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WHERE THERE IS A DISPUTE ABOUT THE EXISTENCE OF A CONTRACT A CAUSE OF ACTION FOR UNJUST ENRICHMENT IS NOT DUPLICATIVE (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court noted that where there is a dispute about the existence of an enforceable contract, a cause of actiono for unjust enrichment is not duplicative:

With respect to the unjust enrichment … [t]hese claims should not have been dismissed as duplicative because “where there is a bona fide dispute as to the existence of a contract or the application of a contract in the dispute in issue, a plaintiff may proceed upon a theory of quasi contract as well as breach of contract, and will not be required to elect his or her remedies” … . CIP GP 2018, LLC v Koplewicz, 2021 NY Slip Op 03370, First Dept 5-27-21

 

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DEFENDANT ATTORNEY WAS UNABLE TO DEMONSTRATE PLAINTIFFS LEARNED OF DEFENDANT’S ALLEGED FRAUD MORE THAN TWO YEARS BEFORE THE ACTION WAS COMMENCED; THE STATUTE OF LIMITATIONS FOR THE UNJUST ENRICHMENT AND AIDING AND ABETTING BREACH OF FIDUCIARY DUTY IS SIX YEARS BECAUSE OF THE ALLEGATIONS OF FRAUD (FIRST DEPT).

The First Department determined the fraud, unjust enrichment and aiding and abetting breach of fiduciary duty causes of action were timely brought against defendant attorney. Defendant attorney represented a party who was found to have defrauded plaintiffs in an arbitration resulting in a $56,4 million judgment. Plaintiffs alleged the attorney’s participation in the fraud was not discovered until the arbitration proceedings:

The limitations period for fraud is the greater of six years from the date of the fraud or two years from the time when, with reasonable diligence, the plaintiff could have uncovered the fraud (CPLR 213[8] … ). In order to prevail, the defendant must show that there is no issue of fact under either prong. Here, defendant failed to show dispositively that plaintiffs were in possession of facts that would have triggered inquiry notice under CPLR 213(8) more than two years before the action was commenced … . …

Nor are plaintiff’s unjust enrichment or aiding and abetting breach of fiduciary duty claims time-barred. Both claims are subject to the six-year statute of limitations because they are based on allegations of actual fraud (CPLR 213[8] …). Sabourin v Chodos, 2021 NY Slip Op 03392, First Dept 5-27-21

 

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THE GUARANTEES QUALIFED AS INSTRUMENTS FOR THE PAYMENT OF MONEY ONLY AND SUPPORTED SUMMARY JUDGMENT IN LIEU OF COMPLAINT; ONLY PURELY LEGAL ARGUMENTS RAISED FOR THE FIRST TIME ON APPEAL CAN BE CONSIDERED (FIRST DEPT).

The First Department determined the plaintiffs were entitled to summary judgment in lieu of complaint based upon guarantees which met the definition of instruments for the payment of money only. The court noted that two arguments raised for the first time on appeal (documents not qualified as business records and failure to include a payment schedule) could not be considered because they were not purely legal arguments. A third argument, which was purely legal, was considered:

Defendants’ contention that the guaranties do not qualify as instruments for the payment of money only, as required by CPLR 3213, because they guarantee performance as well as payment and reference must be made to documents outside the guaranties to determine if the debt service coverage ratio (DSCR) conditions have been met, is unavailing. Although this argument was raised for the first time on appeal, since these are “legal issues appearing on the face of the record which could not have been avoided” if they had been raised earlier, we will address the argument … .

The guaranty at issue in 27 West 72nd St. qualifies as an instrument for the payment of money only because it guarantees only payment and not performance. … [T]he … operative provision of the guaranty says, “Guarantor guarantees the payment of the Guaranteed Obligations.”

The guaranty at issue in 31 East 28th St. also qualifies as an instrument for the payment of money only. Although it says, “Guarantor guarantees the payment and performance of the Guaranteed Obligations as and when due and payable,” the mere addition of the words “and performance” does not necessarily remove the guaranty from the category of instruments for the payment of money only, particularly when the sentence ends with “as and when due and payable.”  27 W. 72nd St. Note Buyer LLC v Terzi, 2021 NY Slip Op 03364, First Dept 5-27-21

 

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THE COMPLAINT STATED A CAUSE OF ACTION FOR FRAUD BASED UPON DEFENDANTS’ ALLEGED INFLATION OF THE VALUE OF THE BUSINESS PURCHASED BY PLAINTIFF; AND THE COMPLAINT STATED A CAUSE OF ACTION FOR BREACH OF CONTRACTUAL WARRANTIES WHICH DID NOT DUPLICATE THE FRAUD CAUSE OF ACTION (FIRST DEPT).

The First Department, reversing Supreme Court, determined the complaint adequately alleged fraud (inflating the value of defendants’ business which was purchased by plaintiff) and breach of contract:

… [T]he key … element of a claim for fraudulent concealment — duty to disclose — is met here, given the hidden nature of the fraud, which turned on falsified records and bribed auditors, and the practical impossibility of discovering the fraud through ordinary diligence … .

