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THE SUBCONTRACTORS DID NOT SIGN THE PRIMARY CONTRACT WHICH INCLUDED AN ARBITRATION PROVISION; HOWEVER THE SUBCONTRACTORS EXPLOITED THE ARBITRATION PROVISION BY PARTICIPATING IN PRE-ARBITRATION MEDIATION; THEREFORE THE SUBCONTRACTORS WERE ESTOPPED FROM COMPELLING LITIGATION (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that the subcontractors, who did not sign the primary contract which included an arbitration provision in the “General Conditions,” had exploited the benefits of the primary contract and therefore should be compelled to arbitrate. The primary contract was between Corning Hospital and Gilbane, the general contractor. One subcontractor (Mancini) was responsible for general construction of the building and the other (Alliance) was responsible for the installation of veneer stone panels, which had begun to fall off the building:

… “[U]nder the direct benefits theory of estoppel, a nonsignatory may be compelled to arbitrate where the nonsignatory knowingly exploits the benefits of an agreement containing an arbitration clause, and receives benefits flowing directly from the agreement” … . … “Where the benefits are merely ‘indirect,’ a nonsignatory cannot be compelled to arbitrate a claim. A benefit is indirect where the nonsignatory exploits the contractual relation of the parties, but not the agreement itself” … . Noting that “it can be difficult to distinguish between direct and indirect benefits,” the Court of Appeals stated that “[t]he guiding principle is whether the benefit gained by the nonsignatory is one that can be traced directly to the agreement containing the arbitration clause” … .

Respondent argues that Mancini and Alliance are estopped from compelling litigation regarding the veneer stone panels because Alliance previously served a demand for arbitration on Gilbane and Mancini, with the demand specifically stating that one of the bases for seeking arbitration was the dispute resolution section of the General Conditions related to the construction project … . Following that demand for arbitration, Alliance, Gilbane and Mancini took part in mediation, as required prior to arbitration per a provision of the dispute resolution section of the General Conditions — a provision that Alliance also cited in its demand for arbitration. As a result of the mediation, those three entities then entered into a settlement agreement and released each other from liability regarding anything related to the veneer panels. …

Based on Alliance’s demand citing the applicability of the arbitration section of the General Conditions, and Mancini’s acquiescence to that demand, both of these nonsignatories to the prime contract and General Conditions should be compelled to arbitrate pursuant to the direct benefits theory of estoppel. Accordingly, the applications to permanently stay arbitration should have been denied, and the parties should proceed to arbitration. Matter of Alliance Masonry Corp. (Corning Hosp.), 2019 NY Slip Op 09348, Third Dept 12-26-19

 

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THE BUILDING OWNER AND MANAGER WERE ADDITIONAL INSUREDS UNDER A POLICY ISSUED TO THE CONTRACTOR HIRED TO RENOVATE CONCRETE WALKWAYS; THE OWNER AND MANAGER ARE ENTITLED TO COVERAGE FOR A SLIP AND FALL ALLEGED TO HAVE BEEN CAUSED BY PAINTING THE WALKWAYS ALL THE SAME COLOR AND THEREBY DISGUISING A CHANGE IN ELEVATION (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Kapnick, determined plaintiffs are additional insureds under an insurance policy issued by defendant to nonparty Upgrade, the contractor hired to restore concrete catwalks. Plaintiffs, Windsor Apartments and Argo Real Estate, are entitled to coverage for a slip and fall in plaintiffs’ building allegedly caused by painting the floor all the same color, thereby disguising a change in elevation:

Defendant State National issued a commercial general liability (CGL) policy to Upgrade during the relevant time period. The policy contained a “Blanket Additional Insured” Endorsement that limited coverage to operations performed by or on behalf of Upgrade:

“It is agreed that this Policy shall include as additional Insureds any person or organization to whom the Named Insured [Upgrade] has agreed by written contract to provide coverage, but only with respect to operations performed by or on behalf of the Named Insured and only with respect to occurrences subsequent to the making of such written contract.”

