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UNDER THE TERMS OF THE SURRENDER AGREEMENT THE TENANT OWED THE LANDLORD AN ADDITIONAL $175,000; UPON DEFENDANT’S DEFAULT, THE PLAINTIFF SUED FOR THE CONTRACTUAL LIQUIDATED DAMAGES OF OVER $1,000,000; THE JUDGMENT FOR $175,000 WAS UPHELD; THE LIQUIDATED DAMAGES OF OVER $1,000,000 VIOLATED THE PUBLIC POLICY AGAINST NON-STATUTORY PENALTIES AND FORFEITURES (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Rivera, over a three-judge dissent, determined the liquidated damages provision of the landlord-tenant surrender agreement violated the public policy against penalties or forfeitures for which there is no statutory penalty. Defendant-tenant, a grocery store chain, entered a surrender agreement with plaintiff-landlord which allowed defendant to get out from under the lease by making certain installment payments. Defendant defaulted on some of the payments (approximately $175,000) and plaintiff sought to recover liquidated damages of over $1,000,000. Defendant had timely surrendered the premises and it had been relet. Supreme Court had denied plaintiff’s motion for summary judgment and granted defendant’s cross-motion agreeing to pay $175,000:

Under our well-established rules of contract, the Surrender Agreement’s liquidated damages provision does not fairly compensate plaintiff for defendant’s delayed installment payments. The provision calls for a sum more than sevenfold the amount due if defendant had complied fully with the Surrender Agreement. We cannot enforce such an obviously and grossly disproportionate award without offending our State’s public policy against “the imposition of penalties or forfeitures for which there is no statutory authority” … . Accordingly, there was no error in rejecting plaintiff’s liquidated damages provision. Trustees of Columbia Univ. in the City of N.Y. v D’Agostino Supermarkets, Inc., 2020 NY Slip Op 06937, Ct App 11-24-20

 

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BASED UPON THE LANGUAGE OF THE INSURANCE POLICIES AT ISSUE, THE EXCESS INSURER WAS NOT LIABLE FOR THE PREJUDGMENT INTEREST ON THE PERSONAL INJURY JUDGMENT AFTER THE PRIMARY POLICY WAS VOIDED (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, over two dissenting opinions, interpreted the insurance policies at issue such that the excess insurer was not obligated to pay interest on the underlying personal injury judgment after the primary policy was voided:

This appeal involves a dispute concerning an excess insurer’s obligation to pay interest on an underlying personal injury judgment after the primary policy was voided. Like the courts below, we are unpersuaded by the injured plaintiff’s argument that the excess policy provided overlapping coverage for certain interest payments covered in the primary policy … .

Plaintiff Jin Ming Chen was injured at a construction site and sued the general contractor Kam Cheung Construction, Inc. (Kam Cheung). At the time, Kam Cheung maintained both primary and excess liability insurance policies: a primary policy with a liability limit of $1 million per occurrence from Arch Specialty Insurance Company (Arch) and an excess policy with $4 million per occurrence in coverage from defendant Insurance Company of the State of Pennsylvania (ICSOP). In December 2011, Supreme Court granted partial summary judgment to plaintiff in that action, and, in October 2013, the court entered a personal injury judgment awarding plaintiff $2,330,000 plus $396,933.70 in prejudgment interest. During that time, Arch commenced a declaratory judgment action seeking rescission of the primary policy due to material misrepresentations made by Kam Cheung in its application, securing a judgment declaring that the Arch Policy was void ab initio. Thus, Arch provided no coverage relating to the personal injury judgment. * * *

Plaintiff effectively asks us to treat interest payments on the underlying award as falling within or reducing the Arch Policy’s $1 million liability limit, which is contrary to the plain language of the Arch Supplementary Payments provision and the ICSOP Policy’s Coverage, Ultimate Net Loss, and Maintenance of Underlying Insurance provisions. To do so would be inconsistent with the language chosen by the parties to the insurance contracts, rendering several clauses forceless—a result that should be avoided …. Arch agreed to expand its coverage of pre- and post-judgment interest beyond its liability limits, and ICSOP agreed to provide coverage only for losses in excess of Arch’s coverage—including both the $1 million Arch policy limit and its Supplementary Payments. Jin Ming Chen v Insurance Co. of the State of Pa., 2020 NY Slip Op 06938, Ct App 11-24-20

 

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QUESTIONS OF FACT WHETHER THE CONTRACTOR HIRED TO WORK ON A SIDEWALK WAS RESPONSIBLE FOR MAKING SURE PEDESTRIANS HAD A SAFE PASSAGEWAY; PLAINTIFFS WERE STRUCK BY A CAR WHEN THEY WALKED IN THE PUBLIC STREET BECAUSE THE SIDEWALK WAS BLOCKED; THE THEORY OF LIABILITY APPEARS TO STEM FROM THE CONTRACTOR’S ALLEGED CREATION OF A DANGEROUS CONDITION UPON A PUBLIC STREET OR SIDEWALK (SECOND DEPT).

