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THE ACTION BY PLAINTIFF SELLER TO RECOVER ON A SECURITY INTEREST IN COLLATERAL FOR A LOAN TAKEN OUT BY THE BUYER AS CONSIDERATION FOR THE PURCHASE BARRED BY THE STANDSTILL AGREEMENT WHICH ASSIGNED PRIORITY TO TWO OTHER SECURITY INTERESTS (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Manzanet-Daniels, determined the language of a so-called standstill provision barred the action by plaintiff Intrepid seeking to recover a security interest in collateral for the $28.7 million loan taken out by the buyer, Selling Source, as consideration for the purchase. Plaintiff was a third priority lender and the standstill agreement provided plaintiff could not seek a remedy until payment was made to the first and second priority lenders:

… Selling Source agreed to acquire a number of Internet businesses from plaintiff Intrepid. In partial consideration, Selling Source executed a $28.7 million junior secured promissory note … . …

In connection with the transaction, the parties executed an intercreditor and subordination agreement (ICA) delineating the priority of each party’s security interest in the collateral pledged by the guarantors. Plaintiff, as the “third priority representative” of the “third priority lenders,” received third priority liens as security for the repayment of the $28.7 million note … .

The ICA contains standstill provisions that circumscribe Intrepid’s ability to exercise its remedies in the event of a default by Selling Source, providing, inter alia, that “[n]o Third Priority Lender shall commence or exercise any Remedies in respect of any default or event of default. . . until such time as the Payment-in-Full of the First Priority Obligations and Second Priority Obligations” … . * * *

This action is barred by the plain language of the standstill provision, which states that “[n]o Third Priority Lender shall commence or exercise any Remedies in respect of any default or event of default . . . until such time as the Payment-in-Full of the First Priority Obligations and Second Priority Obligations” … . Intrepid Invs., LLC v Selling Source, LLC, 2023 NY Slip Op 00396, First Dept 1-31-23

Practice Point: Here priority was assigned to those holding security interests in collateral for a loan taken out by the buyer as consideration for the purchase. The plaintiff seller was a third priority lender. The seller’s action to recover on its security interest was barred by standstill agreement which did not allow the seller to seek a remedy until the payment of the first and second priority lenders.

 

 

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THE STIPULATION SETTING A DATE FOR THE CLOSING ON DEFENDANT’S PURCHASE OF THE PROPERTY DID NOT INFORM DEFENDANT HE WOULD BE CONSIDERED TO BE IN DEFAULT IF THE CLOSING DID NOT TAKE PLACE BY THAT DATE; THEREFORE THERE WAS NO “TIME OF THE ESSENCE” AGREEMENT AND PLAINTIFF WAS NOT ENTITLED TO THE DOWN PAYMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the stipulation waiving defendant’s payment of rent as long as the closing on defendant’s purchase of the property occurred by a designated date did not inform defendant “time was of the essence” such that plaintiff could keep the down payment:

Sometime after the parties entered into the contract, the defendant commenced a landlord-tenant proceeding against the plaintiff, which the parties settled in a stipulation dated February 16, 2011. Paragraph 2 of the stipulation provided that “[i]n settlement and satisfaction of all claims by [the plaintiff], and in consideration of [the plaintiff] closing title on the purchase of 1474 Ralph Avenue, Brooklyn, New York, no later than March 31, 2011, [the defendant] waives the rent due for July 2010.” The closing never occurred. * * *

Where, as here, “time was not made of the essence in the original contract” … , “one party may make time of the essence by giving proper notice to the other party” … and avail himself [or herself] of forfeiture on default” … . “The notice setting a new date for the closing must (1) give clear, distinct, and unequivocal notice that time is of the essence, (2) give the other party a reasonable time in which to act, and (3) inform the other party that if he [or she] does not perform by the designated date, he [or she] will be considered in default” … . “A party need not state specifically that time is of the essence, as long as the notice specifies a time on which to close and warns that failure to close on that date will result in default” … . It does not matter that the date is unilaterally set … , and “[w]hat constitutes a reasonable time for performance depends upon the facts and circumstances of the particular case” … .

