Contract Law – Page 61 – New York Appellate Digest

PLAINTIFF AT-WILL EMPLOYEE WAS ENTITLED TO COMMISSIONS EARNED ON HIS ACCOUNTS BEFORE, BUT NOT AFTER, PLAINTIFF WAS TERMINATED; ALTHOUGH THE EMPLOYMENT CONTRACT WAS ORAL, IT WAS NOT SUBJECT TO THE STATUTE OF FRAUDS UNTIL AFTER PLANTIFF WAS TERMINATED. (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined plaintiff, an at will employee, was not entitled to commissions on sales to any account generated by plaintiff earned after plaintiff was terminated. Although the employment contract was oral, it was not subject to the statute of frauds until after plaintiff was terminated:

General Obligations Law § 5-701 (a) (1) provides that “[e]very agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking . . . [b]y its terms is not to be performed within one year from the making thereof.” “Only those agreements which, by their terms, have absolutely no possibility in fact and law of full performance within one year’ will fall within the statute of frauds” … .

Here, plaintiff was an at-will employee of defendant, and “an at-will employment . . . is capable of being performed within one year despite the fact that compensation remains to be calculated beyond the one-year period” … . We therefore reject defendant’s contention that the court erred in denying its motion with respect to plaintiff’s claim for payment of commissions fixed and earned during the course of plaintiff’s employment with defendant … .

… [T]he court erred in denying [defendant’s] motion [for summary judgment] with respect to plaintiff’s claim for “commissions on sales to any accounts generated by [plaintiff] on a future and ongoing basis including post-termination of [plaintiff’s] employment,” i.e., the claim for commissions that would accrue subsequent to the termination of plaintiff’s employment. Although “[a]n oral agreement that is terminable at will is capable of performance within one year and, therefore, does not come within the Statute of Frauds . . . [,] General Obligations Law § 5-701 (a) (1) bars enforcement of a promise to pay commissions that extends indefinitely, dependent solely on the acts of a third party and beyond the control of the defendant” … . Thus, the court erred in denying defendant’s motion with respect to plaintiff’s claim for commissions accruing subsequent to the termination of plaintiff’s employment … . Bermel v Vital Tech Dental Labs, Inc., 2020 NY Slip Op 04666, Fourth Dept 8-20-20

August 20, 2020

Civil Procedure, Contract Law

QUESTION WHETHER A CONTRACT WHICH IS SILENT ABOUT ITS DURATION WAS PROPERLY TERMINATED REQUIRED CONSIDERATION OF THE INTENT OF THE PARTIES AND COULD NOT BE RESOLVED BASED UPON THE PLEADINGS ALONE; DEFENDANT’S MOTION TO DISMISS THE COMPLAINT SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing Supreme Court, determined defendant’s (Goldman Sachs’) motion to dismiss the complaint in this breach of contract action should not have been granted. The issue is whether a contract with is silent about its duration was properly terminated by Goldman. The issue requires consideration of the intent of the parties and could not be resolved based upon the pleadings:

… Supreme Court failed to examine the surrounding circumstances as well as the intent of the parties in discerning the original intent of the parties …. It improperly determined, as a matter of law, that a “reasonable time” justifying termination of the contract had elapsed and plaintiffs had not made any persuasive arguments to the contrary. In doing so, it relied upon its conclusion that Goldman was no longer receiving a meaningful benefit from the agreement, thus rejecting out of hand plaintiff’s allegations in the amended complaint to the contrary.

As this is a motion to dismiss pursuant to CPLR 3211(a)(7), Supreme Court should have afforded the pleadings a liberal construction (see CPLR 3026), taken the allegations of the complaint as true, and afforded plaintiff[s] the benefit of every possible favorable inference. A motion court must only determine whether the facts as alleged fit within any cognizable legal theory … . Whether a plaintiff can ultimately establish its allegations should not be considered in determining a motion to dismiss … . “Under CPLR 3211(a)(1), a dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law” … . Charles Schwab Corp. v Goldman Sachs Group, Inc., 2020 NY Slip Op 04520, First Dept 8-13-20