The State National policy also stated that its coverage was primary, with exceptions not applicable here, for damages arising out of the premises or operations for which an entity is added as an additional insured.

The policy issued by plaintiff Fireman’s Fund Insurance Company (Fireman’s) to Windsor and Argo provided that coverage was excess when its insureds, Windsor and Argo, have other primary insurance available to them covering liability for damages arising out of the premises or operations for which they have been added as an additional insured. * * *

… [S]ince the injury to the plaintiff in the underlying action here “arose out of” Upgrade’s operation of painting the walkways, plaintiffs are additional insureds under the State National policy and the policy is primary in connection with the underlying action. Fireman’s Fund Ins. Co. v State Natl. Ins. Co., 2019 NY Slip Op 09399, First Dept 12-26-19

 

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PLAINTIFF SUBMITTED EVIDENCE OF DEFENDANTS’ BREACH OF A STIPULATION OF SETTLEMENT; PLAINTIFF’S MOTION TO VACATE (RESCIND) THE STIPULATION SHOULD NOT HAVE BEEN DENIED WITHOUT A HEARING (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion to vacate a stipulation of settlement should not have been granted without a hearing. Plaintiff presented evidence defendants breached the stipulation raising a question whether the stipulation should be rescinded:

… [T]he plaintiff argued that the stipulation should be vacated because the defendants had “openly and willfully violated” the terms of the stipulation. In support of his position, the plaintiff submitted, inter alia, his own affidavit, in which he stated that the defendants had, among other things, assaulted his wife, refused to provide him with an accounting, and had made it impossible for him to operate his plumbing business as agreed to in the stipulation by, among other things, removing and destroying equipment from his office, disconnecting his phone line, and changing locks on the property.

“As a general rule, rescission of a contract is permitted for such a breach as substantially defeats its purpose. It is not permitted for a slight, casual, or technical breach, but . . . only for such as are material and willful, or, if not willful, so substantial and fundamental as to strongly tend to defeat the object of the parties in making the contract'” … .

Under the circumstances, the factual assertions set forth in the plaintiff’s affidavit were sufficient to warrant a hearing on the issue of whether the stipulation should be rescinded due to the defendants’ alleged breaches … . Young v Young, 2019 NY Slip Op 09321, Second Dept 12-24-19

 

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PLAINTIFF POLICE OFFICER’S MOTION FOR SUMMARY JUDGMENT AGAINST THE DRIVER OF THE TRACTOR TRAILER WHICH STRUCK HIM WHEN HE WAS STANDING IN THE ROADWAY SHOULD HAVE BEEN GRANTED, FREEDOM FROM COMPARATIVE FAULT NO LONGER NEED BE SHOWN; OTHER ISSUES ADDRESSED IN THE DECISION INCLUDE THE EMPLOYER’S LIABILITY, THE TRUCK RENTAL COMPANIES’ LIABILITY, THE EMERGENCY DOCTRINE, WORKERS’ COMPENSATION AND GENERAL MUNICIPAL LAW 205-e (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court determined plaintiff police officer was entitled to summary judgment against the driver of the tractor trailer which struck the officer who was standing in the roadway both under a common law negligence theory and under General Municipal Law 205-e. The court dealt with several other issues including: (1) whether a second police officer was engaged in an emergency operation, giving rise to the reckless disregard standard, when he stopped to assist the plaintiff who had made a traffic stop (the answer is no); (2) whether the second officer was liable based upon the position of his car (the answer is no, the car furnished a condition for the accident but was not the cause); (3) whether the injured officer’s recovery was confined to Workers’ Compensation (there is a question of fact whether the injury was “grave”); (4) whether the Graves Amendment protected the truck rental companies (the answer is yes); (5) whether vicarious liability applies to the truck driver’s employer (there is a question of fact on that issue). With respect to the common law negligence and the General Municipal Law 205-e causes of action, the court wrote:

… [T]he plaintiffs were not required to demonstrate that the injured plaintiff was free from comparative negligence in order to obtain summary judgment on the issue of Burke’s [the truck driver’s] liability on the first cause of action [negligence]. * * *

