You are here: / Contract Law
, , ,

QUESTIONS OF FACT PRECLUDED SUMMARY JUDGMENT IN THIS CONSTRUCTIVE TRUST AND UNJUST ENRICHMENT ACTION (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that summary judgment was not available in this dispute about ownership of land and personal property. Plaintiff alleged that land, personal property and the the proceeds of the timber business were his, despite the fact that the land, personal property and bank account, based upon the documentary evidence, appeared to belong to defendant. There were questions of fact whether a constructive trust had been created and whether defendant had been unjustly enriched:

“The elements of a constructive trust are a confidential relationship, a promise, a transfer in reliance on that promise and unjust enrichment. As a constructive trust is an equitable remedy, courts do not rigidly apply the elements but use them as flexible guidelines. In this flexible spirit, the promise need not be express, but may be implied based on the circumstances of the relationship and the nature of the transaction. Similarly, courts have extended the transfer element to include instances where funds, time and effort were contributed in reliance on a promise to share in some interest in property, even though no transfer actually occurred” … . Here, both parties concede that they had a confidential relationship. However, it is sharply disputed whether there was a promise, a transfer or unjust enrichment. * * *

“A person is unjustly enriched when his [or her] retention of the benefit received would be unjust considering the circumstances of the transfer and the relationship of the parties” … . Plaintiff claims this is his business, that he worked full time and utilized all funds earned in the business to purchase the equipment, personal property and the vacant land. On the other hand, defendant argues it was their business, she held title to all assets, paid for all assets and debts and paid for plaintiff’s services by paying his expenses, housing and cash. Baker v Harrison, 2020 NY Slip Op 01233, Third Dept 2-20-20

 

, ,

RESPONDENT WAS A CUSTOMER OF PETITIONER SECURITIES CORPORATION WITHIN THE MEANING OF FINANCIAL INDUSTRY REGULATORY AUTHORITY (FIRA) RULES AND THEREFORE COULD COMPEL ARBITRATION (FIRST DEPT). ​

The First Department, reversing Supreme Court, over an extensive dissent, determined respondent was a customer of petitioner (LekUS) and therefore could compel FINRA (Financial Industry Regulatory Authority) arbitration. Petitioner had been sued by FINRA in connection with shares of Cannibis Science, Inc. (CBIS) purchased by respondent and held by petitioner for trading:

The record establishes that respondent was a customer of nonparty Lek Securities UK, Ltd. (LekUK), where he had his account, and was also a client of petitioner Lek Securities Corp. (LekUS), with which he had a series of direct agreements. Under those agreements, LekUS conditioned its provision of depository and execution services for certain trades on respondent’s providing certain representations and an indemnity … .

Specifically, respondent purchased shares of Cannabis Science, Inc. (CBIS) in a series of transactions in 2015 and 2016 that required that the shares be held and sold in the United States. For each transaction, respondent executed an agreement (Deposit Agreement) directly with LekUS pursuant to which LekUS deposited the shares in its account at the Depository Trust & Clearing Corporation (DTCC). In each Deposit Agreement, (1) respondent represented that his answers to certain questions were true and acknowledged that LekUS would rely on those representations; (2) LekUS agreed to act as the “Processing Broker” to provide the services of depositing and reselling the shares; and (3) LekUS accepted respondent’s “Deposit Securities Request” on certain conditions, including that any claims by respondent or disputes arising from respondent’s representations in the Deposit Agreement “shall be governed by New York law and subject to the exclusive venue and jurisdiction of the courts and arbitration forums in the City and State of New York,” and that respondent would indemnify LekUS in connection with claims arising from respondent’s representations in the Deposit Agreement or from “the deposit process or the subsequent sale of the securities.”

When respondent sought to trade the CBIS shares deposited with LekUS, he communicated with Michael Mainwald, who was located at the office of LekUS, had a LekUS phone number and email address, and was registered with FINRA as the “principal operating officer” of LekUS.