Defendants’ alleged deception also breached numerous warranties set forth in the governing stock purchase agreement, including that … financial statements were materially complete and correct, that its [earning] projections were reasonable and made in good faith, that it had no material undisclosed liabilities, and that it conducted its business in compliance with applicable law. Nevertheless, “[a] warranty is not a promise of performance, but a statement of present fact. Accordingly, a fraud claim can be based on a breach of contractual warranties notwithstanding the existence of a breach of contract claim” … . Thus, the fraud claim does not duplicate the contract claim … . VXI Lux Holdco, S.A.R.L. v SIC Holdings, LLC, 2021 NY Slip Op 03294, First Dept 5-25-21

 

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THE ARBITRATION AWARD IS VALID EVEN IF BASED ON AN ERROR OF LAW OR FACT; THE FAILURE TO PROVIDE A LETTER OF ENGAGEMENT DID NOT PRECLUDE THE ATTORNEY’S ACTION FOR BREACH OF CONTRACT; CPLR 5225 DOES NOT REQUIRE A SPECIAL PROCEEDING TO ENFORCE THE JUDGMENT (FIRST DEPT).

The First Department, reversing Supreme Court, determined (1) the arbitrator’s award was valid even if an error of law or fact was made; (2) the failure to provide a letter of engagement did not preclude the petitioner-attorney’s action for breach of contract; (3) petitioner was not required to commence a special proceeding to enforce the judgment; (4) the motions to enforce the judgement do not violate the Commercial Division rules:

… [E]ven if the arbitrator had made an error of law or fact in concluding that respondents had breached the retainer agreements, this alone would not justify vacating the award … . …

… [T]he court improperly denied the motions [to enforce the judgment] based upon its finding that petitioner had failed to commence a separate special proceeding to enforce the judgment. The language of CPLR 5225 clarifies that the court had jurisdiction to resolve the turnover motion. While CPLR 5225(a) provides that a judgment creditor seeking turnover of money or personal property “in possession or custody” of the judgment debtor does so “[u]pon motion of the judgment creditor,” CPLR 5225(b) provides that a judgment creditor seeking turnover of money or personal property in a third party’s possession or custody does so “[u]pon a special proceeding commenced by the judgment creditor” … Given that petitioner brought the motions against the judgment debtor as opposed to a third party, it was not required to commence a separate proceeding. Matter of Gibson, Dunn & Crutcher LLP v World Class Capital Group, LLC, 2021 NY Slip Op 03252, First Dept 5-20-21

 

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THE BANK IN THIS FORECLOSURE ACTION DID NOT PROVIDE SUFFICIENT PROOF OF COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 AND THE MORTGAGE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action did not submit sufficient proof of compliance with the notice requirements of RPAPL 1304 and the mortgage:

Although the plaintiff submitted copies of the 90-day notices purportedly sent to [defendant] Jimenez, the plaintiff failed to demonstrate, prima facie, that the notices were actually mailed, either through an affidavit of service, other proof of mailing by the post office, or evidence of a standard office mailing procedure designed to ensure that items are properly addressed and mailed, sworn to by someone with personal knowledge of the procedure … . The unsubstantiated and conclusory assertion in an affidavit of a representative of the plaintiff’s loan servicer that the 90-day notice was sent in accordance with RPAPL 1304 is insufficient to establish that the notice was actually mailed to Jimenez by first-class and certified mail … . Moreover, the affiant based her assertions upon her review of unspecified business records without attaching any such business records to her affidavit … . “It is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … .

Similarly, the plaintiff failed to demonstrate, prima facie, that it complied with the notice of default provisions of the consolidated mortgage, which required the plaintiff to send a notice of default to Jimenez at the notice address by first-class mail and to provide a 30-day cure period. Copies of the notice without proof of mailing, along with the affidavit of a representative of the loan servicer averring, based upon her review of unspecified business records which were not attached to the affidavit, that such a notice of default was sent on an unspecified date, was insufficient to satisfy the plaintiff’s prima facie burden … .  Wilmington Trust, N.A. v Jimenez, 2021 NY Slip Op 03212, Second Dept 5-19-21

 

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A GENERAL RELEASE AND WAIVER WHICH IS CONTRADICTED BY ACTIONS WHICH POST-DATE THE DOCUMENT CANNOT BE CONSTRUED AS A RELEASE; THE JUDGE DID NOT HAVE THE POWER, SUA SPONTE, PURSUANT TO CPLR 5019, TO VACATE THE COURT’S OWN ORDER (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined (1) actions which post-date a release and waiver which conflict with the terms of the release and waiver indicate the document can not be construed as a release, and (2) the judge did not have the authority, sua sponte, to vacate the court’s own order:

“‘Where a waiver form purports to acknowledge that no further payments are owed, but the parties’ conduct indicates otherwise, the instrument will not be construed as a release'” … . …

The Supreme Court erred in, sua sponte, vacating the December 2016 order. “‘Pursuant to CPLR 5019(a), a trial court has the discretion to correct an order or judgment which contains a mistake, defect, or irregularity not affecting a substantial right of a party, or is inconsistent with the decision upon which it is based. However, a trial court has no revisory or appellate jurisdiction, sua sponte, to vacate its own order or judgment'” … . Additionally, “[p]ursuant to CPLR 5015(a), a court may relieve a party from an order or judgment, but only ‘on motion of [an] interested person’ and ‘with such notice as the court may direct” … .