The Second Department, reversing Supreme Court, determined there were questions of fact about whether defendant contractor, CSI, was responsible for providing a safe alternative passageway while construction work blocked the sidewalk. Plaintiffs were struck by a car when they attempted to walk in the street. The CSI was hired by the general construction manager hired by Taco Bell, the owner of the premises:

“A contractor may be liable for an affirmative act of negligence which results in the creation of a dangerous condition upon a public street or sidewalk” … . Here, CSI failed to demonstrate its prima facie entitlement to judgment as a matter of law, as its submissions failed to eliminate all triable issues of fact as to whether it created the dangerous condition alleged to have caused the accident. Byrd v Hughes, 2020 NY Slip Op 06741, Second Dept 11-18-20

 

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THE CUSTODY ARRANGEMENTS SET FORTH IN A SETTLEMENT AGREEMENT SHOULD NOT HAVE BEEN MODIFIED IN THE ABSENCE OF A HEARING AND FAMILY COURT SHOULD NOT HAVE RELIED ON INADMISSIBLE EVIDENCE UNTESTED BY THE PARTIES (SECOND DEPT).

The Second Department, reversing Family Court, determined the custody arrangements set forth in the settlement agreement should not have been modified in the absence of a hearing and the modification should not have been based upon inadmissible evidence not tested by either party:

… [T]he Supreme Court should not have granted, without a hearing, that branch of the defendant’s motion which was to modify the terms of the parties’ stipulation of settlement. Custody determinations should generally be made only after a full and plenary hearing … . While the general right to a hearing in custody and visitation cases is not absolute, where “facts material to the best interest analysis, and the circumstances surrounding such facts, remain in dispute,” a hearing is required … . Here, the record shows that there were disputed factual issues regarding the child’s best interests, such that a hearing on the defendant’s petition was necessary … .

In addition, decisions regarding child custody and parental access should be based on admissible evidence … . Here, in making its determination, the Supreme Court improperly relied solely on statements and conclusions of witnesses whose opinions and credibility were untested by either party … . Palazzola v Palazzola, 2020 NY Slip Op 06801, Second Dept 11-18-20

 

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ALTHOUGH CONSEQUENTIAL DAMAGES (MORTGAGE PAYMENTS, TAXES, INSURANCE, ETC.) ARE NOT USUALLY AVAILABLE WHEN A BUYER BREACHES A REAL ESTATE PURCHASE AGREEMENT BECAUSE THE SELLER REMAINS IN THE HOUSE AND THOSE COSTS ARE NOT CAUSED BY THE BREACH, THE SAME IS NOT TRUE FOR A COMMERCIAL SELLER WHO DOES NOT RESIDE IN THE HOUSE AND MUST MAKE SIMILAR PAYMENTS (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined consequential damages were available to the commercial developer in this breach of a real estate purchase agreement case. Usually when a buyer breaches a purchase agreement consequential damages are not available because the seller remains in the house and the mortgage and other costs of living there have nothing to do with the breach. However, where, as here, the seller does not live in the house, the expenses association with the maintenance and care of the home after the breach are financial losses:

As a general rule, consequential damages are not available to a seller of residential real estate when the purchaser breaches the contract … . That is because, typically, the seller “retain[s] ownership, use and enjoyment of the premises,” and it cannot be said that the “mortgage interest expenses, repairs or utilities paid postbreach” are proximately caused by the breach … .

Where, however, the seller is a commercial developer, the seller does not live in the home and never intends to do so. Upon the purchaser’s breach, the developer begins to incur costs that reduce the profit margin. Such carrying costs may include, among other things, maintenance and utility costs as well as real property taxes. Whereas the ordinary residential seller, by living in the home after the purchaser’s breach, receives value for the carrying costs until the subsequent sale, the commercial developer does not receive such value. Instead, the carrying costs are nothing but a financial loss. Chrisanntha, Inc. v deBaptiste, 2020 NY Slip Op 06607, Fourth Dept 11-13-20

 

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THE DISTINCTION BETWEEN DETERMINING THE VALIDITY OF AN AGREEMENT TO ARBITRATE, THE COURT’S ROLE, AND THE INTERPRETATION OF A PROVISION IN THE AGREEMENT, THE ARBITRATOR’S ROLE, EXPLAINED; THE MOTION TO COMPEL ARBITRATION SHOULD HAVE BEEN GRANTED (FOURTH DEPT). ​

The Fourth Department, reversing Supreme Court, determined the motion to compel arbitration should have been granted. Among several substantive issues (not summarized here) the court explained the difference between determining the validity of the arbitration agreement, the court’s role, and interpreting a provision in the agreement, the arbitrator’s role:

The only challenge … that plaintiff could raise in opposition to that part of defendants’ motion seeking to compel arbitration is whether a valid arbitration agreement exists, which is for a court to determine … . The challenge must be directed “specifically to the agreement to arbitrate” … . The validity and enforceability of arbitration agreements is governed by the rules applicable to contracts generally … . “[A] party may resist enforcement of an agreement to arbitrate on any basis that could provide a defense to or grounds for the revocation of any contract, including fraud, unconscionability, duress, overreaching conduct, violation of public policy, or lack of contractual capacity” … .