… LekUS notified respondent that it had been sued by FINRA in connection with CBIS transactions and that LekUS sought indemnification by defendant pursuant to the Deposit Agreements. …

… [R]espondent was a “customer” of LekUS within the meaning of FINRA Rule 12200, and was therefore entitled to demand arbitration. Matter of LEK Sec. Corp. v Elek, 2020 NY Slip Op 01134, First Dept 2-18-20

 

, ,

ALTHOUGH DOCUMENTARY EVIDENCE IS ADMISSIBLE NOTWITHSTANDING THE DEAD MAN’S STATUTE, HERE THE DECEDENT’S SIGNATURE ON THE GUARANTY WAS NOT AUTHENTICATED BY SOMEONE OTHER THAN AN INTERESTED WITNESS; THEREFORE PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT ON THE GUARANTY SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined the personal guaranty signed by decedent was not authenticated. Therefore plaintiff was not entitled to summary judgment on the guaranty:

We modify, however, with respect to the cause of action under the personal guaranty purportedly signed by the decedent, because although documentary evidence is admissible notwithstanding the dead man’s statute, it must be “authenticated by a source other than an interested witness’s testimony” … . Having failed to authenticate the guaranty through “a source other than an interested witness’s testimony,” plaintiff was not entitled to summary judgment on the guaranty. Galpern v Air Chefs, L.L.C., 2020 NY Slip Op 01021, First Dept 2-13-20

 

, , , ,

ARBITRATOR’S AWARD IN FAVOR OF DONALD J TRUMP FOR PRESIDENT INC VACATED AS VIOLATING PUBLIC POLICY AND EXCEEDING THE ARBITRATOR’S AUTHORITY (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined the arbitrator’s award in this action based upon a non-disclosure, non-disparagement agreement (NDA) was against public policy and exceeded the arbitrator’s authority. Plaintiff was employed by defendant, Donald J. Trump For President, Inc. She signed the NDA as a condition of her employment. Plaintiff brought an employment discrimination action in Supreme Court alleging a hostile work environment, sexual discrimination, defamation and intentional and negligent infliction of emotional distress. Pursuant to the NDA defendant demanded arbitration. Plaintiff then started a federal lawsuit seeking a declaration that the NDA was void and unenforceable and defendant, pursuant to the NDA again demanded arbitration. The arbitrator found plaintiff had breached the NDA by disclosing confidential information in the federal action and making disparaging comments on her GoFundMe pages and on her Twitter account. The First Department held the information disclosed in the federal action was protected by privilege and the comments posted on the Internet were not part of the defendant’s demand for arbitration:

Plaintiff’s negative statements about defendant, for which the arbitrator made an award, were made in the context of the federal action in which she sought a declaration that the NDA was unenforceable … . By concluding that the allegations in the federal action are tantamount to disclosure of confidential information violative of the NDA, the arbitrator improperly punished plaintiff for availing herself of a judicial forum. Defendant is hard-pressed to explain how plaintiff could have pursued her rights without setting forth necessary factual statements for the federal court to consider.

The remainder of the award was based upon certain Twitter “Tweets” and statements on a GoFundMe page. The nature of the Demand to Arbitrate, however, was limited to statements made “in connection” with this state action. * * * Defendant relies on plaintiff’s actions subsequent to the date of its Demand to Arbitrate in an effort to have the arbitration award confirmed. Since the award takes into account events occurring after the demand, which could not have been legitimately considered at arbitration, the award was made in excess of the arbitrator’s enumerated authority. Denson v Donald J. Trump for President, Inc., 2020 NY Slip Op 00923, First Dept 2-6-20

 

, , ,

THE PORTION OF THE ARBITRATOR’S AWARD WHICH CONFLICTED WITH THE COLLECTIVE BARGAINING AGREEMENT AND THE PORTION OF THE AWARD WHICH WAS NONFINAL SHOULD NOT HAVE BEEN CONFIRMED BY SUPREME COURT (FOURTH DEPT).

The Fourth Department determined certain findings made by the arbitrator shouldn’t have been confirmed by Supreme Court. The matter concerned the elimination of teaching positions to accommodate the hiring of teachers’ aides. In one instance the arbitrator’s ruling conflicted with the terms of the collective bargaining agreement (CBA). And in the other instance the arbitrator’s ruling was nonfinal:

An award may be vacated where an arbitrator, “in effect, made a new contract for the parties in contravention of [an] explicit provision of [the] arbitration agreement which denied [the] arbitrator power to alter, add to or detract from” the collective bargaining agreement (CBA) … . …

An award is nonfinal and indefinite if, inter alia, “it leaves the parties unable to determine their rights and obligations” … . Matter of Arbitration Between Buffalo Teachers Fedn., Inc. (Board of Educ. of the Buffalo Pub. Schs.), 2020 NY Slip Op 00794, Fourth Dept 1-31-20