… [T]he stipulation did not inform the plaintiff that if he did not perform, he would be considered in default … . Lashley v BDL Real Estate Dev. Corp., 2023 NY Slip Op 00314, Second Dept 1-25-23

Practice Point: To trigger “time is of the essence” the defendant must be informed that failure to close the real estate purchase by the designated date will place the defendant in default.

 

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PLAINTIFF’S FAILURE TO PROVIDE EVIDENCE OF THE EXACT AMOUNT OF DAMAGES HE SUFFERED FROM DEFENDANT’S BREACH OF CONTRACT PRECLUDED SUMMARY JUDGMENT (SECOND DEPT).

​The Second Department, reversing Supreme Court, determined plaintiff’s failure to submit evidence of the exact amount of damages he suffered due to defendant’s breach of contract. Therefore plaintiff should not have been awarded summary judgment:

“A motion for summary judgment should not be granted where the facts are in dispute, where conflicting inferences may be drawn from the evidence, or where there are issues of credibility” … . “The function of the court on a motion for summary judgment is not to resolve issues of fact or determine matters of credibility, but merely to determine whether such issues exist” … .

Here, the plaintiff failed to submit competent evidence establishing the exact amount of damages that he sustained as a result of defendant’s breaches of the parties’ agreements, and “the record does not permit precise determination of the amount of the money judgment to which the plaintiff is entitled, including a calculation of prejudgment interest” … . Spilman v Matyas, 2023 NY Slip Op 00344, Second Dept 1-25-23

Practice Point: Here, on plaintiff’s summary judgment motion, plaintiff proved defendant’s breach of contract but did not present evidence of the exact amount of damages he suffered. Therefore the motion should not have been granted.

 

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IN THIS SLIP AND FALL CASE, THE DEFENDANT SNOW-REMOVAL CONTRACTOR DID NOT NEED TO ADDRESS ANY ESPINAL EXCEPTION IN ITS ANSWER BECAUSE PLAINTIFF DID NOT ALLEGE AN EXCEPTION APPLIED; PLAINTIFF DID NOT DEMONSTRATE THAT AN ESPINAL EXCEPTION APPLIED IN OPPOSITION TO SUMMARY JUDGMENT; DEFENDANT’S SUMMARY JUDGMENT MOTION SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court in this slip and fall case, determined defendant snow-removal company (WM) did not need to address in its answer any Espinal exception to the rule that a contractor is not liable to a plaintiff who is not a party to the snow-removal contract because no Espinal exception was raised by the plaintiff in the pleadings. In opposition to the summary judgment motion, plaintiff did not demonstrate that any of the Espinal exceptions applied:

… WM demonstrated its prima facie entitlement to judgment as a matter of law dismissing the complaint insofar as asserted against it by coming forward with evidence that the plaintiff was not a party to the snow removal contract … . Since the plaintiff did not allege facts in the pleadings that would establish the possible applicability of any of the Espinal exceptions, WM was not required to affirmatively demonstrate tat these exceptions did not apply in order to establish its prima facie entitlement to judgment as a matter of law … . In opposition, the plaintiff failed to raise a triable issue of fact as to whether WM launched an instrument of harm … , and failed to raise a triable issue of fact as to the applicability of the other Espinal exceptions. Accordingly, the Supreme Court should have granted that branch of WM’s motion which was for summary judgment dismissing the complaint insofar as asserted against it. Forbes v Equity One Northeast Portfolio, Inc., 2023 NY Slip Op 00305, Second Dept 1-25-23

Practice Point: Generally, in a slip and fall case, a snow-removal contractor is not liable to a plaintiff who is not a party to the snow-removal contract. The contractor will be liable only if an Espinal exception applies (for example, if the contractor “launches an instrument of harm” which injured plaintiff). If the plaintiff does not allege an Espinal exception applies, the contractor need not address the issue in the answer. If the plaintiff does not, at the summary judgment stage, demonstrate an exception applies, the contractor will be granted summary judgment.

