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A PROPER FOUNDATION WAS NOT LAID FOR THE BUSINESS RECORDS RELIED UPON BY THE PLAINTIFF; THEREFORE THE CRITERIA FOR THE BUSINESS RECORDS EXCEPTION TO THE HEARSAY RULE WERE NOT MET AND PLAINTIFF’S SUMMARY JUDGMENT MOTION IN THIS BREACH OF CONTRACT ACTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the business records relied upon by plaintiff in this breach of contract action were not supported by a sufficient foundation. Therefore, under the criteria for the business records exception to the hearsay rule, the documents were inadmissible hearsay and could not support plaintiff’s summary judgment motion:

“‘Records made in the regular course of business are hearsay when offered for the truth of their contents'” … . “When a party relies upon the business records exception to the hearsay rule in attempting to establish its prima facie case, ‘[a] proper foundation for the admission of a business record must be provided by someone with personal knowledge of the maker’s business practices and procedures'” … .

In support of its motion for summary judgment on the complaint, the plaintiff submitted an affidavit of Denine Chevillot Knowles, its vice president. Though Knowles attested that she had “personal knowledge of the relevant business practices of Plaintiff,” she did not attest that the records submitted in support of the motion were “made in the regular course of business” and were “needed and relied on in the performance of functions of the business,” that it was “the regular course of such business to make the record[s],” or that the records were “made at or about the time of the event being recorded” … . Thus, Knowles failed to lay a proper foundation for the admission of any records concerning the defendants’ payment history and default … . Accordingly, the plaintiff failed to demonstrate that the records relied upon in the affidavit were admissible under the business records exception to the hearsay rule. HSBC Bank USA, N.A. v Vasishta, 2025 NY Slip Op 04885, Second Dept 9-10-25

Practice Point: Business records are hearsay. To be admissible the criteria for the business records exception to the hearsay rule must be met. Consult this decision for the foundation requirements for the admissibility of business records.​

 

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HERE THE OUT-OF-POSSESSION LANDLORD WAS NOT LIABLE FOR A SLIP AND FALL CAUSED BY A LOOSE FLOOR TILE IN PLAINTIFF’S APARTMENT, CRITERIA EXPLAINED (SECOND DEPT).

The Second Department, reversing Supreme Court in this premises liability slip and fall case, determined (1) the motion court should not have considered an argument first raised in opposition to the defendant out-of-possession landlord’s motion for summary judgment, and the defendant out-of-possession landlord could not be held liable for a loose floor tile in plaintiff’s apartment. The lease between defendant and plaintiff’s landlord made defendant responsible for maintenance of the public areas of the building and plaintiff’s landlord responsible for maintenance of all other areas:

The plaintiff’s allegation that the loose floor tile was caused by a leaky roof was not pleaded, “and a plaintiff cannot raise a new theory of liability in opposition to a motion for summary judgment” … .

… [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” … . Here, since the complaint sounds in common-law negligence and the pleadings do not allege a violation of a statute, the defendant cannot be held liable unless he retained control over the premises and owed a duty assumed by contract or a course of conduct … .

“[C]ontrol refers to the ability of an out-of-possession landlord to remedy dangerous conditions” … . “Reservation of a right of re-entry for inspection and repair in a lease may, under certain circumstances, constitute sufficient retention of control to impose liability for injuries caused by an alleged hazard” … . In the absence of a statutory violation, there must be a significant structural or design defect present in order for a right of re-entry to constitute sufficient retention of control to impose liability … .

Here, the defendant, who had no key to access the building, never visited the second floor, and did not know there were tenants living on the second floor, established, prima facie, that he did not have an ability to remedy the loose floor tile, which was not a significant structural defect … .  Alexandre v Shih T. Wang, 2025 NY Slip Op 04855, Second Dept 9-10-25

Practice Point: Consult this decision for a concise explanation of the liability of an out-of-possession landlord for a non-structural defect inside a tenant’s apartment.