When the light changed, Burke began his left turn onto northbound Midland Avenue. Prior to beginning his turn, Burke was aware that there was a police officer conducting a traffic stop on foot and a police car parked on the northbound side of Midland Avenue. Although Burke believed he could make the turn safely, the rear of the trailer hit the injured plaintiff. * * *

The plaintiffs also established … Burke’s liability as to … a violation of General Municipal Law § 205-e. … [T]hat statute permits a police officer to bring a tort claim for injuries sustained “while in the discharge or performance at any time or place of any duty imposed by . . . superior officer[s]” where such injuries occur “directly or indirectly as a result of any neglect, omission, willful or culpable negligence of any person or persons in failing to comply with the requirements of any of the statutes, ordinances, rules, orders and requirements of the federal, state, county, village, town or city governments” … . In order to recover under the statute, “a police officer must demonstrate injury resulting from negligent noncompliance with a requirement found in a well-developed body of law and regulation that imposes clear duties” … .

Vehicle and Traffic Law § 1146(a) requires a driver to “exercise due care to avoid colliding with any . . . pedestrian.” Here, the unrebutted evidence established a prima facie violation of § 1146(a), as it demonstrated that Burke failed to exercise due care to avoid hitting the injured plaintiff. Cioffi v S.M. Foods, Inc., 2019 NY Slip Op 09251, Second Dept 12-24-19

 

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FAMILY COURT EXCEEDED ITS JURISDICTION WHEN IT SUSPENDED MAINTENANCE PAYMENTS; THE PAYMENTS WERE GOVERNED BY THE PARTIES’ SEPARATION AGREEMENT, AN INDEPENDENT CONTRACT (FOURTH DEPT).

The Fourth Department, reversing (modifying) Family Court, determined Family Court exceeded its jurisdiction in suspending maintenance payments to mother because the maintenance was provided for in the parties’ separation agreement:

… [W]e agree with the mother and the AFC [attorney for the child] that the court exceeded its jurisdiction in suspending maintenance payments to the mother inasmuch as the parties’ separation agreement setting forth that obligation is an independent contract … . Family Court is a court of limited jurisdiction and cannot exercise powers beyond those granted to it by statute … , and “[i]t generally has no subject matter jurisdiction to reform, set aside or modify the terms of a valid separation agreement”… . We therefore modify the order by vacating the tenth provision of the second ordering paragraph insofar as it relates to the suspension of maintenance payments, and we remit the matter to Family Court for a determination of the amount of any maintenance arrears … . Matter of Krier v Krier, 2019 NY Slip Op 09129, Fourth Dept 12-20-19

 

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LOAN FUNDED BY THE PROCEEDS OF ILLEGAL GAMBLING IS ENFORCEABLE (CT APP).

The Court of Appeals determined that the loan agreement between plaintiff and defendant was enforceable despite the fact that the loan was funded by illegal gambling:

Neither the terms of the agreement nor plaintiff’s performance — i.e., loaning money to a friend — was intrinsically corrupt or illegal. Although the loan was funded by the parties’ illegal gambling operation (for which both were criminally prosecuted), the record does not support a characterization of their conduct as “malum in se, or evil in itself” … and the source of funds used for a loan is not typically a factor in determining its validity. Defendant argues the agreement should be deemed unenforceable because the courts should not assist a party in profiting from ill-gotten gains. But, here, where both parties were involved in the underlying illegality, neither enforcement nor invalidation of the contract would avoid that result. Indeed, if the loan is not enforced, defendant receives a windfall despite his participation in the criminal acquisition of the funds. We have been reluctant to reward “a defaulting party [who] seeks to raise illegality as a sword for personal gain rather than a shield for the public good'” … . Although we do not condone plaintiff’s illegal bookmaking business, for which he was prosecuted and fined, the circumstances presented here do not warrant a departure from this tenet. Centi v McGillin, 2019 NY Slip Op 09058, CtApp 12-19-19

 

