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THE COMPLAINT IN THIS TRAFFIC ACCIDENT CASE STATED CAUSES OF ACTION (1) FOR FRAUDULENT INDUCEMENT TO SIGN A RELEASE AND (2) FOR RESCISSION OF THE RELEASE BASED UPON UNILATERAL MISTAKE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s complaint stated causes of action for fraudulent inducement (to sign a release) and for recsission of the release based on a unilateral mistake. Plaintiff in this traffic accident case alleged the defendant insurer fraudulently induced him to sign the release by telling him the release applied only to property damage, not to personal injury. Plaintiff alleged English was his second language, he did not have his reading glasses, and he relied on the insurance agent’s representations:

“To state a [cause of action to recover damages] for fraudulent inducement, there must be a knowing misrepresentation of material present fact, which is intended to deceive another party and induce that party to act on it, resulting in injury'” … . “The plaintiff must also establish that he or she reasonably relied upon the alleged misrepresentation” … . “A party is under an obligation to read a document before signing it, and cannot generally avoid the effect of the document on the ground that he or she did not read it or know its contents” … . However, “there are situations where an instrument will be deemed void because the signer was unaware of the nature of the instrument he or she was signing, such as where the signer is illiterate, or blind, or ignorant of the alien language of the writing, and the contents thereof are misread or misrepresented to him [or her] by the other party, or even by a stranger” … .

Here, the complaint stated a cause of action by Israel to recover damages for fraudulent inducement against Progressive and Roberts by alleging, inter alia, that English is Israel’s second language, his ability to read English is limited, and he justifiably relied on the misrepresentations made by Progressive’s agent, Roberts, as to the effect of the release, which has resulted in financial damages to him … .

Moreover, the complaint stated a cause of action by Israel, in effect, to rescind the release based on a unilateral mistake against Progressive and Roberts, as the complaint alleged that Israel’s mistake was induced by fraudulent misrepresentation … . Israel v Progressive Cas. Ins. Co., 2023 NY Slip Op 06357, Second Dept 12-13-24

Practice Point: Plaintiff alleged English was his second language, he didn’t have his reading glasses, he was told the release pertained only to property damage, not personal injury, and he relied on that representation. The complaint stated causes of action for fraudulent inducement and rescission of the release based on unilateral mistake.

 

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THE NOTICE TO ADMIT SOUGHT CONCESSIONS THAT WENT TO THE ESSENCE OF THE CONTROVERSY AND THEREFORE WAS PALPABLY IMPROPER (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the notice to admit in this breach of contract action was palpably improper:

CPLR 3123(a) authorizes the service of a notice to admit upon a party, and provides that if a timely response thereto is not served, the contents of the notice are deemed admitted … . However, the purpose of a notice to admit is only to eliminate from contention those matters which are not in dispute in the litigation and which may be readily disposed of … . A notice to admit is not to be employed to obtain information in lieu of other disclosure devices, or to compel admissions of fundamental and material issues or contested ultimate fact … .

… [T]he notice to admit at issue sought concessions that go to the essence of the controversy … . Thus, the … defendants could not have reasonably believed that the admissions they sought were not in substantial dispute … , and the notice to admit was palpably improper … . Moreover, the information sought in the notice to admit may be obtained through discovery, including depositions … . American Bldrs. & Contrs. Supply Co., Inc. v Vinyl is Final, Inc., 2023 NY Slip Op 06346, Second Dept 12-13-24

Practice Point: A notice to admit which seeks concessions at the heart of the controversy is palpably improper and should be struck.

 

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THE ORAL AGREEMENT BETWEEN PLAINTIFF AND HER MOTHER REQUIRING MOTHER TO TRANSFER FUNDS TO THE PLAINTIFF COULD HAVE BEEN COMPLETED WITHIN A YEAR AND THEREFORE DID NOT VIOLATE THE STATUTE OF FRAUDS; THE RELATED BREACH OF CONTRACT AND TORTIOUS INTERFERENCE WITH CONTRACT CAUSES OF ACTION SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT). ​

The Second Department, reversing (modifying) Supreme Court, determined that an oral agreement to distribute funds to the plaintiff did not violate the statute of frauds because the agreement could have been fulfilled within a year. The related breach of contract and tortious interference with contract causes of action should not have been dismissed:

… [T]he statute of frauds concerns those agreements which, by their terms, “have absolutely no possibility in fact and law of full performance within one year” (… see General Obligations Law § 5-701[a][1] …). Here, although the portion of the alleged oral agreement that required the mother to make payments to the plaintiff in amounts equal to those payments the mother made to the plaintiff’s siblings was capable of an indefinite continuance, it could have been fully performed within a year of its making … . * * *

… [T]he complaint sufficiently sets forth a cause of action sounding in tortious interference with contract, alleging that the plaintiff sustained damages when Janice intentionally and improperly interfered with the portion of the alleged oral agreement requiring the mother to pay the plaintiff an amount equal to any amounts the mother paid to the plaintiff’s siblings, and aided the mother in her breach of that portion of the agreement … . Pare v Aalbue, 2023 NY Slip Op 06377, Second Dept 12-13-23

Practice Point: Even though a contract need not have been fulfilled within a year, it does not violate the statute of frauds if it could be fulfilled within a year.

 

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IN THIS TRAFFIC ACCIDENT CASE, THE PASSENGER IN PLAINTIFF’S CAR EXECUTED A RELEASE IN FAVOR OF PLAINTIFF-DRIVER; DEFENDANT’S COUNTERCLAIM FOR CONTRIBUTION FROM PLAINTIFF FOR ANY INJURY SUFFERED BY THE PASSENGER SHOULD HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the release executed by the passenger (Jelissa) in favor of the plaintiff-driver (Nicole) required the dismissal of the defendant’s counterclaim seeking contribution for any injuries suffered by Jelissa:

Pursuant to General Obligations Law § 15-108(b), “[a] release given in good faith by the injured person to one tortfeasor as provided in [General Obligations Law § 15-108(a)] relieves him [or her] from liability to any other person for contribution as provided in article fourteen of the civil practice law and rules.” Here, pursuant to General Obligations Law § 15-108(b), the release executed by Jelissa in favor of Nicole relieves Nicole from liability to the defendant for contribution … . Moraskin v Lati, 2023 NY Slip Op 06362, Second Dept 12-13-23

Practice Point: Here in this traffic accident case, the passenger in plaintiff’s car released plaintiff-driver from any liability. Therefore the defendant’s counterclaim against plaintiff for contribution for any injury to the passenger should have been dismissed.

 

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THE STIPULATION OF SETTLEMENT INCORPORATED BUT NOT MERGED IN THE JUDGMENT OF DIVORCE WAS UNAMBIGUOUS AND PROVIDED EACH PARTY WAS RESPONSIBLE FOR THEIR OWN ATTORNEY’S FEES; IT WAS THEREFORE ERROR TO AWARD FATHER ATTORNEY’S FEES (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined that the stipulation incorporated but not merged in to the judgment of divorce, which provided that each party was responsible for their own attorney’s fees, controlled. Therefore the award of attorney’s fees to father was error:

… [T]he parties executed a written stipulation of settlement containing the provision, “as and for a global resolution, each party shall be responsible for the payment of his and her respective attorney fees.”

“A stipulation of settlement that is incorporated but not merged into a judgment of divorce is a contract subject to principles of contract construction and interpretation” … . “Generally, where the parties have agreed to provisions in a settlement agreement which govern the award of attorney’s fees, the agreement’s provisions, rather than statutory provisions, control” … . If the contract is clear and unambiguous, it is to be interpreted so as to give effect to the parties’ intent and the intent is to be gleaned from within the four corners of the document … . Here, the fees awarded were as a result of the initial custody determination, and a review of the stipulation of settlement reveals no ambiguity as the agreement clearly provides that each party is to be responsible for his and her respective counsel fees and we must give its terms their plain meaning … . Moreover, in rendering its determination, Supreme Court did not reference the stipulation’s express provision that each parent shall be responsible for his and her counsel fees, thus, it erred in awarding the father counsel fees … . Daryl N. v Amy O., 2023 NY Slip Op 06286, Third Dept 12-7-23

Practice Point: A stipulation of settlement incorporated but not merged into a judgment of divorce is a contract which supersedes statutory provisions. The unambiguous provision in the stipulation that each party is responsible for their own attorney’s fees controls. Attorney’s fees should not have been awarded to father.

 

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THE UNDERWRITING GUIDELINES DID NOT SUPPORT THE UNDERWRITER’S CLAIM THAT THE LIFE INSURANCE POLICY WOULD NOT HAVE BEEN ISSUED IF THE COMPANY HAD BEEN AWARE OF PLAINTIFF’S DECEDENT’S HEART CONDITION; THEREFORE THE INSURANCE COMPANY DID NOT DEMONSTRATE, AS A MATTER OF LAW, THAT PLAINTIFF’S DECEDENT MADE A MATERIAL MISREPRESENTATION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant insurance company’s motion for summary judgment in this breach of contract action should not have been granted. The insurance company alleged plaintiff’s decedent misrepresented his medical condition when applying for the term life insurance policy eight months before his death. The insurance company failed to demonstrate, as a matter of law, that plaintiff’s decedent made a material misrepresentation:

“To establish materiality as a matter of law, an insurer must present clear and substantially uncontradicted documentation concerning its underwriting practice, such as underwriting manuals, bulletins, or rules pertaining to similar risks, which show that it would not have issued the same policy if the correct information had been disclosed in the application … . …

Although the defendant’s chief underwriter testified at his deposition that the defendant would not have issued the subject policy to the decedent at the same premium rate had he disclosed the extent of his heart conditions, the underwriting guidelines submitted by the defendant do not state that the heart conditions which the decedent failed to disclose must be assessed at a higher premium … . Ruiz v First Invs. Life Ins. Co., 2023 NY Slip Op 06269, Second Dept 12-6-23

Practice Point: Here the underwriting guidelines did not support the insurance company’s claim that it would not have issued plaintiff’s decedent’s life insurance policy had it been aware of his heart condition. Therefore the company did not demonstrate, as a matter of law, that plaintiff’s decedent made a material misrepresentation when applying for the policy.

 

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THE STIPULATION RE: SHARING HUSBAND’S PENSION AT A FUTURE DATE WAS NOT AMBIGUOUS AND NEED NOT BE REFORMED; THE STIPULATION WHICH WAS INCORPORATED BUT NOT MERGED INTO THE DIVORCE JUDGMENT CANNOT BE REFORMED PURSUANT TO A MOTION, A PLENARY ACTION IS REQUIRED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the stipulation that was incorporated but not merged into the divorce judgment was not ambiguous and should not have reformed the stipulation based upon a mutual mistake. The stipulation was not ambiguous and required the husband to share his pension when he turned 62. In addition, reformation of the stipulation was not appropriate pursuant to a motion. A plenary action is required to reform stipulation which is incorporated but not merged into the judgment of divorce:

… Supreme Court should have rejected the plaintiff’s contention that the stipulation of settlement was ambiguous. The interpretation of the stipulation advanced by the plaintiff would render meaningless the terms of the stipulation providing that distribution of pension benefits to the plaintiff would commence in the future, when the defendant reached the age of 62 … . Inasmuch as the language of the stipulation disclosed the parties’ intent to defer the plaintiff’s pension distribution until the defendant reached age 62, at a time he would have been eligible for regular service retirement benefits, and is not subject to more than one reasonable interpretation, the agreement is not ambiguous … .

… [T]o the extent that the Supreme Court determined that the stipulation of settlement was affected by a mutual mistake, reformation was not appropriate. A motion is not the proper vehicle for challenging a separation agreement incorporated but not merged into a judgment of divorce. Rather, the plaintiff was required to commence a plenary action to reform the stipulation … . In any event, reformation of the stipulation was unwarranted, as the parties’ mistake regarding the category of benefits the defendant would receive did not “involve a fundamental assumption of the contract” … . Anderson v Anderson, 2023 NY Slip Op 06108, Second Dept 11-29-23

Practice Point: Here the judge should not have determined the stipulation incorporated but not merged into the judgment of divorce was ambiguous because it was subject to only one interpretation.

Practice Point: A stipulation which is incorporated but not merged into the judgment of divorce cannot be reformed pursuant to a motion. A plenary proceeding must be commenced.

 

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THE UNION’S CHALLENGE TO THE DEDUCTION OF THE COST OF HEALTH INSURANCE FROM A VILLAGE POLICE OFFICER’S PAYCHECK WAS A BREACH-OF-CONTRACT ACTION FOR WHICH THE STATUTE OF LIMITATIONS BEGAN RUNNING ANEW FOR EACH PAYCHECK (SECOND DEPT). ​

The Second Department, reversing (modifying) Supreme Court, in a full-fledged opinion by Justice Brathwaite Nelson, determined the action by the union on behalf of a village police officer challenging the deduction of health insurance costs from each paycheck was a breach-of-contract action and the statute of limitations began running anew for each paycheck:

Teamsters Local 445 (hereinafter the Union) filed a demand for arbitration of a grievance against the Village of Maybrook alleging that the Village breached the parties’ collective bargaining agreement (hereinafter CBA) by deducting a certain amount from each paycheck of Sergeant Michael Maresca for health insurance costs. The Supreme Court granted the Village’s petition to permanently stay arbitration on the ground that the claim sought to be arbitrated was barred by the four-month statute of limitations applicable to CPLR article 78 proceedings. The principal issues raised on this appeal are (1) whether the underlying claim is in the nature of CPLR article 78 seeking review of an administrative determination or in the nature of breach of contract, and (2) if the latter, whether the claim is predicated on a single breach or a series of breaches that occurred with each paycheck. … [W]e determine that the nature of the claim is breach of contract and that the claim is predicated on a series of independent alleged breaches. Since the statute of limitations began anew as to each breach, we find that the claim to be arbitrated was not wholly time-barred. We therefore modify the order appealed from by … granting the Union’s cross-motion to the extent of compelling arbitration of so much of the grievance as was not time-barred. Matter of Village of Maybrook v Teamsters Local 445, 2023 NY Slip Op 06051, Second Dept 11-22-23

Practice Point: Here the union’s challenge to the deduction of the cost of health insurance from a village police officer’s paycheck was governed by the six-year statute of limitations for a breach of contract action, not the four-month statute of limitations for an Article 78 proceeding. The statute began running anew for each paycheck.

 

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PLAINTIFF DID NOT DEMONSTRATE THE RELEASE WAS PROCURED BY FRAUD, CRITERIA EXPLAINED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined plaintiff did not demonstrate the release plaintiff agreed to was procured by fraud. Therefore the motion to dismiss the causes of action covered by the release should have been granted:

“Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release” … . “If the language of a release is clear and unambiguous, the signing of a release is a jural act binding on the parties” … . “Notably, a release may encompass unknown claims, including unknown fraud claims, if the parties so intend and the agreement is fairly and knowingly made” … .

“A release should never be converted into a starting point for . . . litigation except under circumstances and under rules which would render any other result a grave injustice” … . “A release may be invalidated, however, for any of the traditional bases for setting aside written agreements, namely, duress, illegality, fraud, or mutual mistake” … . “Although a defendant has the initial burden of establishing that it has been released from any claims, a signed release shifts the burden of going forward . . . to the [plaintiff] to show that there has been fraud, duress or some other fact which will be sufficient to void the release” …  “A plaintiff seeking to invalidate a release due to fraudulent inducement must establish the basic elements of fraud, namely a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury” … . “[A] party that releases a fraud claim may later challenge that release as fraudulently induced only if it can identify a separate fraud from the subject of the release” … . JM UC Group, LLC v Precious Care Mgt., LLC, 2023 NY Slip Op 06034, Second Dept 11-22-23

Practice Point: The decision includes the text of a detailed release which is worth reading. A release can even cover unknown claims, even unknown fraud claims. Here plaintiff did not demonstrate the release was procured by fraud and the relevant causes of action should have been dismissed.

 

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THE LIFE INSURANCE POLICY REQUIRED WRITTEN NOTICE OF ANY ASSIGNMENT OF THE POLICY; THE FAILURE TO PROVIDE WRITTEN NOTICE PRECLUDED THE ASSIGNEE FROM BRINGING A CLAIM UNDER THE POLICY AGAINST THE INSURER (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Halligan, answering a question from the Second Circuit, determined the failure to give notice of the assignment of the life insurance policy precluded the assignee from suing the insurer:

The United States Court of Appeals for the Second Circuit has asked us to determine whether, where a life insurance policy provides that “assignment will be effective upon Notice” in writing to the insurer, the failure to provide such written notice voids the assignment so that the purported assignee does not have contractual standing to bring a claim under the Policy … . … [W]e reformulate the question as follows:

Where a life insurance policy provides that ‘assignment will be effective upon notice’ in writing to the insurer, does the failure to provide such written notice deprive the purported assignee of contractual standing to bring a claim under the Policy against the insurer?

We answer the reformulated question in the affirmative. Brettler v Allianz Life Ins. Co. of N. Am.2023 NY Slip Op 05958, CtApp 11-20-23

Practice Point: Here the life insurance policy required written notice to the insurer of any assignment of the policy. The failure to provide notice precluded the assignee from bringing a claim under the policy against the insurer.

 

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