 

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SUPREME COURT PROPERLY APPLIED THE “PIERCE THE CORPORATE VEIL CRITERIA” AND ASSESSED DAMAGES FOR BREACH OF CONTRACT AGAINST THE DEFENDANT PARENT CORPORATION; THERE WAS A COMPREHENSIVE TWO-JUSTICE DISSENT (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Kapnick, over a comprehensive two-justice dissent, determined Supreme Court had properly applied the “pierce the corporate veil” criteria to assess damages for breach of contract against the defendant parent company:

“Because a decision to pierce the corporate veil in any given instance will necessarily depend on the attendant facts and equities, there are no definitive rules governing the varying circumstances when this power may be exercised” … . However, under the totality of the circumstances presented here, we conclude that plaintiffs met their heavy burden of showing that “[JAE] exercised complete domination of [J.A. Madison] in respect to the transaction attacked[,] [specifically the Consulting Agreement]” … . Thus, we will address the second prong of the test – namely, whether plaintiffs met their burden to show “that such domination was used to commit a fraud or wrong against the plaintiff[s] which resulted in plaintiff[s’] injury” … . * * *

“Wrongdoing in this context does not necessarily require allegations of actual fraud. While fraud certainly satisfies the wrongdoing requirement, other claims of inequity or malfeasance will also suffice … . Allegations that corporate funds were purposefully diverted to make it judgment proof or that a corporation was dissolved without making appropriate reserves for contingent liabilities are sufficient to satisfy the pleading requirement of wrongdoing which is necessary to pierce the corporate veil on an alter-ego theory … .

… The evidence presented at trial showed that JAE used its domination of J.A. Madison to commit a wrong against plaintiffs by stopping payments to plaintiffs under the Consulting Agreement, causing J.A. Madison to become judgment proof, and then by dissolving J.A. Madison after this action had already been commenced, making plaintiffs’ judgment against J.A. Madison nothing more than a pyrrhic victory. The fact that J.A. Madison may have initially been created for a legitimate purpose of operating a store selling Jonathan Adler merchandise and products does not change the analysis. Rich v J.A. Madison, LLC, 2025 NY Slip Op 04818, First Dept 8-28-25

Practice Point: Consult this opinion and the dissent for a comprehensive discussion of the criteria for piercing the corporate veil in the context of a breach of contract.

 

IN THIS DISPUTE BETWEEN PLAINTIFF BEER DISTRIBUTORS AND DEFENDANT BEER COMPANY, THE SECOND DEPARTMENT HELD THAT ALCOHOLIC BEVERAGE CONTROL ACT SECTION 55-C(4), WHICH PROHIBITS TERMINATION OF A DISTRIBUTION AGREEMENT WITHOUT GOOD CAUSE AND AN OPPORTUNITY TO CURE, APPLIES TO BOTH WRITTEN AND ORAL CONTRACTS; THE COURT WENT ON TO FIND THAT THE COMPLAINT, WHICH WAS BASED ON AN ORAL DISTRIBUTION AGREEMENT, DID NOT STATE A CAUSE OF ACTION FOR BREACH OF SECTION 55-C(4) (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Hom, in a matter of first impression, determined the “Alcoholic Beverage Control Act § 55-c(4) [hereinafter “the Act”], which prohibits the termination of agreements between brewers and beer wholesalers without good cause and an opportunity to cure, applies to non-written agreements.” Plaintiffs are beer distributors. Plaintiffs’ distribution contracts with defendant beer company (Yuengling) were oral. Defendant purported to terminate plaintiffs’ distribution contracts. In response to plaintiffs’ lawsuit alleging violation of the Act, defendants argued the Act does not apply to oral contracts. The Second Department held that the Act does apply to oral contracts, but determined the complaint did not state a cause of action for breach of the Act

:…[W]e conclude that the amended complaint in this action failed to state a cause of action alleging violations of Alcoholic Beverage Control Law § 55-c because the plaintiffs failed to plead the essential and material terms of their alleged distribution agreements. Oak Beverages, Inc. v D.G. Yuengling & Son, Inc., 2025 NY Slip Op 04730, Second Dept 8-20-25

Practice Point: Consult this decision for a statutory-interpretation analysis where the statute is ambiguous. The issue here was whether a statute, which required that any termination of a beer distribution agreement be for good cause with an opportunity to cure, applied to both written and oral contracts. The court resolved the ambiguity in favor of protecting oral as well as written agreements.