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THE DEMAND FOR THE RETURN OF THE DEPOSIT UNDER A REAL ESTATE PURCHASE CONTRACT WAS AN ANTICIPATORY BREACH OF THE CONTRACT AND PLAINTIFF WAS ENTITLED TO KEEP THE DEPOSIT AS LIQUIDATED DAMAGES (SECOND DEPT). ​

The Second Department determined defendant’s demand for the return of its deposit in a real estate transaction was an anticipatory breach of the purchase agreement entitling plaintiff to retain the deposit as liquidated damages. Plaintiff, Lamarche Food, had represented that it was a New York corporation authorized to do business in New York. The corporation had been dissolved in 1992. For that reason defendant claimed plaintiff had breached the contract and demanded the return of the deposit. However, pursuant to Business Corporation Law 1006, a dissolved corporation may continue to function for the purpose of winding up affairs. Apparently defendant acknowledged the “winding up affairs” issue and argued only that its demand for a return of the deposit was not an anticipatory breach:

By letter dated June 23, 2017, a new attorney for the defendant informed the plaintiffs’ attorney that Lamarche Food had defaulted on its obligations under the contract of sale inasmuch as it had represented therein that it was a New York corporation authorized to carry on its business in New York, with all the power and authority to enter into and perform the contract, and yet Lamarche Food was dissolved on June 24, 1992, and, therefore, was not a registered corporation in New York capable of engaging in new business. The defendant’s attorney further stated that in light of the breach, the defendant demanded a refund of its deposit within 10 days. * * *

On appeal, the defendant does not dispute that Lamarche Food could continue to function for the purpose of selling the subject property as part of its winding up of the corporation’s affairs. Rather, the defendant contends that its June 23, 2017, letter to the plaintiffs’ attorney did not constitute an anticipatory breach of the contract of sale. “An anticipatory breach of contract by a promisor is a repudiation of [a] contractual duty before the time fixed in the contract for . . . performance has arrived” … . “For an anticipatory repudiation to be deemed to have occurred, the expression of intent not to perform by the repudiator must be positive and unequivocal'” … . We agree with the Supreme Court’s determination that the June 23, 2017, letter reflected a positive and unequivocal repudiation of the contract by the defendant … , thereby, under the terms of the contract, entitling the plaintiffs to retain the deposit as liquidated damages for the defendant’s anticipatory breach. Lamarche Food Prods. Corp. v 438 Union, LLC, 2019 NY Slip Op 08995, Second Dept 12-18-19

 

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THE CRITERIA FOR PRE-ANSWER DISMISSAL OF THE COMPLAINT BASED UPON DOCUMENTARY EVIDENCE AND IN THE INTEREST OF JUDICIAL ECONOMY WERE NOT MET (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the defendant’s pre-answer motion to dismiss the complaint alleging the breach of a letter of intent (LOI) should not have been granted. The evidence submitted by the defendant was not “documentary” evidence within the meaning of CPLR 3211 and the defendant did not demonstrate the complaint should be dismissed in the interest of judicial economy:

… [T]he emails and the unsigned documents relied on by the Supreme Court to conclude that the LOI was an unenforceable agreement to agree were not essentially undeniable, and did not constitute documentary evidence … . Furthermore, the LOI itself contained all the essential elements of a lease, including the area to be leased, the duration of the lease, and the price to be paid … . Moreover, nothing in the LOI stated that it was not binding, and its language did not conclusively establish that the parties did not intend to be bound by it … . Accordingly, the court should have denied that branch of the defendant’s motion which was pursuant to CPLR 3211(a)(1) to dismiss the complaint.