 

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ALTHOUGH THE LIMITED LIABILITY COMPANY (LLC) VOTING AGREEMENT CONCERNED THE SALE OF REAL PROPERTY, IT WAS NOT SUBJECT TO THE STATUTE-OF-FRAUDS PROHIBITION OF ORAL AGREEMENTS (FIRST DEPT). ​

The First Department, reversing (modifying) Supreme Court, determined the counterclaim adequately alleged breach of contract. The contract was an LLC voting agreement which was not subject to the statute of frauds even though the agreement authorized the sale of real property:

Supreme Court should not have dismissed defendants’ counterclaims for breach of contract and specific performance, which it properly construed as a single claim for breach of contract seeking specific performance and monetary relief. The alleged agreement at issue was not an unenforceable oral contract for the sale of real property, as it did not provide for the sale or transfer of real property or any party’s interest in real property (see General Obligations Law § 5-703[2]). Instead, giving defendants’ allegations every favorable inference, defendants sufficiently pled that the oral agreement was effectively an LLC voting agreement under which plaintiff agreed to vote her membership interest in favor of defendants’ sale of their membership interests or a sale of the property. Tsai v Lo, 2023 NY Slip Op 00291, First Dept 1-24-23

Practice Point: Although the voting agreement concerned the sale of real property by the limited liability company, it was not subject to the statute-of-frauds prohibition of oral agreements.

 

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PLAINTIFF FELL THROUGH A STOREFRONT WINDOW IN DEFENDANT PLANET ROSE’S KARAOKE BAR; GIVEN THE CIRCUMSTANCES, THE FAILURE TO INSTALL TEMPERED GLASS MAY HAVE BEEN NEGLIGENT; BY THE TERMS OF THE LEASE, THE OUT-OF-POSSESSION LANDLORD, DEFENDANT 219 AVE. A, COULD NOT BE HELD LIABLE (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined the defendant 219 Ave. A was an out-of-possession landlord which, by the terms of the lease, was not obligated to repair or maintain the premises where plaintiff’s fall occurred. Plaintiff was standing on a couch in defendant Planet Rose’s karaoke bar when she fell backwards through a storefront window:

… [T]he owner of Planet Rose acknowledged that when vandals smashed another window in the storefront years earlier, the glazier recommended tempered glass as the best option for a storefront, and she accepted that recommendation. She also testified that there were many times over the years that patrons stood on the couch, as shown in photographs posted on Planet Rose’s social media. Thus, the record presents issues of fact as to whether defendants were negligent in failing to use tempered glass in the window to prevent a foreseeable injury … .

… Given the evidence that patrons of the karaoke bar sometimes stood on the couch, plaintiff’s conduct was not extraordinary or unforeseeable, and it therefore cannot be said that the setup at the bar merely furnished the occasion for the harm … .

219 Ave. A demonstrated that it had relinquished sufficient control of the premises to be deemed an out-of-possession landlord, and as such, was not contractually obligated to make repairs or maintain the premises … . Accordingly, its liability is limited to claims “based on a significant structural or design defect that is contrary to a specific statutory safety provision,” which are not at issue here … . Kitziger v 219 Ave. A. NYC LLC, 2023 NY Slip Op 00239, First Dept 1-19-23

Practice Point: Because patrons of defendant karaoke bar stood on the couch to dance, plaintiff’s fall through the storefront window was foreseeable and the failure to install tempered glass may have been negligent. This was not a case where the condition (the glass storefront window) merely furnished the occasion for the accident, as opposed to a proximate cause. By the terms of the lease the out-of-possession landlord was responsible only for structural repairs which were not at issue.