 

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PLAINITFF’S AGENTS WHO MAILED THE RPAPL 1304 NOTICE OF FORECLOSURE WERE NOT IDENTIFIED IN PLAINTIFF’S AFFIDAVIT OFFERED IN SUPPORT OF SUMMARY JUDGMENT IN THIS FORECLOSURE PROCEEDING; ALSO, THE AFFIDAVIT PROVIDED NO FOUNDATION FOR SUBMITTED DOCUMENTS FROM A THIRD-PARTY VENDOR; THEREFORE PLAINTIFF WAS NOT ENTITLED TO SUMMARY JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the affidavit submitted by the plaintiff in this foreclosure action to demonstrate the proper mailing of the RPAPL 1304 notice of foreclosure was deficient, requiring denial of plaintiff’s motion for summary judgment:

… [P]laintiff submitted an affidavit of Connie Melendez, an employee of the plaintiff. … Melendez’s affidavit failed to establish that notice was sent … in the manner required by RPAPL 1304. While Melendez averred that she had personal knowledge of the plaintiff’s standard office mailing procedures and described those purported procedures, she acknowledged that the mailings were carried out “by and through [the plaintiff’s] agents.” However, Melendez did not identify who those agents were or attest that she was familiar with their standard office mailing procedures. Thus, Melendez’s affidavit did not establish proof of a standard office mailing procedure designed to ensure that items are properly addressed and mailed … . Further, Melendez’s affidavit failed to address the nature of the plaintiff’s relationship with a certain third-party vendor and whether the third-party vendor’s records were incorporated into the plaintiff’s own records or routinely relied upon in the plaintiff’s business … . Thus, Melendez’s affidavit failed to lay a foundation for the admission of a transaction report generated by the third-party vendor … . Finally, “the tracking numbers on the copies of the . . . notices submitted by the plaintiff, standing alone, did not suffice to establish, prima facie, proper mailing under RPAPL 1304” … . Likewise, a “Proof of Filing Statement” from the New York State Banking Department pursuant to RPAPL 1306 failed to establish, prima facie, the plaintiff’s compliance with the requirements of RPAPL 1304 … . For the same reasons, the plaintiff failed to establish, prima facie, that a notice of default in accordance with sections 15 and 22 of the mortgage agreement was properly transmitted prior to the commencement of this action … . Nationstar Mtge., LLC v Ricks, 2025 NY Slip Op 04728, Second Dept 8-20-25

Practice Point: Agents who mailed the RPAPL 1304 notice were not identified in plaintiff’s affidavit and plaintiff’s relationship with a third party vendor was not demonstrated. Therefore the affidavit submitted by plaintiff in this foreclosure action did not prove proper mailing of the notice of foreclosure and did not demonstrate compliance with related provisions in the mortgage agreement.

 

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PLAINTIFFS REQUESTED GENERAL LIABILITY INSURANCE WHICH WAS PROCURED BY THE BROKER; THE BROKER WAS NOT UNDER A DUTY TO ADVISE, GUIDE OR DIRECT PLAINTIFFS TO OBTAIN ADDITIONAL COVERAGE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff did not demonstrate the defendant insurance broker breached its duty to procure additional insurance for the plaintiffs. Defendant proved plaintiffs requested general liability insurance which was procured:

“As a general principle, insurance brokers have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so” … . “Absent a specific request for coverage not already in a client’s policy or the existence of a special relationship with the client, an insurance agent or broker has no continuing duty to advise, guide, or direct a client to obtain additional coverage” … .

… [P]laintiffs did not make a specific request for a particular kind of insurance coverage that the defendant failed to procure … . The plaintiffs’ CEO and president testified … [the] plaintiffs needed general liability insurance. The defendant’s vice president of operations testified that the plaintiffs’ application was for general liability insurance, which the record reflects is the kind of insurance the defendant procured for the plaintiffs. In opposition, the plaintiffs failed to raise a triable issue of fact  Spa Castle, Inc. v Choice Agency Corp., 2025 NY Slip Op 04676, Second Dept 8-13-25

Practice Point: An insurance broker’s duty to a client does not extend beyond procuring the coverage requested by the client. There is no duty to advise the client to obtain additional coverage.

 

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A PLAINTIFF’S STIPULATED SETTLEMENT WITH THE INSURED ACCOMPANIED BY A COVENANT NOT TO EXECUTE THE JUDGMENT AND AN ASSIGNMENT OF THE INSURED’S CLAIMS AGAINST THE INSURER IS NOT A “RELEASE;” THE INSURER STILL HAS A DUTY TO INDEMNIFY (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, in a full-fledged opinion by Justice Kapnick, determined defendant insurer had a duty to indemnify plaintiffs under a policy issued to a bar sued by plaintiffs for using plaintiffs’ images without their consent. Plaintiffs had entered a settlement agreement with the bar which included a consent judgment in which plaintiffs agreed to forgo execution of the judgment in consideration for the bar’s assignment of its rights against the insurer. The insurer agued the settlement agreement constituted a release, extinguishing its obligation to indemnify. The First Department, in a matter of first impression, held the agreement was not a release and the insurer still had a duty to indemnify:

In New York, the legal ramifications of a general release in the context of an insured/insurer relationship are clear; a general release in favor of an insured abolishes any present or future duty of indemnification on the part of the insurer … . However, it appears that no New York precedent exists on the issue presented here: whether the insurer’s liability is maintained where, in settlement, a consent judgment is entered that incorporates an assignment of the insured’s rights against the insurer coupled with a covenant not to execute on the judgment. * * *

We conclude … that a stipulated judgment … accompanied by a covenant not to execute and an assignment of claims can be enforced against an insurer. Geiger v Hudson Excess Ins. Co., 2025 NY Slip Op 04609, First Dept 8-7-25

Practice Point: Here the plaintiffs settled with the insured in return for the assignment of the insured’s claims against the insurer. In a matter of first impression, the First Department held that the covenant not to execute the judgment against the insured (included in the settlement agreement) was not a “release” which extinguished the insurer’s duty to indemnify. The duty to indemnify remains.

 

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THIS BREACH OF CONTRACT ACTION WAS BASED UPON A LEASE ENTERED BY A LIMITED LIABILITY COMPANY THE ASSETS OF WHICH WERE PURCHASED BY THE TWO DEFENDANT LIMITED LIABILTY COMPANIES; THE MAJORITY CONCLUDED THE COMPLAINT STATED A CAUSE OF ACTION UNDER THE THEORY THAT THE DEFENDANTS CONSTITUTED A “MERE CONTINUATION” OF THE ORIGINAL LESSEE’S BUSINESS; THERE WAS A TWO-JUSTICE DISSENT (FIRST DEPT).

The First Department, reversing Supreme Court, over a two-justice dissent, determined the breach of contract (commercial lease) cause of action against defendant limited liability companies which had purchased the assets of the original lessee (another limited liability company) should not have been dismissed. The majority concluded the complaint stated a cause of action under the theory that defendants constituted a “mere continuation” of the original lessee. The dissent argued the “mere continuation” theory does not apply where, as here, there are two purchasers of the original lessee’s assets:

… [W]e find that plaintiff has sufficiently stated a cause of action for breach of contract against [defendants] based on the “mere continuation” exception to the rule against successor liability. “Although no one factor is dispositive,” courts determining whether a successor corporation is a “mere continuation” of its predecessor have considered whether: (1) all or substantially all assets are transferred to the successor corporation; (2) the predecessor corporation has been effectively extinguished following the transaction; (3) the successor has assumed an identical or nearly identical name; (4) the successor has retained one or more of the same corporate officers, directors, and/or employees; and (5) the successor has continued the same business … . * * *

Neither the motion court nor defendants cite to any authority prohibiting application of mere continuation successor liability where more than one company has acquired the assets of the predecessor. We disagree with the dissent to the extent that it asserts that Schumacher (59 NY2d 239) stands for the proposition that the existence of more than one successor corporation necessarily bars application of the mere continuation doctrine. In Schumacher, there was only one successor … . Accordingly, it does not address the situation in the facts pleaded by plaintiff in this case. Avamer 57 Fee LLC v Hunter Boot USA LLC, 2025 NY Slip Op 04607, First Dept 8-7-25

Practice Point: The purchasers of a business which constitute a “mere continuation” of the seller’s business can be liable under a contract originally entered by the seller.

