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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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WHAT IS THE DIFFERENCE BETWEEN A REVENUE PURCHASE AGREEMENT AND A LOAN?

The Fourth Department, reversing Supreme Court, over a two-justice concurrence, determined the contract between plaintiff and defendants was a revenue purchase agreement, not a loan. Therefore defendants’ argument the agreement constituted a usurious loan was rejected. However, questions of fact about the extent of the damages precluded summary judgment in favor of plaintiff. The concurring justices agreed the contract was a revenue purchase agreement, but argued the analysis of the issue used by the majority, based upon a specific case, was wrong and suggested a different approach:

Under the agreement, plaintiff advanced a monetary amount to the entity defendants in exchange for 25% of the future revenues of their business, until the purchased amount, i.e., an agreed-upon amount that was greater than the advanced amount, was paid to plaintiff. There was no interest rate or payment schedule and no time period during which the purchased amount was to be collected by plaintiff. Indeed, the agreement specifically stated that it was not a loan and that the entity defendants were “not borrowing money from” plaintiff. The agreement contained a daily remittance amount, which constituted “a good faith estimate of” plaintiff’s share of the future revenue stream. The agreement also contained an acknowledgment from plaintiff that it was “entering this [a]greement knowing the risks that [the entity defendants’] business may slow down or fail, [that plaintiff] assumes these risks,” and that there would be no recourse for plaintiff in the event the entity defendants went bankrupt, went out of business, or experienced a slowdown in business, among other things. The agreement also contained two reconciliation provisions, whereby the daily remittance would be modified both retroactively and prospectively upon request and with proof of earned revenue amounts. * * *

In determining whether a transaction constitutes a loan, courts must determine whether the plaintiff ” ‘is absolutely entitled to repayment under all circumstances’ “; “[u]nless a principal sum advanced is repayable absolutely, the transaction is not a loan” … . “Usually, courts weigh three factors when determining whether repayment is absolute or contingent: (1) whether there is a reconciliation provision in the agreement; (2) whether the agreement has a finite term; and (3) whether there is any recourse should the merchant declare bankruptcy” (… see Samson MCA LLC, 219 AD3d at 1128 …). Bridge Funding Cap LLC v SimonExpress Pizza, LLC, 2025 NY Slip Op 04306, Fourth Dept 7-25-25

Practice Point: Consult this decision for a discussion of the nature of a revenue purchase agreement, as opposed to a loan. The majority used a Second Department case to structure its analysis. The two-justice concurrence agreed with the majority that the contract was a revenue purchase agreement, but suggested a different approach to the analysis.​

 

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THE BROKERAGE AGREEMENT DID NOT GIVE PLAINTIFF THE EXCLUSIVE RIGHT TO NEGOTIATE A LOAN ON DEFENDANT’S BEHALF; THEREFORE PLAINTIFF WAS NOT ENTITLED TO A COMMISSION ON A LOAN PROCURED BY DEFENDANT WITHOUT PLAINTIFF’S ASSISTANCE; “EXCLUSIVE RIGHT TO …” CRITERIA IN THIS CONTEXT EXPLAINED (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Warhit, determined the brokerage agreement did not give plaintiff the right to a commission when the defendant procured financing on its own:

This appeal presents the opportunity to examine the law of brokerage agreements granting an “exclusive right to sell,” as well as the application of such agreements outside the context of transactions involving the sale or lease of real property. In the present case, the plaintiff broker contends that it had an exclusive agreement to secure certain financing on behalf of the defendant and that it was entitled to a commission even though it was not the procuring cause of a loan the defendant ultimately obtained. * * *

The agreement did not clearly and expressly provide the plaintiff with the exclusive right to deal or negotiate on the defendant’s behalf … . The defendant demonstrated that the plaintiff was not the procuring cause of the loan … . Angelic Real Estate, LLC v Aurora Props., LLC, 2025 NY Slip Op 04223, Second Dept 7-23-25

Practice Point: Consult this opinion for an explanation of the contractual terms necessary to confer on a broker an exclusive right to procure a loan, such that a commission is owed even when the loan is procured without the broker’s assistance (not the case here).