Here, to the extent that the Supreme Court was acting pursuant to CPLR 5019(a), the court erred, since that statute cannot be used by courts to vacate prior orders or judgments or “reconsider[ ] the merits of summary judgment” … . United Airconditioning Corp. v Axis Piping, Inc.2021 NY Slip Op 03210, Second Dept 5-19-21

 

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THE TRANSFER OF CERTAIN ASPECTS OF SELLER’S BUSINESS TO BUYER DID NOT MEET THE CRITERIA IN LABOR LAW 581; THEREFORE THE TRANSFER DID NOT TRIGGER THE TAKEOVER OF THE SELLER’S UNEMPLOYMENT INSURANCE EXPERIENCE ACCOUNT (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that the HOP’s purchase of certain aspects of a competing business, Playground, did not trigger HOP’s takeover of Playground’s unemployment insurance experience account:

The statute provides that where a business has been transferred from one employer to another, either in whole or in part, the transferee shall take over and continue the unemployment insurance experience account of the transferor (see Labor Law § 581 [4] [a] …). A transfer, however, will not be deemed to have occurred “if the transferee has not assumed any of the transferring employer’s obligations, has not acquired any of the transferring employer’s good[]will, has not continued or resumed the business of the transferring employer either in the same establishment or elsewhere, and has not employed substantially the same employees as those of the transferring employer” … . To negate a transfer, all four of these requirements must be met … . …

… [U]ndisputed evidence was presented that, in connection with its purchase of assets from Playground, HOP did not assume any of Playground’s obligations, did not continue or resume operation of Playground’s screening room … and did not retain any of Playground’s employees. The sole basis upon which the Board concluded that a transfer had occurred was HOP’s alleged acquisition of Playground’s goodwill. The record, however, does not support the Board’s finding in this regard.

The asset purchase agreement did not identify goodwill as an asset encompassed by the agreement, nor was it specifically mentioned on the list of property set forth on schedule 2.1 of the agreement. Matter of HOP N.Y. Entertainment, LLC (Commissioner of Labor), 2021 NY Slip Op 03093, Third Dept 5-13-21

 

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PLAINTIFF BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 AND THE MORTGAGE IN THIS FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff bank did not demonstrate compliance with the notice requirements of RPAPL 1304 and the mortgage. Therefore the bank’s motion for summary judgment in this foreclosure action should not have been granted:

… [T]he plaintiff failed to submit proof of the actual mailings, such as the affidavits of mailing or domestic return receipts with attendant signatures, or proof of a standard mailing procedure designed to ensure that items are properly addressed and mailed, sworn to by someone with personal knowledge of the procedure. Instead, the plaintiff relied on the affidavit of an employee of the plaintiff’s loan servicer, who did not attest that she had personal knowledge that the notices were mailed, or attest to a standard office mailing procedure designed to ensure that items are properly addressed and mailed … .

Likewise, relying on the same affidavit, the plaintiff failed to establish compliance with the requirements for a notice of default pursuant to sections 15 and 22 of the mortgage agreement. Statements in the employee’s affidavit, “which asserted that the notice of default was sent in accordance with the terms of the mortgage, [were] unsubstantiated and conclusory and . . . , even when considered together with the copy of the notice of default, failed to show that the required notice was in fact mailed by first class mail or actually delivered to the designated address if sent by other means, as required by the subject mortgage” … . U.S. Bank N.A. v Peykar, 2021 NY Slip Op 03077, Second Dept 5-12-21

 

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DEFENDANT DOCTOR’S FAILURE TO APPEAR FOR THE NO-FAULT EXAMINATION UNDER OATH (EUO) REQUESTED BY THE INSURER JUSTIFIED THE DENIAL OF DEFENDANT’S CLAIMS FOR BENEFITS (FIRST DEPT).

The First Department, reversing Supreme Court, determined the surgeon’s failure to appear for the no-fault examination under oath (EUO) requested by the insurer voided the insurance policy:

Plaintiff sent defendant a timely request for an examination under oath (EUO) with respect to a claim for benefits in the amount of $6,106.56, for shoulder surgery performed by defendant on an individual that was a passenger in a vehicle involved in an accident, covered by a no-fault insurance policy issued by plaintiff. Defendant failed to appear and plaintiff denied all claims for benefits made by defendant.

The failure to appear for an EUO that was requested in a timely fashion by the insurer is a breach of a condition precedent to coverage and voids the policy ab initio … . The coverage defense applies to any claim and is not determined on a bill by bill basis … . The EUO was timely requested as to the second claim for benefits for the shoulder surgery, accordingly, defendant’s failure to appear at that EUO voided the policy ab initio as to all claims, and plaintiff’s cross motion for summary judgment should have been granted in its entirety. Unitrin Advantage Ins. Co. v Dowd, 2021 NY Slip Op 03012, First Dept 5-11-21

 

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