 

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HERE THE “SOPHISTICATED PARTIES” TO THE COMMERCIAL LEASE PROPERLY USED INSURANCE TO ALLOCATE THE RISK OF LIABILITY TO THIRD PARTIES; THEREFORE THE TENANT CAN BE LIABLE TO THE PLAINTIFF FOR THE PROPERTY OWNER’S NEGLIGENCE IN THIS SIDEWALK SLIP AND FALL CASE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the tenant (Beachbum Tanning) was obligated to indemnify the property owner (RJJR Corp) for the property owner’s negligence in this sidewalk (raised flag) slip and fall case. The “sophisticated parties” to the commercial lease had properly allocated the risk of liability to third parties through insurance:

“Pursuant to General Obligations Law § 5-321, a lease that obligates a tenant to indemnify a landlord for the landlord’s own negligence is against public policy and unenforceable. However, in the context of a commercial lease, negotiated between two sophisticated parties, where a ‘lessor and lessee freely enter into an indemnification agreement whereby they use insurance to allocate the risk of liability to third parties between themselves, General Obligations Law § 5-321 does not prohibit indemnity'” … . Under such circumstances the landlord “‘is not exempting itself from liability to the victim for its own negligence. Rather, the parties are allocating the risk of liability to third parties between themselves, essentially through the employment of insurance. Courts do not, as a general matter, look unfavorably on agreements which, by requiring parties to carry insurance, afford protection to the public'” … . Arnold v RJJR Corp., 2025 NY Slip Op 04534, Second Dept 8-6-25

Practice Point: Sophisticated parties to a commercial lease can use insurance to allocate liability to third parties. Thereforethe tenant can be liable for the property owner’s negligence in this sidewalk slip and fall case.

 

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THE EXCLUSIONARY PROVISIONS IN THIS FIRE INSURANCE POLICY WERE AMBIGUOUS AND MUST THEREFORE BE CONSTRUED AGAINST THE INSURER; PLAINTIFF IS ENTITLED TO COVERAGE FOR THE FIRE DAMAGE DESPITE THE UNAUTHORIZED OCCUPANTS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the exclusionary provisions of the fire insurance policy were ambiguous and therefore must be construed in favor of the insured. At the time of the fire unauthorized occupants were living in the building and the insurer disclaimed coverage on that ground:

Here, the disputed exclusionary provisions read as follows:

“C. We do not cover loss resulting directly or indirectly:

Vacancy or Occupancy

1. While a described building, whether intended for occupancy . . . is vacant or unoccupied beyond a period of sixty (60) consecutive days.

Increase in Hazard

2. While the hazard is increased by any means within the control or knowledge of the insured.”

​Construed in the context of the contract as a whole, the plain and ordinary meaning of these exclusionary provisions is not apparent. The exclusionary provisions at issue are listed in the supplemental special provisions that modified the original dwelling insurance policy. The contract provides for certain general exclusions in parts A and B, and thereafter included the above referenced supplemental general exclusions as part C. Part A provides that, “[w]e do not insure for loss caused directly or indirectly by any of the following” … , and lists conditions or events that could damage the insured premises, including, for example, earth movement, water damage, and power failure. Part C, as referenced above, does not contain any language after “directly or indirectly.” Thus, it is not clear whether the “vacancy or occupancy” or “increase in hazard” must cause the loss or whether the condition must simply exist at the time of the loss. Because the exclusionary provisions are ambiguous, and any ambiguity is construed against the insurer in favor of the insured, the plaintiff has established her prima facie entitlement to coverage … . Eubanks v New York Prop. Ins. Underwriting Assn., 2025 NY Slip Op 04460, Second Dept 7-30-25

Practice Point: At the time of the fire the building was inhabited by “unauthorized occupants” and coverage was disclaimed. However, the exclusionary provisions of the policy were ambiguous. The ambiguity must be construed in favor of the insured. Therefore the disclaimer constituted a breach of contract.

 

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