… A court is permitted to consider evidentiary material submitted by a defendant in support of a motion to dismiss pursuant to CPLR 3211(a)(7), and then the question becomes whether the plaintiff has a cause of action, not simply whether a cause of action is stated … . Unless the defendant can demonstrate that there is no factual issue as claimed by the plaintiff, the motion to dismiss should be denied … . Here, the defendant failed to demonstrate that there was no factual issue regarding whether the LOI can be construed as a binding contract. Accordingly, that branch of the defendant’s motion which was to dismiss the complaint pursuant to CPLR 3211(a)(7) should have been denied. S & J Serv. Ctr., Inc. v Commerce Commercial Group, Inc., 2019 NY Slip Op 09049, Second Dept 12-18-19

 

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ELEVATOR MAINTENANCE COMPANY DID NOT DISPLACE THE BUILDING OWNER’S AND MANAGER’S DUTY TO KEEP THE ELEVATORS SAFE AND DID NOT LAUNCH AN INSTRUMENT OF HARM; IT’S MOTION FOR SUMMARY JUDGMENT IN THIS ELEVATOR ACCIDENT CASE SHOULD HAVE BEEN GRANTED; A VIOLATION OF THE NYC BUILDING CODE IS NOT NEGLIGENCE PER SE (FIRST DEPT). ​

The First Department, modifying Supreme Court in this elevator accident case, noted that violation of the NYC Building Code is some evidence of negligence but not negligence per se, and held that Dunwell’s (the elevator maintenance company’s) motion for summary judgment should have been granted. Dunwell had demonstrated two Espinal factors did not apply (it did not displace the building defendants’ obligation to keep the elevators safe and it did not launch an instrument of harm, i.e., it did not exacerbate or create the defects in the elevator):

Dunwell’s motion for summary judgment dismissing all claims against it should be granted. Dunwell cannot be held liable to plaintiff, because it did not owe the decedent any duty. There is no evidence in the record that Dunwell created or exacerbated any of the alleged elevator defects, including the missing door rollers and link arms, even if it were found to have wrongfully failed to diagnose or correct them (see Espinal v Melville Snow Contrs., 98 NY2d 136, 140, 142-143 [2002] … ). Moreover, Dunwell in fact did recommend that these parts be replaced, but its proposal was not accepted by the Building Defendants, and the governing maintenance agreement did not allow Dunwell to replace them without authorization … . The maintenance agreement was not comprehensive and exclusive and therefore did not displace the Building Defendants’ obligations to maintain the elevators in a safe condition … . Plaintiff does not argue that the decedent detrimentally relied on Dunwell’s continued performance of its duties … . Baez v 1749 Grand Concourse LLC, 2019 NY Slip Op 08948, First Dept 12-12-19

 

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POLICIES DID NOT REQUIRE THE INSURER TO DEFEND THE INSURED, BUT DID REQUIRE THE INSURER TO PAY THE INSURED’S DEFENSE COSTS (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Friedman, determined that the terms of the policies at issue did not obligate the insurer to defend the insured, but do require the insurer to pay the insured’s defense costs. The opinion is too fact-specific and too comprehensive to fairly summarize here:

In this insurance coverage action brought by a putative additional insured, the liability insurance policies at issue do not impose on the insurers a duty to defend the insured in a covered action. The policies do, however, require the insurers to reimburse the insured for defense costs incurred in an action “in which damages . . . to which this insurance applies are alleged.” The ultimate factual determination in the underlying personal injury actions was that the loss was actually outside the scope of the additional insured coverage. This determination, while it means that the insurers have no duty to indemnify the putative additional insured for its liability to pay damages, is not conclusive of a different question posed to us, which is whether the putative additional insured is entitled reimbursement of its defense costs. * * *

Under the terms of the … policy, the timing of the Port Authority’s demand for reimbursement does not defeat its claim for reimbursement of its defense costs through the time its liability was adjudicated in the underlying actions. … [The] policy entitles the insured to coverage of the costs it incurred in defending “any . . . suit’ to which this policy applies,” and the policy defines the term “suit” to mean an action “in which damages because of bodily injury’ . . . to which this insurance applies are alleged” … . … [U]ntil the jury rendered the verdict adverse to the Port Authority, each of the underlying actions remained a ” suit’ to which th[e] … policy applie[d]” … . Port Auth. of N.Y. & N.J. v Brickman Group Ltd., LLC, 2019 NY Slip Op 08958, First Dept 12-12-19

 

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