August 13, 2020

Attorneys, Civil Procedure, Contract Law

DEFENDANT OFFERED MORE TO SETTLE THE ACTION THAN WAS AWARDED PLAINTIFF AFTER TRIAL; DEFENDANT WAS THEREFORE ENTITLED TO ATTORNEY’S FEES PURSUANT TO CPLR 3220 (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined defendant was entitled to attorney’s fees pursuant to CPLR 3220 in this breach of contract action. The defendant offered $950,000 to settle the action before trial and the plaintiff was awarded about $525,000:

CPLR 3220 provides, in relevant part, that, in an action to recover damages for breach of contract, at any time at least 10 days prior to trial, a defendant may make “a written offer to allow judgment to be taken against [it] for a sum therein specified, with costs then accrued, if the [defendant] fails in his defense.” If the plaintiff rejects the offer and thereafter “fails to obtain a more favorable judgment, [the plaintiff] shall pay the expenses necessarily incurred by the [defendant], for trying the issue of damages from the time of the offer” (CPLR 3220 … ). Here, since the defendant’s offer of $950,000 exceeded the plaintiff’s award of $524,253.92 and the plaintiff rejected that offer, the court should have awarded the defendant its expenses, including attorneys’ fees, incurred in trying the issue of damages from the date of its offer pursuant to CPLR 3220 … . Kirchoff-Consigli Constr. Mgt., LLC v Dharmakaya, Inc., 2020 NY Slip Op 04468, Second Dept 8-12-20

August 12, 2020

Civil Procedure, Contract Law

THE 90-DAY CONTRACTUAL STATUTE OF LIMITATIONS WAS VALID AND ENFORCEABLE; THE BREACH OF CONTRACT CAUSE OF ACTION WAS TIME-BARRED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the 90-day statute of limitation in the contract applied and the breach of contract cause of action was therefore time-barred. The construction contract required an action to be brought within 90 days of the completion of construction:

… [An] “agreement which modifies the Statute of Limitations by specifying a shorter, but reasonable, period within which to commence an action is enforceable'” … . ” [T]he period of time within which an action must be brought . . . should be fair and reasonable, in view of the circumstances of each particular case. . . . The circumstances, not the time, must be the determining factor'” … . “Absent proof that the contract is one of adhesion or the product of overreaching, or that [the] altered period is unreasonably short, the abbreviated period of limitation will be enforced” … .

Here, the [defendant] demonstrated, prima facie, that the time within which to commence this action had expired inasmuch as the plaintiff failed to commence this action within 90 days after May 31, 2011, when construction was indisputably complete … . Stonewall Contr. Corp. v Long Is. Rail Rd. Co., 2020 NY Slip Op 04505, Second Dept 8-12-20

August 12, 2020

Contract Law, Partnership Law

THE DETAILED STATUTORY SCHEME OF THE REVISED LIMITED PARTNERSHIP ACT (RLPA) PRECLUDED ENFORCEMENT OF THE UNSIGNED PURPORTED AMENDMENT TO THE PARTNERSHIP AGREEMENT (FIRST DEPT).

he First Department determined the 1999 partnership agreement controlled and the purported 2004 amendment to the agreement, which was not executed, could not be enforced. The decision is too detailed to fairly summarize here. Suffice to say that the detailed statutory scheme of the Revised Limited Partnership Act (RLPA) precluded ignoring the Statute of Frauds with respect to the unexecuted amendment:

By design, the RLPA sets forth a clear separation between general and limited partners. This separation is more defined than the division between managers and members in limited liability corporations. With few exceptions, the RLPA provides that a general partner has the liabilities of a partner in a non-limited partnership. In exchange for a more passive position, the limited partners are generally sheltered from personal liability to third parties who transact business with the limited partnership (see generally, Bruce A. Rich, Practice Commentaries, McKinney’s Cons. Laws of NY, Book 38, Revised Limited Partnership Act, at 317, 334-336). The RLPA’s default requirements of partner consent to substantive changes to a limited partnership agreement helps protect the passive limited partners from actions taken by general partners that might adversely affect the limited partners’ interests. That default protection would be undermined if we were to engraft on to the RLPA the equitable exceptions applicable to the Statute of Frauds. Accordingly, we decline to do so. A&F Hamilton Hgts. Cluster, Inc. v Urban Green Mgt., Inc., 2020 NY Slip Op 04440, First Dept 8-6-20

August 6, 2020

Attorneys, Contract Law

PLAINTIFF BANK’S ATTORNEY’S FEES IN THIS BREACH OF CONTRACT ACTION SHOULD NOT HAVE BEEN AWARDED ABSENT PROOF OF THE ATTORNEY’S EXPERIENCE AND ABILITIES AND THE NATURE OF THE SERVICES RENDERED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the court should not have awarded attorney’s fees to plaintiff bank in this breach of contract/guaranty action because the attorney’s experience and abilities and the nature of the services were not spelled out:

… [T]he Supreme Court should not have awarded the bank attorneys’ fees, costs, and disbursements based solely on the affirmation of legal services provided by the bank’s attorney. “An award of an attorney’s fee pursuant to a contractual provision may only be enforced to the extent that the amount is reasonable and warranted for the services actually rendered” … . “In determining reasonable compensation for an attorney, the court must consider such factors as the time, effort, and .skill required; the difficulty of the questions presented; counsel’s experience, ability, and reputation; the fee customarily charged in the locality; and the contingency or certainty of compensation” … . “While a hearing is not required in all circumstances, the court must possess sufficient information upon which to make an informed assessment of the reasonable value of the legal services rendered” … . “There must be a sufficient affidavit of services, detailing the hours reasonably expended . . . and the prevailing hourly rate for similar legal work in the community” … .

Here, the affirmation of services rendered submitted by the bank’s counsel “did not set forth counsel’s experience, ability, and reputation, and failed to detail the prevailing hourly rate for similar legal work in the community” … . Sterling Natl. Bank v Alan B. Brill, P.C., 2020 NY Slip Op 04418, Second Dept 8-5-20

August 5, 2020

Contract Law

EVEN THOUGH THE BREACH OF CONTRACT ACTION WAS TIME-BARRED, THE EXISTENCE OF A VALID CONTRACT PRECLUDED AN ACTION IN QUANTUM MERUIT OR QUASI CONTRACT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant’s motion to dismiss the breach of contract cause of action should have been granted because it was time-barred. In addition, the quantum meruit cause of action should have been dismissed because a valid contract precludes recovery in quasi contract:

The defendants established, prima facie, that this action was not commenced within the limitations period set forth in the contract for breach of contract claims … . In opposition, the plaintiff failed to raise a question of fact as to whether the statute of limitations was tolled or otherwise inapplicable, or whether the action was actually commenced within the period propounded by the defendants.

… [T]o the extent that the complaint seeks recovery in quantum meruit, it should have been dismissed since “the existence of a valid contract governing the subject matter generally precludes recovery in quasi contract for events arising out of the same subject matter” … . D. Gangi Contr. Corp. v City of New York, 2020 NY Slip Op 04378, Second Dept 8-5-20

August 5, 2020

Civil Procedure, Contract Law, Real Estate

THE SELLER WAS NOT OBLIGATED TO EXERCISE AN OPTION IN THE RESTRICTED REMEDIES CLAUSE OF THE REAL ESTATE PURCHASE CONTRACT BECAUSE THE BUYER NEVER DEMANDED SPECIFIC PERFORMANCE OF THE CONTRACT (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Oing, affirming Supreme Court and noting that a motion to dismiss for failure to state a cause of action may be brought at any time, determined the motion to dismiss this action for specific performance of a real estate purchase agreement was properly granted. The buyer argued it was entitled to specific performance because the seller was required to exercise one of the remedies described in the restricted remedies clause of the purchase agreement. The court disagreed and held the buyer never in fact demanded specific performance. Rather, the buyer indicated it would not close unless the seller remedied a tax misclassification and lowered the purchase price:

Supreme Court properly considered the seller’s post note of issue CPLR 3211(a)(7) motion to dismiss for failure to state a cause of action because it can be made at any time (CPLR 3211[e]). Thus, CPLR 3212(a)’s requirement of demonstrating good cause for the delay does not apply … . * * *