 

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THE TERMS OF THE LEASE DID NOT DEMONSTRATE DEFENDANT OUT-OF-POSSESSION LANDLORD DID NOT HAVE A DUTY TO MAKE NONSTRUCTURAL FLOOR REPAIRS; THE LANDLORD’S MOTION FOR SUMMARY JUDGMENT IN THIS SLIP AND FALL CASE SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court in this slip and fall case, determined the terms of the lease raised a question of fact whether the out-of-possession landlord was required to repair nonstructural floor defects:

“An out-of-possession landlord is not liable for injuries that occur on its premises unless the landlord has retained control over the premises and has a ‘duty imposed by statute or assumed by contract or a course of conduct'” … . “Where the terms of an agreement are unambiguous, interpretation is a question of law for the court” … . Here, according to the lease agreement, the landlord was required to “make all structural, exterior walls, floor and roof repairs and replacements to Tenant’s Building.” Contrary to the defendant’s contention, pursuant to the lease agreement, its duty to repair the floor was not limited to floor conditions which were structural in nature, and it failed to establish, prima facie, that it had no duty to repair the alleged nonstructural condition at issue … . Weidner v Basser-Kaufman 228, LLC, 2023 NY Slip Op 00126, Second Dept 1-11-23

Practice Point: The lease provided the out-of-possession landlord was required to “make all structural, exterior walls, floor and roof repairs and replacements to Tenant’s Building.” The landlord was not entitled to summary judgment in this slip and fall case on the ground the lease did not create a duty to make nonstructural floor repairs.

 

THE TYPOGRAPHICAL ERROR IN THE CONTRACT RENDERED A CRUCIAL SENTENCE AMBIGUOUS; THE ERROR COULD NOT BE CORRECTED WITHOUT POSSIBLY ALTERING THE PARTIES’ INTENT; THEREFORE EXTRINSIC EVIDENCE IS NECESSARY TO INTERPRET THE CONTRACT (FIRST DEPT).

The First Department, in full-fledged opinion by Justice Webber, over an extensive two-justice dissent, determined there was a typographical error in the sentence describing the effective date of the contract which rendered the contract ambiguous. The dissent argued the intended meaning of the sentence was clear and the error should be corrected by the court: The effective date of the contract was crucial to a determination whether the contract was enforceable or had expired:

… [W]e are not ascribing one interpretation over the other. Rather, we are pointing out the multiple reasonable interpretations and concluding that additional information is necessary to ascertain the proper interpretation (see Castellano v State of New York, 43 NY2d 909 [1978]). In Castellano, when faced with a word in a lease clause that was grammatically inconsistent with the rest of the lease, the Court considered the different ways the parties proposed to change the clause to render it grammatically correct, both of which were reasonable. Each required altering a word in the lease. Rather than choosing one alteration over another, the Court found that there should be an exploration to ascertain the proper interpretation. …

… [T]hese are not “inadvertent errors,” or a “mistake” that can be corrected without altering the intent of the parties … . While “mistakes in grammar, spelling or punctuation should not be permitted to alter, contravene or vitiate manifest intention of the parties as gathered from the language employed” … , the [contract language] cannot be rendered grammatically correct without possibly altering the parties’ intent. “[T]he question of whether an ambiguity exists must be ascertained from the face of an agreement without regard to extrinsic evidence” … . Here, the … language is literally unclear and ambiguous and must be interpreted in light of extrinsic evidence. Mak Tech. Holdings Inc. v Anyvision Interactive Tech. Ltd., 2022 NY Slip Op 07507, First Dept 12-29-22

Practice Point: Although a court can correct an obvious typographical error in a contract, here the majority concluded there was more than one way to make the language grammatically correct, rendering the contract ambiguous. Extrinsic evidence was therefore necessary to interpret the contract.

