You are here: / Contract Law
,

PLAINTIFFS PROVED THE “ENSUING LOSS” EXCEPTION TO THE “FAULTY WORKMANSHIP” EXCLUSION IN THE HOME INSURANCE POLICY APPLIED; PLUMBING WORK WAS FAULTY, RESULTING IN FLOODING THROUGHOUT THE HOUSE; THE WATER DAMAGE WAS COVERED UNDER THE “ENSUING LOSS” EXCEPTION TO THE “FAULTY WORKMANSHIP” EXCLUSION (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the “ensuing loss’ exception to the “faulty workmanship” exclusion applied. The plumbers apparently used the wrong adhesion material for a water-pipe connection. The connection failed and the house was flooded. The “ensuing loss” exception to the “faulty workmanship” exclusion “provide[s] coverage when, as a result of an excluded peril, a covered peril arises and causes damage:”

We conclude that the ensuing loss exception applies to provide coverage for the household water damage because the excluded peril of faulty workmanship resulted in “collateral or subsequent damage” … “to property ‘wholly separate from the defective property itself’ ” … , and plaintiffs’ claim is for “a new loss to property that is of a kind not excluded by the policy,” i.e., sudden and accidental water leakage from within a plumbing system … . In other words, the ensuing loss exception provides coverage here because, as a result of an excluded peril (faulty workmanship), a covered peril arose (water discharge from a plumbing system) and caused other harm (water damage) to separate property (areas throughout the house) … . Ewald v Erie Ins. Co. of N.Y., 2023 NY Slip Op 01439, Fourth Dept 3-17-23

Practice Point: Here water damage throughout the house was covered by the “ensuing loss” exception to the “faulty workmanship” exclusion in the home insurance policy. The plumbers used the wrong material for a water-pipe connection and the house was flooded.

 

,

PLAINTIFF SUED THE TOWN ALLEGING BREACH OF CONTRACT; TOWN LAW 65 (3) REQUIRED PLAINTIFF TO FILE A NOTICE OF CLAIM WITHIN SIX MONTHS (WHICH PLAINTIFF FAILED TO DO) AND MAKES NO PROVISION FOR FILING A LATE NOTICE; THE COMPLAINT SHOULD HAVE BEEN DISMISSED (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined plaintiff in this breach of contract action against the town did not comply with the notice-of-claim requirement in the Town Law and the action therefore should have dismissed. Unlike other notice statutes, Town Law 65 (3) does not allow a late notice of claim:

Plaintiff commenced this action to recover payment for highway repair work it performed for defendant, asserting causes of action for breach of contract, unjust enrichment, and quantum meruit. Defendant moved to dismiss the complaint on the ground, inter alia, that plaintiff failed to comply with the notice of claim provision under Town Law § 65 (3) and plaintiff cross-moved for leave to file a late notice of claim. Supreme Court denied the motion and granted the cross motion, concluding that, although plaintiff failed to comply with section 65 (3), it should be permitted to file a late notice of claim inasmuch as defendant had actual notice of the essential facts of the claim and did not demonstrate any prejudice that would arise from the late filing of the claim. Defendant appeals.

We agree with defendant that the court erred in denying the motion and in granting the cross motion. Town Law § 65 (3) requires that a written verified claim be filed with the town clerk “within six months after the cause of action shall have accrued.” “[I]n contrast to other notice statutes, Town Law § 65 (3) contains no provision allowing the court to excuse noncompliance with its requirements” … . Accadia Site Contr., Inc. v Town of Pendleton, 2023 NY Slip Op 01386, Fourth Dept 3-17-23

Practice Point: Unlike other notice statutes, Town Law 65 (3) does not make any provision for filing a notice after the six-month deadline.