… .[T]he buyer maintains that Supreme Court erred in dismissing that claim by misreading Mehlman v 592-600 Union Ave. Corp. (46 AD3d 338 [1st Dept 2007]) in applying the contract’s restricted remedy clause against it. That clause expressly and strictly limited the buyer to two remedies in the event the seller was unable to convey title to the premises pursuant to the terms of the contract: (i) terminate the contract and receive its down payment or (ii) consummate the transaction with a $25,000 credit to remedy any title issue. The buyer argues that our holdings in Mehlman and 101123 LLC v Solis Realty LLC (23 AD3d 107 [1st Dept 2005]) obligate the seller to concede the title defect and demand that the buyer exercise one of the options set forth in the restricted remedies clause at the closing, and that the seller’s failure to satisfy this obligation enables the buyer to maintain its specific performance claim. * * *

… [A] seller unable to convey clear title for reasons contemplated in the parties’ contract is entitled to invoke the restricted remedies clause in response to a buyer’s demand for specific performance of the parties’ contractual terms. Here, the buyer’s allegations unmistakably demonstrate that it did not demand specific performance from the seller to convey title as alleged in the complaint, namely, by conveying title in accordance with the seller’s contractual representation that there were no negative tax issues associated with the premises. Instead, the buyer alleged in its complaint that it was ready, willing and able to close provided that the seller, inter alia, corrected the tax misclassification and reduced the purchase price to address the tax liabilities arising from the misclassification. In fact, the allegations underlying the claim demonstrate the complete absence of a demand for specific performance of the parties’ contract. Rather, according to those allegations, the buyer’s demand would result only if the seller did not comply with the buyer’s condition to close. These allegations, as a matter of law, demonstrate that the seller was not obligated to invoke the restricted remedies clause. Thus, under these circumstances, the buyer is precluded from seeking from the seller specific performance of their contract. M&E 73-75, LLC v 57 Fusion LLC, 2020 NY Slip Op 04372, First Dept 7-30-20

July 30, 2020

Appeals, Contract Law, Criminal Law

RESTITUTION ORDERED WAS GREATER THAN THAT AGREED TO IN THE PLEA AGREEMENT; ALTHOUGH THE ISSUE WAS NOT PRESERVED, THE APPEAL WAS CONSIDERED IN THE INTEREST OF JUSTICE; RESTITUTION VACATED AND MATTER REMITTED (THIRD DEPT).

The Third Department, vacating the restitution award in the interest of justice, determine the restitution ordered was not that agreed to in the plea agreement:

Defendant contends that Supreme Court improperly enhanced the sentence by ordering him to pay restitution in an amount greater than what was agreed to under the plea agreement. The record supports his claim, and the People concede that the restitution award should be reduced. Although defendant failed to preserve his claim by requesting a hearing or objecting to the amount of restitution at sentencing, we deem it appropriate to take corrective action in the interest of justice … . As defendant was not sentenced in accordance with the plea agreement, the matter must be remitted to Supreme Court to provide defendant with the opportunity to either accept the sentence with the enhanced restitution award or withdraw his guilty plea … . In addition, as Supreme Court failed to set forth the time and manner of payment of the amount of restitution in the restitution order, this omission must also be addressed upon remittal … . People v Gravell, 2020 NY Slip Op 04344, Third Dept 7-30-20

July 30, 2020

Contract Law, Corporation Law, Fraud

QUESTION OF FACT WHETHER THE CORPORATE VEIL SHOULD BE PIERCED IN THIS BREACH OF CONTRACT ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff had raised questions of fact about whether the corporate veil should be pierced in this breach of contract action:

The plaintiff alleged that it contracted with the defendant China Perfect Construction Corp. (hereinafter China Perfect) to perform certain construction work, and that China Perfect breached that contract by performing the work in a substandard manner. The plaintiff alleged that the defendants Rushang Zhao and May Lu … exercised complete dominion and control over the operations of China Perfect and used such dominion and control to commit a fraud or wrong against the plaintiff. In this regard, the plaintiff alleged that the individual defendants created the defendant New Empire Builder Corp. … solely to avoid the debts and liabilities of China Perfect, and that they transferred the assets of China Perfect to New Empire in order to render China Perfect “judgment-proof.” * * *

… [T]he defendants failed to affirmatively establish, prima facie, that the individual defendants did not exercise dominion and control over China Perfect to commit a wrong or injustice against the plaintiff, such that the doctrine of piercing the corporate veil is inapplicable … . Sterling Park Developers, LLC v China Perfect Constr. Corp., 2020 NY Slip Op 04340, Second Dept 7-29-20

July 29, 2020