 

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THE LEASE REQUIRED THE OUT-OF-POSSESSION LANDLORD TO REPAIR STRUCTURAL DEFECTS IN THE ROOF AND WALLS; THERE WAS A QUESTION OF FACT WHETHER WATER ENTERED THE PREMISES THROUGH DEFECTS IN THE ROOF AND WALLS CAUSING THE ALLEGED DANGEROUS CONDITION, A CRACK IN THE FLOOR WHICH ALLEGEDLY CONTRIBUTED TO PLAINTIFF’S INJURY (FOURTH DEPT).

The Fourth Department, over a two-justice dissent, determined the out-of-possession landlord was required under the terms of the lease to repair structural defects in the roof and walls and there was a question of fact whether such defects caused a crack in the floor. The cracked floor was alleged to constitute a dangerous condition which cause a load of tines in a payloader to fall and injure plaintiff:

Plaintiff commenced this negligence action seeking damages for personal injuries he sustained when tires that were being moved by a forklift struck him when they fell from the forklift after it drove over a crack in the concrete floor. Insofar as relevant to this appeal, the complaint asserted a negligence cause of action against Estes Express Lines (defendant), which owned the premises on which plaintiff was injured, alleging that defendant negligently permitted a dangerous condition to exist on the premises that contributed to his injury, i.e., the crack in the concrete floor. * * *

… [P]laintiff raised a triable issue of fact whether defendant was liable based on its contractual obligation to maintain the structural integrity of the roof and walls. … [T]he court …. properly denied defendant’s motion for summary judgment. … [P]laintiff submitted an affidavit from one of plaintiff’s former colleagues and from a code enforcement officer, who each averred that the damage to the floor may have been caused by water damage or water infiltration due to poor maintenance of the roof and walls. Plaintiff’s former colleague further averred that defendant had conducted annual inspections of the property and had previously repaired damage to the floor of the premises. Thus, there is a question of fact concerning defendant’s liability for defects in the condition of the floor … . Weaver v Deronde Tire Supply, Inc., 2022 NY Slip Op 07328, Fourth Dept 12-23-22

Practice Point: Whether an out-of-possession landlord is liable for injury caused by dangerous conditions on the property can be determined by the terms of the lease. Here the lease required the landlord to repair structural defects in the roof and walls. Plaintiff alleged water entered the premises through those structural defects causing a crack in the floor which contributed to his injury. Plaintiff’s allegations survived summary judgment.

 

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THE MOTION COURT ABUSED ITS DISCRETION BY DEEMING PLAINTIFF’S STATEMENT OF MATERIAL FACTS ADMITTED BECAUSE DEFENDANTS DID NOT SUBMIT A COUNTER STATEMENT OF UNDISPUTED FACTS (FOURTH DEPT). ​

The Fourth Department, reversing Supreme Court, determined that defendants’ failure to submit a counter statement of undisputed facts (22 NYCRR 202.8-g[b]) should not have been deemed an admission to plaintiff’s statement of material facts. Therefore plaintiff’s motion for summary judgment on the breach of contract cause of action should not have been granted:

Although the court had discretion under section 202.8-g (former [c]) to deem the assertions in plaintiff’s statement of material facts admitted, it was not required to do so … .  “[B]lind adherence to the procedure set forth in 22 NYCRR 202.8-g” was not mandated … .

Here, considering that plaintiff’s statement of material facts did not fully comply with 22 NYCRR 202.8-g (d) and ignored the pivotal factual dispute arising from discovery, we conclude that, although it would have been better practice for defendants to “submit a paragraph-by-paragraph response to plaintiff’s statement” … , “the court abused its discretion in deeming the entire statement admitted” … . On the Water Prods., LLC v Glynos, 2022 NY Slip Op 07320, Fourth Dept 12-23-22

Practice Point: Here plaintiff submitted a statement of material facts but defendants did not submit a counter statement of undisputed facts. The motion court was not required to deem the statement of material facts admitted and should not have done so under the specific circumstances of this case. Plaintiff’s motion for summary judgment in this breach of contract action should not have been granted.

 

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