 

, ,

​ THE COMPLAINT ALLEGED AN ORAL JOINT VENTURE AGREEMENT BUT DID NOT ALLEGE THE PARTIES AGREED TO SHARE THE LOSSES; THE STATUTE OF FRAUDS THEREFORE APPLIED AND THE COMPLAINT WAS DISMISSED; PLAINTIFF’S MOTION TO AMEND THE COMPLAINT TO ALLEGE THE PARTIES AGREED TO SHARE THE LOSSES SHOULD HAVE BEEN GRANTED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the plaintiff’s motion to amend the complaint should have been granted. The initial breach of contract complaint was dismissed because it was not alleged the parties to the oral joint venture agreed to share the losses (therefore the statute of frauds applied to the agreement). The amendment sought to include the allegation the parties agreed to share the losses:

… Supreme Court improperly denied the plaintiff’s motion on the basis that the breach of contract causes of action in the amended complaint had previously been dismissed … . Moreover, under the circumstances here, the court should have granted the plaintiff’s motion. The defendants cannot be prejudiced or surprised by the proposed amendments, which were premised upon the same facts, transactions, or occurrences alleged in the amended complaint and “simply sought to cure the deficiencies cited by the Supreme Court in its earlier order which resulted in the dismissal” … . Further, the plaintiff explained that the omission of a loss-sharing allegation from the amended complaint was inadvertent, and he diligently sought to amend the pleading to correct the defect … . Benjamin v 270 Malcolm X Dev., Inc., 2023 NY Slip Op 01275, Second Dept 3-15-23

Practice Point: In the absence of prejudice amendment of a complaint should be allowed. Here the complaint was dismissed because plaintiff did not allege the parties agreed to share the losses in an oral joint venture agreement which triggered the statute of frauds. Plaintiff’s motion to amend the complaint to allege the parties agreed to share the losses should have been granted.

 

, ,

THE PROCEEDS OF THE SALE OF COLLATERAL TO THE MAJORITY LENDERS WERE NOT DISTRIBUTED TO THE MINORITY LENDERS IN THE MANNER REQUIRED BY THE CREDIT AND SECURITY AGREEMENTS IN THIS PRIVATE FORECLOSURE; THE MINORITY LENDERS’ BREACH OF CONTRACT CAUSES OF ACTION SHOULD NOT HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Renwick, determined the breach of contract claims by the minority lenders against the majority lenders and a collateral agent should not have been dismissed. Collateral was sold to the majority lenders but the proceeds were not distributed to the minority lenders in the manner required by the credit and security agreements. The opinion is fact-specific and far too complex to fairly summarize here:

… [T]he pro rata sharing provisions required that all minority lenders receive pro rata treatment of their debt obligations, which meant that the proceeds of the sale of the collateral (notes and equity) should have been distributed to all secured lenders pro rata in accordance with the terms of the credit agreement. … While the Collateral Agent, as directed by the majority lenders, was authorized to define the terms, conditions, and limitations of how the restructuring sale should be carried out, the reorganization had to be for the pro rata benefit of all those holders of secured debt, including minority lenders. Thus, the minority lenders have the right to object to the restructure sale conducted through credit bidding based upon the failure to provide them adequate protection of their pro rata interest on the foreclosed collateral. AEA Middle Mkt. Debt Funding LLC v Marblegate Asset Mgt., LLC, 2023 NY Slip Op 01157, First Dept 3-7-23

Practice Point: This comprehensive opinion concerns a private foreclosure of collateral and the distribution of the proceeds to the majority and minority lenders pursuant to complex credit and security agreements.

 

,

THE HANDWRITTEN ADDITION TO THE PRINTED CONTRACT IS PRESUMED TO EXPRESS THE LATEST INTENTION OF THE PARTIES; HERE THE ENTRY CREATED AMBIGUITY IN THE “NO DAMAGES FOR DELAY” CLAUSE REQUIRING DISCOVERY (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined a handwritten entry in a printed contract is presumed to express the latest intention of the parties and created ambiguity requiring discovery:

The subcontractor agreement between plaintiff and defendant JDS Construction Group LLC contains clauses precluding damages for delay. It also provides that if plaintiff’s work was “delayed or disrupted by fault of [JDS], Architect, or any other contractor, or by abnormal weather conditions, then the time fixed for the completion of the Work shall be extended for a period equivalent to the time actually lost, in the discretion of [JDS] and compensated for additional, mutually agreed to costs,” with the words in italics handwritten onto the typed agreement.

