Contract Law – Page 20 – New York Appellate Digest

PLAINTIFF DID NOT PROVE DEFENDANT RECEIVED AND RETAINED THE INVOICES; SUMMARY JUDGMENT ON THE ACCOUNT STATED CAUSE OF ACTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff was not entitled to summary judgment on the account stated and breach of contract causes of action. With respect to the elements of an “account stated” cause of action, the court wrote:

“An account stated is an agreement between parties, based upon their prior transactions, with respect to the correctness of the account items and the specific balance due” … . “The agreement may be express or implied where a defendant retains bills without objecting to them within a reasonable period of time, or makes partial payment on the account” … . “In order to establish a prima facie case to recover on an account stated, the plaintiff must establish that it submitted invoices and that the defendant received and retained the invoices without objection for an unreasonable period of time” … .

Here, the plaintiff failed to demonstrate its prima facie entitlement to judgment as a matter of law on its causes of action to recover on an account stated, as the plaintiff failed to present evidence showing that the plaintiff’s invoices for the amounts at issue were mailed to and received by the defendants … . In support of its motion, the plaintiff submitted an affidavit from its underwriting manager regarding the mailing of invoices. However, the affiant did not attest to personal knowledge of the mailings or of a standard office practice and procedure designed to ensure that items were properly addressed and mailed … . Alliance Natl. Ins. Co. v Hagler, 2023 NY Slip Op 04648, Second Dept 9-20-23

Practice Point: In order to prove an “account stated” cause of action, the plaintiff must prove the invoices were properly mailed to the the defendant, which includes proof of personal knowledge of the mailing procedure.

September 20, 2023

Civil Procedure, Contract Law, Environmental Law

PLAINTIFF WAS HIRED BY THE CITY TO INSTALL A SEWER AND DISCOVERED 45,000 TONS OF CONTAMINATED SOIL; DEFENDANT, WHO CAUSED THE CONTAMINATION, REFUSED TO REMEDIATE; PLAINTIFF, WHO REMEDIATED THE CONTAMINATION, STATED A CAUSE OF ACTION FOR UNJUST ENRICHMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the unjust-enrichment cause of action should not have been dismissed. Plaintiff was hired by the city to install a sewer. Plaintiff discovered 45,000 tons of contaminated soil in the process. Defendant, who was responsible for the contamination, refused to remediate. Plaintiff remediated the contamination and sued defendant for the cost. There was no contract between plaintiff and defendant, so the breach of contract action was properly dismissed. However, the complaint stated a cause of action for unjust enrichment:

“To recover under a theory of unjust enrichment, a litigant must show that (1) the other party was enriched, (2) at that party’s expense, and (3) that it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered” … . “‘[T]he essential inquiry in any action for unjust enrichment . . . is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered'” … . “Although privity is not required for an unjust enrichment claim, a claim will not be supported if the connection between the parties is too attenuated” … .

Here, affording the complaint a liberal construction, we find that it sufficiently alleged that the defendant was unjustly enriched, at the plaintiff’s expense, by the plaintiff’s remediation of the contaminated soil, and that it would be against equity and good conscience to permit the defendant to retain what was sought to be recovered … . Bedford-Carp Constr., Inc. v Brooklyn Union Gas Co., 2023 NY Slip Op 04566, Second Dept 9-13-23

Practice Point: When there is no contract between the parties, the unjust-enrichment theory may be viable, as it was in this case.

September 13, 2023

Civil Procedure, Contract Law, Evidence, Real Estate

THE LETTER OF INTENT WAS NOT A BINDING REAL ESTATE CONTRACT; THE MOTION TO DISMISS THE BREACH OF CONTRACT, BASED ON “DOCUMENTARY EVIDENCE,” SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the letter of intent was a non-binding agreement-to-agree, not a contract for the sale of real property. The letter of intent constituted “documentary evidence” which warranted dismissal of the breach of contract action:

… [T]he defendant submitted the letter of intent which conclusively established that the parties did not enter into a binding contract, but instead had a mere agreement to agree … . The letter of intent expressly stated that the letter was not contractually binding and expressly anticipated the future preparation and execution of a contract. Accordingly, the Supreme Court should have granted dismissal of so much of the complaint as was predicated upon allegations of breach of contract pursuant to CPLR 3211(a)(1). Krasnow v Catania, 2023 NY Slip Op 04584, Second Dept 9-13-23

Practice Point: This is a rare example of a successful motion to dismiss based on documentary evidence. The letter of intent was, by its terms, not a binding contract. Therefore the breach of contract action, based upon the letter of intent, should have been dismissed.

September 13, 2023

Civil Procedure, Contract Law, Fraud, Limited Liability Company Law

THE CRITERIA FOR LONG-ARM JURISDICTION BASED UPON A TORT COMMITTED “WITHIN THE STATE” CLARIFIED; NEW YORK DID NOT HAVE LONG-ARM JURISDICTION OVER THE OUT-OF-STATE INDIVIDUAL DEFENDANTS, MEMBERS OF AN LLC WHICH SOLD N95 MASKS TO THE NEW YORK PLAINTIFF; IT WAS ALLEGED THE QUALITY OF THE MASKS WAS MISREPRESENTED IN AN EMAIL TO THE NEW YORK PLAINTIFF (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Pitt-Burke, determined New York did not have long-arm jurisdiction over out-of-state individual defendants based upon an alleged misrepresentation in an email sent by defendants as principals of defendant LLC (RPP) to the New York plaintiff. RPP sold N95 masks to plaintiff. A picture of a mask sent in the email had the FDA-approval logo on the packaging. Plaintiff alleged the masks actually shipped were not FDA approved:

This appeal presents the opportunity to reaffirm this Court’s position on what constitutes a tort committed within the boundaries of this state for purposes of New York’s long-arm jurisdiction under CPLR 302(a)(2). … [W]e find that the language “within the state” in CPLR 302(a)(2), means that a nondomiciliary is only subject to New York’s long-arm jurisdiction under subsection (a)(2) when they have committed a tortious act, in person or through an agent, while physically present within the boundaries of this state. * * *

… [I]t is undisputed that the alleged fraudulent statements were made outside of New York and that the individual defendants communicated with plaintiff solely in their capacity as principals of RPP. Therefore, we find that plaintiff has failed to demonstrate a basis for imposing long-arm jurisdiction over the individual defendants pursuant to CPLR 302(a)(2), and the motion court should have granted the individual defendants’ motion to vacate the default judgment pursuant to CPLR 5015(a)(4) and dismissed the cause of action as against them pursuant to CPLR 3211(a)(8). In light of our determination, we need not reach the issue of whether the exercise of personal jurisdiction comports with due process or whether a discretionary vacatur was warranted as it relates to the individual defendants. SOS Capital v Recycling Paper Partners of PA, LLC, 2023 NY Slip Op 04480, First Dept 8-31-23

Practice Point: Here the criteria for long-arm jurisdiction based upon a tort committed in New York were clarified by the First Department.

August 31, 2023

Contract Law, Real Estate

ALTHOUGH THE MORTGAGE CONTINGENCY PROVISION OF THE PURCHASE CONTRACT WAS NO LONGER OPERABLE BECAUSE THE MORTGAGE COMMITMENT WAS REVOKED AFTER THE CONTINGENCY PERIOD HAD ELAPSED, THE SELLER’S BAD FAITH WARRANTED RETURN OF THE DOWN PAYMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff purchaser was entitled to return of the down payment after the bank refused to extend the mortgage commitment because the seller had not submitted an environmental report. Although the original mortgage-contingency clause was no longer operable (because the loan commitment had been extended pending receipt of the environmental report), it was the seller’s failure to provide the report, and not the actions or omissions of the purchaser, which resulted in the termination of the loan commitment:

“A mortgage contingency clause is construed to create a condition precedent to the contract of sale” … . “The purchaser is entitled to return of the down payment where the mortgage contingency clause unequivocally provides for its return upon the purchaser’s inability to obtain a mortgage commitment within the contingency period” … . “However, when the lender revokes the mortgage commitment after the contingency period has elapsed, the contractual provision relating to failure to obtain an initial commitment is inoperable, and the question becomes whether the lender’s revocation was attributable to any bad faith on the part of the purchaser” … . Rivkin v 1946 Holding Corp., 2023 NY Slip Op 04427, Second Dept 8-30-23

Practice Point: Here the mortgage commitment was revoked after the contingency period in the purchase contract had elapsed. Therefore the contingency provision was no longer operable. However, the seller was responsible for the revocation of the mortgage commitment for failure to submit an environmental report. Therefore the purchaser was entitled to return of the down payment.

August 30, 2023

Attorneys, Contract Law

HERE THE LANGUAGE OF THE CONTRACT DID NOT MAKE IT “UNMISTAKABLY CLEAR” THAT THE LOSER WOULD PAY THE WINNER’S ATTORNEY’S FEES; THEREFORE THE FEE AWARD WAS REVERSED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the plaintiffs, who prevailed in this contract action (based upon a license to repair damage to plaintiffs’ property), were not entitled to have the defendants pay their attorney’s fees because the contract did not explicitly so provide:

“Under the general rule, attorney’s fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule” … . “It is not uncommon, however, for parties to a contract to include a promise by one party to hold the other harmless for a particular loss or damage and counsel fees are but another form of damage which may be indemnified in this way” … . “When a party is under no legal duty to indemnify, a contract assuming that obligation must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed” (id.). “The promise should not be found unless it can be clearly implied from the language and purpose of the entire agreement and the surrounding facts and circumstances” .. . “Inasmuch as a promise by one party to a contract to indemnify the other for attorney’s fees incurred in litigation between them is contrary to the well-understood rule that parties are responsible for their own attorney’s fees, the court should not infer a party’s intention to waive the benefit of the rule unless the intention to do so is unmistakably clear from the language of the promise” … .

Here, the license did not provide for attorney’s fees for the instant litigation. Neither of the paragraphs in the license regarding attorney’s fees provided for attorney’s fees in litigation between the parties over alleged breaches of the license. Because the parties did not make “unmistakably clear” in the license that they intended to depart from the general rule that the losing party is not responsible for the winning party’s attorney’s fees, the Supreme Court erred in granting that branch of the plaintiffs’ motion which was for an award of attorney’s fees … . Giannakopoulos v Figame Realty Mgt., 2023 NY Slip Op 04364, Second Dept 8-23-23

Practice Point: The general rule is each party pays its own attorney’s fees. Any contract to the contrary must be “unmistakably clear,” not the case here.

August 23, 2023

Civil Procedure, Contract Law

TO STATE A CAUSE OF ACTION FOR BREACH OF CONTRACT, THE PROVISIONS OF THE CONTRACT WHICH WERE ALLEGEDLY BREACHED MUST BE IDENTIFIED IN THE COMPLAINT; WHERE IT IS CONCEDED THAT A CONTRACT EXISTS, A CAUSE OF ACTION FOR QUASI CONTRACT MUST BE DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the complaint did not adequately allege breach of contract or quasi contract and therefore should have been dismissed:

“[T]o state a cause of action to recover damages for a breach of contract, the plaintiff’s allegations must identify the provisions of the contract that were breached” … . Here, the complaint failed to specify the provision of the parties’ contract that was allegedly breached … .

… Supreme Court should have granted those branches of the defendant’s motion which were pursuant to CPLR 3211(a)(7) to dismiss the causes of action alleging quasi contract sounding in restitution and unjust enrichment. The parties do not dispute that a contract … exists … . We Transp., Inc. v Westbury Union Free Sch. Dist., 2023 NY Slip Op 04394, Second Dept 8-23-23

Practice Point: A complaint alleging breach of contract does not state a cause of action if the specific provisions alleged to have been breached are not identified.

Practice Point: Where the existence of a contract is conceded, a cause of action for quasi contract must be dismissed.

August 23, 2023

Civil Procedure, Contract Law, Evidence

THE DEFENDANT REHABILITATION FACILITY DID NOT PROVE PLAINTIFF’S DECEDENT SIGNED THE ADMISSIONS AGREEMENT USING AN ELECTRONIC FORMAT CALLED DOCUSIGN; THEREFORE THE AGREEMENT WAS NOT AUTHENTICATED AND THE FORUM SELECTION CLAUSE IN THE AGREEMENT COULD NOT BE ENFORCED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Gonzalez, reversing Supreme Court, over a dissent, determined the defendant rehabilitation facility, Dewitt. did not demonstrate plaintiff’s decedent signed the facility’s admission agreements. Therefore the forum selection clause in the agreements should not have been enforced by the motion court. The agreements were allegedly signed using an electronic format called Docusign. But the defendant did not submit any evidence demonstrating how Docusign works and did not submit an affidavit by the representative who allegedly witnessed plaintiff’s signatures. The agreement was not, therefore, authenticated and was not admissible evidence of an agreement to the forum:

… [T]he “burden of proving the existence, terms and validity of a contract rests on the party seeking to enforce it” … . This requires, in the first instance, authentication of the purported writing … . Authentication may be effected by various means, including, for example, by certificate of acknowledgment (see CPLR 4538), by comparison of handwriting (see CPLR 4536), or by the testimony of a person who witnessed the signing of the document … .