 

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THE ARGUMENT THAT THE ARBITRATOR’S AWARD, WHICH ALLOWED REINSTATEMENT OF AN EMPLOYEE AFTER A PERIOD OF SUSPENSION, VIOLATED PUBLIC POLICY WAS REJECTED; CRITERIA EXPLAINED (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the arbitrator’s award in this employment-discipline case should not have been vacated. The court rejected the argument that the award, which penalized the employee (Williams) for misbehavior as a corrections officer but allowed her reinstatement, violated public policy. The decision is too complex to fairly summarize here. But it illustrates just how difficult it is to vacate an arbitrator’s award on public-policy grounds:

“A court may vacate an arbitrator’s award only on grounds stated in CPLR 7511 (b)” … . Among other circumstances, vacatur is permitted where an arbitrator directs an award that “violates a strong public policy” … . An arbitration award may only be vacated on public policy grounds “where a court can conclude, without engaging in any extended factfinding or legal analysis [(1)] that a law prohibits, in an absolute sense, the particular matters to be decided, or [(2)] that the award itself violates a well-defined constitutional, statutory or common law of this State” … . As there is no contention that the law prohibited the arbitrator from deciding Williams’ guilt and penalty under the CBA, [collective bargaining agreement] our inquiry focuses on whether “the final result creates an explicit conflict with other laws and their attendant policy concerns” … . Matter of Spence (New York State Dept. of Corr. & Community Supervision), 2025 NY Slip Op 04135, Third Dept 7-10-25

Practice Point: Consult this decision for an explanation of the criteria for vacating an arbitrator’s award on public policy grounds.

 

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A COURT’S POWER TO VACATE AN ARBITRATOR’S AWARD IS EXTREMELY LIMITED; AN ARBITRATOR’S INTERPRETATION OF A COLLECTIVE BARGAINING AGREEMENT CANNOT BE REVIEWED UNLESS IT IS “COMPLETELY IRRATIONAL;” HERE THE ARBITRATOR’S AWARD UPHOLDING THE SUSPENSION OF PETITIONER-DENTAL-HYGIENIST FOR HER FAILURE TO OBTAIN A COVID-19 VACCINE WAS CONFIRMED (FOURTH DEPT). ​

The Fourth Department, reversing Supreme Court, determined the arbitrator’s award in this COVID-19 vaccine-mandate case should not have been vacated. The arbitrator found that the petitioner-employee, a dental hygienist, was properly suspended without pay and issued a Notice of Discipline for failure to obtain a COVID-19 vaccine. A court’s power to vacate an arbitration award is extremely limited:

We agree with respondent that the court “erred in vacating the award on the ground that it was against public policy because petitioner[] failed to meet [her] heavy burden to establish that the award in this employer-employee dispute violated public policy” … . We further agree with respondent that the court “erred in vacating the award on the ground that it was irrational” … . ” ‘An award is irrational if there is no proof whatever to justify the award’ ” … . Where, however, “an arbitrator ‘offer[s] even a barely colorable justification for the outcome reached,’ the arbitration award must be upheld” … . Here, there is no dispute that respondent directed petitioner to fully receive the COVID-19 vaccine by a specific date, that it apprised her that her continued employment was contingent upon her compliance, and that petitioner refused to be vaccinated by the required date. It is also undisputed that petitioner was never granted a reasonable accommodation that excused her compliance with the vaccine mandate. Consequently, the court erred in concluding that the arbitrator’s award was irrational … . To the extent petitioner argues that the arbitrator erred in not considering the propriety of respondent’s denial of petitioner’s request for a reasonable accommodation based on a pre-existing health condition, we note that the arbitrator interpreted the CBA as precluding any review of that decision. Inasmuch as we conclude that “the arbitrator’s ‘interpretation of the [CBA] [is] not . . . completely irrational, [it] is beyond [our] review power’ ” … . Finally, we note that the court was not permitted to vacate the award merely because it believed vacatur would better serve the interest of justice … . Matter of Davis (State of New York Off. of Mental Health), 2025 NY Slip Op 03910, Fourth Dept 6-27-25

Practice Point: Consult thee decisions for an explanation of the limits on a court’s review of an arbitration award.

 

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