… [P]laintiff failed to raise any challenge to the validity of the agreement to arbitrate. … [P]laintiff relied on a provision in the arbitration agreement that stated that it would not apply “to any employee represented by a labor organization … ” which plaintiff contends shows that there was no valid agreement to arbitrate. … [P]laintiff’s contention conflates the issue of whether there is a valid agreement to arbitrate, which is for a court to decide, with the issue of the arbitrability of the dispute, which is for the arbitrator to determine. The arbitrability issue includes the interpretation of any contract provision, such as the provision exempting union employees from the arbitration agreement under certain circumstances … . Basile v Riley, 2020 NY Slip Op 06600, Fourth De[pt 11-13-20

 

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FEDERAL TAX RETURNS AND EMAILS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WITHIN THE MEANING OF CPLR 3211 (A)(1); THE MOTION TO DISMISS BASED ON DOCUMENTARY EVIDENCE SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant’s motion to dismiss based upon documentary evidence pursuant to CPLR 3211 (a)(1) should not have been granted. Defendants submitted federal income tax returns to demonstrate the amount owed under the contract at issue:

In considering a motion to dismiss a complaint pursuant to CPLR 3211(a)(1), “the documentary evidence must utterly refute the plaintiff’s factual allegations, conclusively establishing a defense as a matter of law” … . Further, where a court considers evidentiary material in the context of a motion to dismiss pursuant to CPLR 3211(a)(7), the complaint may only be dismissed when “it has been shown that a material fact as claimed by the [plaintiff] to be one is not a fact at all and unless it can be said to that no significant dispute exists regarding it” … .

… {The business’s] federal income tax return, submitted by the defendants in support of their motion to dismiss, was insufficient to utterly refute [the] allegation that [the business’s] 2016 profits exceeded the sum reported therein as “ordinary business income,” and to prove that this allegation was “not a fact at all.” Among other things, … the accuracy of the tax return [was disputed] … . While the defendants additionally submitted certain email correspondence … , these emails were not “documentary evidence” within the intendment of CPLR 3211(a)(1) … . Lessin v Piliaskas, 2020 NY Slip Op 06515, Second Dept 11-12-20

 

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PLAINTIFF FAILED TO DEMONSTRATE THE SEPARATION AGREEMENT WAS UNCONSCIONABLE AS A MATTER OF LAW; PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff failed to demonstrate the separation agreement was unconscionable as a matter of law and plaintiff’s motion for summary judgment, therefore, should not have been granted. The court outlined the analytical criteria for unconscionability in this context:

“A separation agreement or stipulation of settlement which is fair on its face will be enforced according to its terms unless there is proof of fraud, duress, overreaching, or … . However, because of the fiduciary relationship existing between spouses, a marital agreement should be closely scrutinized and may be set aside upon a showing that it is unconscionable or the result of fraud or where it is shown to be manifestly unjust because of the other spouse’s overreaching … . “In general, an unconscionable contract has been defined as one which is so grossly unreasonable as to be unenforc[ea]ble because of an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party” … . “This definition reveals two major elements which have been labeled by commentators, procedural and substantive unconscionability. The procedural element of unconscionability concerns the contract formation process and the alleged lack of meaningful choice; the substantive element looks to the content of the contract, per se” … . A reviewing court examining a challenge to a separation agreement “will view the agreement in its entirety and under the totality of the circumstances” … . Eichholz v Panzer-Eichholz, 2020 NY Slip Op 06500, Second Dept 11-12-20

 

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ALLEGED CONTRACTS FOR THE SALE OF REAL PROPERTY DID NOT SATISFY THE STATUTE OF FRAUDS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the alleged agreements to sell real property did not satisfy the statute of frauds:

“Pursuant to General Obligations Law § 5-703(2), a contract for the sale of real property ‘is void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing'” … . “A writing satisfies the statute of frauds if it identifies the parties to the transaction, describes the properties to be sold with sufficient particularity, states the purchase price and the down payment required, and is subscribed by the party to be charged” … . Moreover, “‘a memorandum evidencing a contract and subscribed by the party to be charged must designate the parties, identify and describe the subject matter, and state all of the essential terms of a complete agreement'” … . “In a real estate transaction, the essential terms of a contract typically include the purchase price, the time and terms of payment, the required financing, the closing date, the quality of title to be conveyed, the risk of loss during the sale period, and adjustments for taxes and utilities”… .

… [T]he alleged contract did not satisfy the statute of frauds, as it did not contain the essential terms typically included in a contract for the sale of real property, including the purchase price, the time and terms of payment, the required financing, the closing date, the risk of loss during the sale period, and adjustments for taxes and utilities … . Additionally, the alleged contract was not signed by the defendant Michael Israel, and it indicated that several of the properties were co-owned by other individuals who also were not signatories to the document … .

Further, the emails relied upon by the plaintiff to demonstrate that the parties reached a complete agreement were between the parties’ attorneys, and there was neither an allegation in the complaint nor any evidence in the record that the attorneys were authorized in writing to bind the parties to a contract of sale … . Ehrenreich v Israel, 2020 NY Slip Op 06499, Second Dept 11-12-20

 

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