Here, …in support of its motion, Dewitt submitted Trimarchi’s [the defendant’s director of admission’s] affidavit, along with copies of the admissions agreements. Trimarchi admitted, however, that she was not present during the signing of the admissions agreement. Trimarchi attested only to her understanding of how admissions agreements were usually signed; she had no actual knowledge of how the agreements bearing decedent’s name came to be signed. Moreover, Trimarchi did not describe any protocols governing the use of Docusign. Accordingly, her affidavit cannot serve to authenticate the agreements … . Dewitt did not seek to authenticate decedent’s signature by any other means, such as a certificate of acknowledgment or a handwriting exemplar. Since Dewitt failed to authenticate the agreements, it correspondingly failed to show that the forum selection clauses set forth in those documents are enforceable against plaintiff … . Knight v New York & Presbyt. Hosp., 2023 NY Slip Op 04258, First Dept 8-10-23

Practice Point: This case illustrates the need to authenticate signatures which involve some sort of electronic signing format. Here the defendant did not demonstrate how the electronic signature format worked and therefore did not authenticate plaintiff’s decedent’s signature. The forum selection clause in the agreement, therefore, could not be enforced.

August 10, 2023

Civil Procedure, Contract Law, Fiduciary Duty, Fraud, Trusts and Estates

EVERY CAUSE OF ACTION WAS ERRONEOUSLY DISMISSED AS TIME-BARRED; THE PROPER CRITERIA FOR DETERMINING THE CORRECT STATUTES OF LIMITATIONS DISCUSSED IN SOME DETAIL (SECOND DEPT).

The Second Department, reversing Supreme Court, determined several causes of action including fraud, breach of fiduciary duty, breach of constructive trust, and breach of contract should not have been dismissed as time-barred:

“‘[W]here an allegation of fraud is essential to a breach of fiduciary duty claim, courts have applied a six-year statute of limitations under CPLR 213(8)'” … . * * * … [P]laintiffs discovered the alleged fraud in 2019 and the cause of action was timely commenced within two years. * * *

… [T]he statute of limitations on the cause of action for the imposition of a constructive trust did not begin to run until 2019, when [defendant] allegedly breached his promise … . …

“[I]n order to determine the statute of limitations applicable to an action for a declaratory judgment, a court must examine the substance of the action. Where it is determined that the parties’ dispute can be, or could have been, resolved in an action or proceeding for which a specific limitation period is statutorily required, that limitation period governs” … . * * *

… Supreme Court erred in concluding that the causes of action alleging fraud in the inducement and promissory estoppel are time-barred. The statute of limitations for those causes of action is six years … . …

The statute of limitations applicable to a breach of contract cause of action is six years (see CPLR 213[2]), “and begins at the time of the breach, even when no damage occurs until later, and even though the injured party may be ignorant of the existence of the wrong or injury” … . Statharos v Statharos, 2023 NY Slip Op 04226, Second Dept 8-9-23

Practice Point: Here the criteria for determining the applicable statute of limitations for breach of fiduciary duty, fraud, breach of constructive trust, declaratory judgment, promissory estoppel, fraud in the inducement and breach of contract are discussed in some detail.

August 9, 2023

Contract Law, Corporation Law, Limited Liability Company Law, Negligence

THE ALLEGATIONS WERE SUFFICIENT TO SUPPORT PIERCING THE CORPORATE VEIL TO REACH DEFENDANT LLC MEMBER PERSONALLY FOR BREACH OF THE HOUSING MERCHANT IMPLIED WARRANTY OBLIGATIONS; AND DEFENDANT COULD BE HELD PERSONALLY LIABLE FOR NEGLIGENT REPAIRS UNDER A HOME RENOVATION CONTRACT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiffs in this home-renovation-contract dispute sufficiently alleged the corporate veil should be pierced to reach the defendant Assaf, member of the LLC, personally for failing to comply with the implied warrant requirements. Defendant could also be held personally liable for negligent repairs:

Among the plaintiffs’ allegations were that Assaf wound down the LLC’s business following the closing of title in an effort to keep the LLC undercapitalized and judgment proof and that, following the closing, he distributed sale proceeds without reserving sufficient assets needed to satisfy the LLC’s obligations under New York State’s housing merchant implied warranty and any contingent liability.

… “Although [c]orporate officers may not be held personally liable on contracts of their corporations, provided they did not purport to bind themselves individually under such contracts, corporate officers may be held personally liable for torts committed in the performance of their corporate duties” … . Here, the plaintiffs adequately alleged that Assaf personally engaged in acts of negligence in performing repairs at the home … . Gold v 22 St. Felix, LLC, 2023 NY Slip Op 04194, Second Dept 8-9-23

Practice Point: Here the allegation that defendant LLC member undercapitalized the LLC supported piercing the corporate veil for breach of the home merchant implied warranty obligations.

Practice Point: A member of an LLC may be personally liable for negligent repairs pursuant to a home-renovation contract.