… [A] handwritten provision that conflicts with the language of the preprinted form document will control, “as it is presumed to express the latest intention of the parties” … . The handwritten amendment to the no-damages-for-delay clause renders the clause ambiguous as to whether plaintiff is entitled to be compensated for costs incurred as a result of such delays, which requires discovery to discern the parties’ intent … . Henick-Lane, Inc. v 616 First Ave. LLC, 2023 NY Slip Op 01163, First Dept 3-7-23

Practice Point: A handwritten entry in a printed contract is presumed to reflect the latest intention of the parties.

 

, ,

THE INJURED PARTY WAS STRUCK WITH A BATON IN AN ALTERCATION OUTSIDE A BAR; IT WAS ALLEGED THE INJURY WAS ACCIDENTAL; THE INSURER SOUGHT A DECLARATORY JUDGMENT RE: THE OBLIGATION TO DEFEND AND INDEMNIFY; THERE WERE QUESTIONS OF FACT WHETHER THE INCIDENT FELL OUTSIDE THE COVERAGE OF THE POLICY (NO DISCLAIMER REQUIRED) OR WHETHER THE INCIDENT WAS SUBJECT TO A POLICY EXCLUSION (TIMELY DISCLAIMER REQUIRED) (SECOND DEPT).

The Second Department, reversing Supreme Court, determined there were questions of fact whether the disclaimer by the insurer, Mapfre, was required and/or timely in this personal injury case. In the midst of some sort of altercation outside a bar, Groskopf was struck with a baton by Edward Ferrall. Edward Ferrall claimed he did not intend to strike Groskopf. The two questions before the court in this declaratory judgment action were (1) whether the injury was the result of an “occurrence” (accident) within the coverage terms of the policy, and (2) whether the injury was intended and therefore subject to a policy exclusion. If the claim falls outside the coverage terms no disclaimer is required. If the claim is subject to an exclusion from coverage, a timely disclaimer is required:

… Groskopf and the Ferrall defendants failed to establish, prima facie, their respective entitlement to judgment as a matter of law on whether an “occurrence” was involved giving rise to policy coverage and, if so, whether such occurrence fell within the “expected or intended” injury policy exclusion. * * *

… [D]efendants also failed to demonstrate their respective prima facie entitlement to judgment as a matter of law based upon Mapfre’s alleged untimely disclaimer. * * * [G]iven that there are triable issues of fact regarding whether the claim falls within the coverage, [the] defendants failed to establish, prima facie, that a timely disclaimer was required. Mapfre Ins. Co. of N.Y. v Ferrall, 2023 NY Slip Op 01082, Second Dept 3-1-23

Practice Point: Here there was an altercation outside a bar and the injured party was struck with a baton. It was alleged the injury was accidental and the insurer sought a declaratory judgment on its obligation to defend and indemnify. There were questions of fact whether the incident fell within the coverage terms (if so, no disclaimer was required) and whether the incident was subject to an exclusion from coverage (if so, a timely disclaimer was required).

 

, , ,

AFFIDAVITS NOT BASED ON PERSONAL KNOWLEDGE AND NOT SUPPORTED BY CERTIFIED BUSINESS RECORDS HAVE NO PROBATIVE VALUE; HERE THE AFFIDAVITS FAILED TO PROVE DEFENDANT WAS IN THE BUSINESS OF RENTING TRUCKS SUCH THAT THE GRAVE’S AMENDMENT APPLIED, AND FAILED TO PROVE THE TRUCK WAS PROPERLY MAINTAINED; DEFENDANT SHOULD NOT HAVE BEEN AWARDED SUMMARY JUDGMENT IN THIS TRAFFIC ACCIDENT CASE (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Mendez, determined defendant lessor of the truck which struck plaintiff’s vehicle did not present sufficient evidence that it was in the business of renting trucks, such that the Grave’s amendment applied, or that the truck was properly maintained. The defendant attempted to show it was in the business of renting trucks with affidavits which referred to documents that were not attached. In addition, the papers did not demonstrate the truck was properly maintained:

… [Defendant] failed to establish their entitlement to summary judgment under the Graves Amendment, which bars state law vicarious liability actions against owners of motor vehicles when (1) they are engaged in the trade or business of renting or leasing motor vehicles, (2) they leased the vehicle involved in the accident, (3) the subject accident occurred during the period of the lease or rental and (4) there is no triable issue of fact as to the plaintiff’s allegation of negligent maintenance contributing to the accident ,,, , ,,,

Neither affidavit sufficiently establishes the basis — personal knowledge or from identifiable business records — for the affiants’ knowledge of the contents of the affidavits. Therefore, they are of no probative value.

The documents submitted with the motion cannot be admitted as business records because they are not certified, and the affidavits do not lay a sufficient foundation for their admissibility … . Although an affidavit that is not based on the affiant’s personal knowledge may still serve to authenticate a document for its admissibility as a business record, as long as the affiant demonstrates sufficient personal knowledge of the document in question … , and the affidavit sufficiently establishes that the document falls within the business record exception to the hearsay rule … , here we are lacking both. The “acknowledgment of lease” letters — which refer to an unattached “previously executed Equipment Rental Agreement” — submitted with these affidavits are not certified as business records, nor do the affidavits lay a sufficient foundation for the letters’ introduction as business records. Without a proper foundation, these documents are not admissible. …

When a plaintiff seeks to hold a vehicle owner liable for the failure to maintain a rented vehicle, the owner is not afforded protection under the Graves Amendment if it fails to demonstrate that it did not negligently maintain the vehicle … , or to prove that it was not responsible for the maintenance and repair of the vehicle during the lease … .  Muslar v Hall, 2023 NY Slip Op 01063, First Dept 2-28-23

Practice Point: Affidavits must either be based upon the affiant’s personal knowledge or supported by certified business records. Here the affidavits did not show defendant was in the business of renting trucks and did not show the truck involved in the accident was properly maintained. Therefore the Grave’s amendment criteria were not proven and defendant was not entitled to summary judgment. The Grave’s amendment provides that the vehicle-owner who is in the business of renting vehicles will not be liable for an accident if the vehicle was properly maintained.

 

, ,

IN THIS DIVORCE ACTION, THE SETTLEMENT AGREEMENT STATED THE WIFE’S INCOME WAS WELL BELOW THE FEDERAL POVERTY LEVEL YET SHE WAIVED SPOUSAL SUPPORT; GENERAL MUNICIPAL LAW 5-311 MAY, THEREFORE, HAVE BEEN VIOLATED; ALTHOUGH THE AGREEMENT AS A WHOLE WAS NOT UNCONSCIONABLE, THE MATTER WAS SENT BACK TO ALLOW THE JUDGE TO ENQUIRE ABOUT THE WAIVER (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court in this divorce action, determined a portion of the settlement agreement may violate the General Municipal Law and sent the matter back for further inquiry by the judge. The wife’s income is well below the federal poverty guidelines yet she waived spousal support:

General Obligations Law § 5-311 prohibits spouses from contracting to dissolve a marriage and “relieve either of his or her liability to support the other in such a manner that he or she will become incapable of self-support and therefore is likely to become a public charge …”. * * *

… [A]rticle four of the settlement agreement, concerning spousal support, sets forth the wife’s income as $11,446, which is well below the applicable federal 2020 poverty guidelines … . As such, there is a question as to whether this provision is in violation of General Obligations Law § 5-311 in that the wife “is likely to become a public charge.” Because of this, we find that Supreme Court erred when it failed to make an inquiry into the circumstances surrounding the wife’s waiver of spousal support … .Majid v Hasson, 2023 NY Slip Op 01035, Third Dept 2-23-23

Practice Point: The settlement agreement in this divorce action was not unconscionable, but a provision may violate the General Municipal Law which prohibits agreeing to a level of support which will result in the wife becoming a public charge. The wife’s income is well below the federal poverty level, yet she waived spousal support. The matter was sent back for judicial inquiry into the waiver.

, ,

THE TENANT WAS NOT ENTITLED TO A YELLOWSTONE INJUNCTION BECAUSE THE RELIEF WAS SOUGHT AFTER THE DEADLINE IN THE NOTICE TO CURE; THAT DEADLINE WAS CONTROLLED BY THE LEASE AND THEREFORE WAS NOT EXTENDED BY THE COVID-RELATED EXECUTIVE ORDERS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the tenant was not entitled to a Yellowstone injunction because the relief was not sought before the deadline in the notice to cure, which is controlled by the lease. The time-limit extensions in response to COVID do not apply to the notice-to-cure deadline which is contractual:

… [T]he landlord served a notice to cure on the tenant on May 15, 2020, and the cure period ended on June 1, 2020, in accordance with the terms of the lease. When the tenant did not cure the alleged defects, the landlord served a notice of termination on June 2, 2020. The tenant commenced this action and moved for a Yellowstone injunction on June 15, 2020, well after the cure period expired.

Executive Order 202.8, and the subsequent orders extending that order, did not toll the cure period since the cure period, set by contract, was not “prescribed by [a] procedural law[ ] of the state” or “any other statute, local law, ordinance, order, rule, or regulation” (9 NYCRR 8.202.8). Moreover, filing of new non-essential matters through the New York State Courts Electronic Filing System was available in the five New York City counties, including Kings County, as of May 25, 2020 … . Prestige Deli & Grill Corp. v PLG Bedford Holdings, LLC, 2023 NY Slip Op 01019, Second Dept 2-22-23

Practice Point: The deadlines extended by the COVID Executive Orders do not apply to contractual deadlines (here the deadline for seeking a Yellowstone injunction after the tenant’s receipt of a notice to cure).

 

, ,

THIS BREACH OF CONTRACT, QUASI CONTRACT, UNJUST ENRICHMENT COMPLAINT SHOULD HAVE BEEN DISMISSED; PLAINTIFF SCHOOL BUS COMPANY WAS SEEKING PAYMENT FOR THE MONTHS THE SCHOOLS WERE CLOSED DUE TO COVID-19 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined this breach of contract, quasi contract, unjust enrichment complaint should have been dismissed. Defendant school-bus company was demanding payment for those months the schools were closed due to COVID-19:

… [T]he complaint failed to specify the provision of the parties’ contract that was allegedly breached … . … [N]o provision was identified which would permit the plaintiff to demand payment from the defendant in exchange for merely remaining available to provide transportation services … . In addition, the evidentiary material submitted by the plaintiff in opposition to the defendant’s motion failed to remedy this defect in the complaint … .

… “[T]he existence of a valid contract governing the subject matter generally precludes recovery in quasi contract for events arising out of the same subject matter” … . “[T]he theory of unjust enrichment lies as a quasi-contract claim. It is an obligation the law creates in the absence of an agreement” … . “An unjust enrichment claim is not available where it simply duplicates, or replaces, a conventional contract or tort claim” … .

“The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered” … . “A plaintiff must show that (1) the other party was enriched, (2) at the plaintiff’s expense, and (3) that it is against equity and good conscience to permit the [defendant] to retain what is sought to be recovered” … . Here, the complaint fails to sufficiently allege that the defendant was enriched or otherwise received a benefit at the plaintiff’s expense to support a cause of action for quasi contract sounding in restitution or unjust enrichment … . Pierce Coach Line, Inc. v Port Wash. Union Free Sch. Dist., 2023 NY Slip Op 01018, Second Dept 2-22-23

Practice Point: An unjust enrichment cause of action will not fly if there is a contract covering the same subject matter (here there was such a contract). Unjust enrichment sounds in equity and addresses when it is unfair for a party to retain what the other party is seeking to recover. The defendant school district was not unjustly enriched by not paying the plaintiff school bus company for those months when the school was closed due to COVID.

 

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy