference afforded to arbitration awards, the available grounds for vacating them are extremely limited. Mere errors of law or fact reflected in an arbitration award are insufficient for a court to overturn it, since “the courts should not assume the role of overseers to mold the award to conform to their sense of justice” …. A court may only disturb the award “when it violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on an arbitrator’s power” ….  Matter of McIver-Morgan, Inc, v Dal Piaz, 2013 NY Slip Op 03411, 1st Dept, 5-9-13

 

Criteria for Common-Law Indemnification Explained

In upholding Supreme Court’s determination that a cause of action for common-law indemnification should not be dismissed, the Third Department explained:

Common-law indemnification …is a quasi-contract claim in which a  contract is implied in law in order to avoid unjust enrichment, accomplished  by  shifting a  loss by  “placing the obligation where  in equity it belongs” …..   Common-law  indemnification avoids  unfairness  and  unjust  enrichment  by  “recogniz[ing]  that [a] person  who,  in whole  or in part, has discharged a duty which is owed  by  him  but  which  as between  himself and  another should have been discharged by  the other, is entitled to indemnity” …  It “requires a showing that [the] plaintiff and [the] defendant[] owed a duty to third parties, and that [the] plaintiff discharged the duty which, as between [the] plaintiff and [the] defendant[], should have been discharged by [the] defendant[]” … .Murray Bresky Consultants, Ltd v New York Compensation Manager’s Inc, 515591, 3rd Dept, 5-9-13

 

“Unconscionable Contract” Elements Explained

In finding the arbitration clause in a contract valid, the Third Department explained the criteria for an “unconscionable” contract as follows:

As to the crux of petitioner’s appeal – that the contracts at issue are unconscionable and/or constitute contracts of adhesion – “an unconscionable contract [is] defined as one which is so grossly unreasonable as to be unenforcible because  of an absence  of meaningful choice on  the part of one  . . . part[y] together with contract terms which are unreasonably favorable to the other” …   Unconscionability, in turn, has two  elements. Substantive unconscionability “appear[s] in the content of the contract per se” and may include, by way of example, “inflated prices, unfair termination clauses,  unfair  limitations on consequential damages  and  improper disclaimers of warranty”… .Procedural unconscionability, on the other hand, entails “an examination of the contract formation process and the alleged lack of meaningful choice” ….  In this regard, “[t]he focus is on such matters as the size and commercial  setting of the transaction, whether deceptive or high- pressured tactics were  employed,  the use of fine print in the contract, the experience and education of the party claiming unconscionability, and whether  there  was  disparity  in  bargaining power” … . Matter of Conifer Realty …, 515560, 3rd Dept, 5-9-13

 

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In-Court Stipulation Enforceable Even Though Party Not Represented by Counsel​ 

The Third Department upheld an in-court stipulation concerning a mortgage foreclosure action that was entered without counsel:

Open court stipulations of settlement are highly favored, binding on  the parties and  strictly enforced, and generally will not be  cast aside absent a showing  of “fraud, collusion, mistake or accident” … .The fact that a party was not represented by counsel when entering into a  stipulation, while certainly relevant, is not sufficient  in  itself to  invalidate  a  stipulation,  particularly where the party was advised to retain counsel and chose not to … Liquori v Liquori, 515502, 3rd Dept, 5-9-13

 

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Statute of Frauds Precluded Real Property-Related Action; Equitable Part Performance Doctrine Not Applicable

The Second Department determined the statute of frauds barred the real-property-related action and, since the action was brought “at law,” the equitable “part performance” doctrine could not be applied:

Here, the County established, prima facie, that there is no extant writing subscribed by the County or its agent referencing an alleged oral agreement involving real property, as described by the plaintiff (see General Obligations Law § 5-703[3];…). In opposition, the plaintiff failed to raise a triable issue of fact. “Part performance by the party seeking to enforce [a] contract [for the sale of real property] may be sufficient in some circumstances to overcome the statute of frauds, but only in an action for specific performance” (…see General Obligations Law § 5-703[4];…). Since, here, the action is pleaded as one at law, and seeks only money damages, without any specific prayer for equitable relief, the plaintiff cannot rely on the doctrine of part performance to defeat the statute of frauds defense …. Accordingly, the Supreme Court should have granted the County’s motion for summary judgment dismissing the complaint, based on the statute of frauds. Zito v County of Suffolk, 2013 NY Slip Op 03324, 2nd Dept, 5-8-13

 

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Anticipatory Repudiation Cause of Action Stated;Four-Year UCC Statute of Limitations Applied

In a full-fledged opinion by Justice Leventhal, the Second Department determined that the plaintiff had pled a valid “anticipatory repudiation” cause of action and that the four-year UCC statute of limitations applied.  The case concerned the return (for a refund) of drugs when the expiration date is close or has passed.  The plaintiff brought the action when it learned the refund would not be offered in full. Regarding the anticipatory repudiation and statute of limitations issues, Justice Leventhal wrote:

Here, the complaint alleges that, when the defendants refused to accept the plaintiff’s attempt to return the unsold merchandise, the defendants anticipatorily repudiated their respective return policies by unambiguously stating that they would not accept the returns. The complaint asserts that the defendants’ anticipatory repudiation occurred before the plaintiff tendered the unsold merchandise to the defendants and before the plaintiff attempted to return the merchandise to the manufacturer in accordance with standard industry practice. When a party repudiates a contract prior to the time designated for performance and before all of the consideration has been fulfilled, the nonrepudiating party can seek to recover damages …. * * *

The general rule applicable to actions to recover damages for breach of contract is that a six-year statute of limitations begins to run when a contract is breached or when one party fails to perform a contractual obligation …. However, UCC 2-725(1) provides that “[a]n action for breach of any contract for sale [of goods] must be commenced within four years after the cause of action has accrued” (see CPLR 203[a]). QK Healthcare, Inc v InSource, Inc, 2013 NY Slip Op 03312, 2nd Dept, 5-8-13

 

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Unlicensed Contractor Could Not Sue for Breach of Contract or Quantum Meruit

The Second Department affirmed the dismissal of a contractor’s “breach-of-contract” and “quantum-meruit” causes of action because the contractor was not licensed, and thereby forfeited his right to recover:

Where a home improvement contractor is not properly licensed in the municipality where the work is performed at the time the work is performed, the contractor forfeits the right to recover for the work performed both under the contract and on a quantum meruit basis …. Administrative Code of Suffolk County § 563-17(A) provides, in pertinent part, that “[i]t is unlawful for any person to engage in any business as a home improvement contractor without obtaining a license therefor.” Graciano Corp v Baronoff, 2013 NY Slip Op 03301, 2nd Dept, 5-8-13

 

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Broad Arbitration Clause Required Arbitration of Topic Not Directly Covered by Collective Bargaining Agreement

In upholding the lower court’s determination that a matter involving “shift swapping” in the sheriff’s department was subject to arbitration even though the topic was not directly covered by the collective bargaining agreement (CBA), the Fourth Department wrote:

In determining whether the parties agreed to arbitrate the dispute at issue, “[o]ur review . . . is limited to the language of the grievance and the demand for arbitration, as well as to the reasonable inferences that may be drawn therefrom” …. “Where, as here, there is a broad arbitration clause and a ‘reasonable relationship’ between the subject matter of the dispute and the general subject matter of the parties’ [CBA], the court ‘should rule the matter arbitrable, and the arbitrator will then make a more exacting interpretation of the precise scope of the substantive provisions of the [CBA], and whether the subject matter of the dispute fits within them’ ” … .  Matter of Ontario County…, CA 12-01766, 309, 4th Dept, 5-3-13

 

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Criteria for Specific Performance of Plea Agreement Explained

The Fourth Department noted the criteria for a defendant’s right to specific performance of a plea agreement (criteria not met in this case):
“ ‘The remedy of specific performance in the context of plea agreements applies where a defendant has been placed in a no-return position in reliance on the plea agreement . . . , such that specific performance is warranted as a matter of essential fairness’ ” … Inasmuch as neither the prosecution nor the defense had taken any action on the second plea agreement …defendant was not placed in a “ ‘no-return position’ ” in reliance on the second plea agreement and is thus not entitled to specific performance of that agreement… . People v Weather, KA 11-01247, 482, 4th Dept, 5-3-13

 

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