 

, ,

ALTHOUGH THE CITY GAVE A PERMIT TO A BUS COMPANY TO USE A PARKING LOT, THE CITY DID NOT DEMONSTRATE IT RELINQUISHED ALL CONTROL OVER THE MAINTENANCE OF THE PARKING LOT SUCH THAT IT COULD NOT BE HELD LIABLE IN THIS SLIP AND FALL CASE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the City did not demonstrate it relinquished maintenance responsibilities for a parking lot licensed to a bus company in this slip and fall case:

… [T]he City failed to meet its prima facie burden of demonstrating that it relinquished control of the premises such that it had no duty to the plaintiff to remedy the allegedly defective condition. In support of its motion, the City submitted a copy of the permit agreement, as well as the deposition testimony of several City employees. The permit agreement provided that the bus company had some responsibility for maintenance of the premises, but that the permit also was revocable at will by the City, and the City reserved “the right at all times to free and interrupted access” to any portion of the premises. Moreover, the deposition testimony submitted by the City established, prima facie, that City employees made regular visual inspections of the premises.

Viewing the evidence in the light most favorable to the plaintiff … , it cannot be said as a matter of law that the City relinquished control of the premises to the bus company such that it owed no duty to the plaintiff to remedy the allegedly defective condition… . D’Angelo v City of New York, 2020 NY Slip Op 00569, Second Dept 1-29-20

 

CONTRACTUAL PROVISION LIMITING DAMAGES IS ENFORCEABLE, CRITERIA EXPLAINED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the contractual provision limiting damages was enforceable. Plaintiff, Astoria, owned a power station and hired defendant, Rileu, to overhaul a steam boiler, which exploded. The contract limited Riley’s damages to one and a half times the contract price:

A clear contractual provision limiting damages is enforceable, unless there is a special relationship between the parties, there is a statutory prohibition against it, or it is against public policy because the conduct of the party seeking to enforce it was grossly negligent … . Here, Riley established, prima facie, that the clear limitation of liability provision contained in the addendum to the contract was part of an arm’s length transaction between the parties, two sophisticated commercial entities, and is thus valid and enforceable … . Riley further established, prima facie, that there was no special relationship between it and Astoria, that there was no statutory prohibition against the limitation of liability provision, and that the provision was not against public policy … . Astoria Generating Co., LP v Riley Power, Inc., 2020 NY Slip Op 00560, Second Dept 1-29-20

 

, ,

TRIAL COURT’S DECLARING A MISTRIAL VIOLATED THE PARTIES’ STIPULATION PURSUANT TO THE SUMMARY JURY TRIAL RULES (FIRST DEPT).

The First Department, reversing Supreme Court, determined the trial should not have, sua sponte, declared a mistrial in this summary jury trial (SJT) in an attempt to correct an evidentiary error. The mistrial violated the parties’ STJ stipulation which constitutes a binding contract:

The SJT rules to which the parties stipulated provide, among other things, that “[p]arties agree to waive any motions for directed verdicts as well as any motions to set aside the verdict or any judgment rendered by said jury” and that the “Court shall not set side any verdict or any judgment entered thereon, nor shall it direct that judgment be entered in favor [of] a party entitled to judgment as a matter of law, nor shall it order a new trial as to any issues where the verdict is alleged to be contrary to the weight of the evidence” … .

The court erred in sua sponte declaring a mistrial and setting aside the verdict. While this was an attempt to correct an admittedly erroneous evidentiary ruling, the parties’ stipulation to a summary jury trial, subject to the applicable rules and procedures for Bronx County, was a legally binding contract … . Since the summary jury trial rules for Bronx County do not provide for any means to correct errors of law committed during trial, the court exceeded the boundaries of the parties’ agreement by setting aside the verdict, regardless of whether it in fact did so on its own initiative in the interest of justice … .

… [T]his holding does not proscribe post-trial motions of any kind in connection with summary jury trials; rather, it abides by the parties’ own proscriptions made at the time that they stipulated to proceed with a summary jury trial. There was nothing barring the parties from stipulating to reserve their right to appeal or move to set aside the verdict on the ground of an error of law. Vargas v LaMacchia, 2020 NY Slip Op 00556, First Dept 1-28-2o

 

, ,

THE TRUST-ASSET-SUBSTITUTION AGREEMENT, SUBSTITUTING LIFE INSURANCE FOR CERTAIN ASSETS, WAS SUBJECT TO EPTL 11-1.7(a)(1); THEREFORE THE PROVISION OF THE AGREEMENT RELEASING THE TRUSTEE FROM LIABILITY WAS AGAINST PUBLIC POLICY AND THE TRUSTEE IS LIABLE FOR FAILING TO ENSURE THE LIFE INSURANCE PREMIUMS WERE PAID (SECOND DEPT).

The Second Department, reversing Surrogate’s Court, determined the 1992 agreement substituting life insurance for trust assets was covered by Estates, Powers and Trusts Law (EPTL) 11-1.7(a)(1) and the trustee, which owned the policies, was liable in negligence for failing to ensure the premiums were paid (the policies had lapsed). The provision of the trust-asset-substitution agreement exonerating the trustee from liability was invalid as against public policy. The matter was remitted for a determination of damages:

The Surrogate’s Court found that the 1992 agreement created a “new trust agreement” funded in part by the life insurance policies, which was not part of the testamentary trust, and therefore not governed by EPTL 11-1.7(a). The court further found that the agreement released the trustee from any promises relating to “the substitution of property,” which relieved the trustee of any “liability to monitor the investment owed to the trust,” released the trustee and any successor trustee “from any future lawsuit,” and released the trustee of any fiduciary duty to act upon Robert’s default in paying insurance premiums.

Contrary to the conclusion of the Surrogate’s Court, the agreement did not create a new trust. Rather, the agreement provided for the substitution of testamentary trust property with life insurance policies. The petitioner included the life insurance policies in its final account of the testamentary trusts as worthless assets. There is no reference to any separate accounting for the life insurance policies as part of a separate trust. Thus, the duty of the trustee was governed by EPTL 11-1.7(a)(1), which states that the exoneration of a testamentary trustee from liability for failure to exercise reasonable care, diligence, and prudence is contrary to public policy. Matter of Wilkinson, 2020 NY Slip Op 00286, Second Dept 1-15-20

 

, ,

BECAUSE THE DEFENDANT EMPLOYER SUFFERED NO DAMAGE AS A RESULT OF PLAINTIFF’S BREACH OF THE CONFIDENTIALITY PROVISION OF THE EMPLOYMENT CONTRACT, DEFENDANT EMPLOYER WAS NOT ENTITLED TO ENFORCEMENT OF THE LIQUIDATED DAMAGES PROVISION IN THE CONTRACT; PLAINTIFF’S BREACH-OF-AN-ORAL-CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED BECAUSE PLAINTIFF SUBMITTED EVIDENCE OF PARTIAL PERFORMANCE BY DEFENDANT AND PLAINTIFF’S RELIANCE ON THE ORAL MODIFICATION (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined that, although the law firm defendants demonstrated plaintiff attorney violated the confidentiality provision of her employment contract, the law firm was not entitled to enforcement of the liquidated damages provision of the contract because the law firm did not demonstrate it suffered any damage as a result of plaintiff’s breach. In addition, plaintiff’s cause of action alleging the law firm defendants violated an oral agreement promising her a five percent bonus related to attorney’s fees paid for cases in which she was involved should not have been dismissed because she presented some evidence she had in fact been paid several such bonuses:

“Liquidated damages constitute the compensation which, the parties have agreed, should be paid in order to satisfy any loss or injury flowing from a breach of their contract” … . “A contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation. If, however, the amount fixed is plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced” … . Although the party challenging the liquidated damages provision has the burden to prove that the liquidated damages are, in fact, an unenforceable penalty … , the party seeking to enforce the provision must necessarily have been damaged in order for the provision to apply … . Here, defendants did not identify to the motion court any damages that they sustained as a result of plaintiff’s breach of the agreement. …

The law firm defendants met their burden on summary judgment by providing plaintiff’s employment agreement which did not include any reference to a 5% nondiscretionary bonus, and which included a general merger clause requiring any modification to be in writing. However, plaintiff raised a triable issue of fact as to this claim. … [T]he Court of Appeals has held that while generally an oral modification may not be enforced in light of a merger clause, an oral modification may be enforced if there is partial performance that is “unequivocally referable to the oral modification” or if one party “induced another’s significant and substantial reliance upon an oral modification.” Rubin v Napoli Bern Ripka Shkolnik, LLP, 2020 NY Slip Op 00250, First Dept 1-14-20

 

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy