Contract Law – Page 88 – New York Appellate Digest

COMPLAINT ALLEGING BREACH OF A JOINT VENTURE AGREEMENT SHOULD HAVE BEEN DISMISSED, TWO ESSENTIAL ELEMENTS OF A JOINT VENTURE, SHARING COSTS AND CONTROL, WERE ABSENT (FIRST DEPT).

The First Department, reversing Supreme Court, determined the underlying breach of contract complaint should have been dismissed. Plaintiff alleged the contract created a joint venture. But the absence of an agreement to share costs and control precluded any finding that a joint venture had been formed by the contract:

In order to properly plead the existence of a joint venture agreement, a plaintiff must allege “acts manifesting the intent of the parties to be associated as joint venturers, mutual contribution to the joint undertaking through a combination of property, financial resources, effort, skill or knowledge, a measure of joint proprietorship and control over the enterprise, and a provision for the sharing of profits and losses”… . “An indispensable [element] of a contract of partnership or joint venture, both under common law and statutory law, is a mutual promise or undertaking of the parties to share in the profits of the business and submit to the burden of making good the losses” … .

Here, plaintiff fails to indicate the losses he would be jointly and severally liable for, and points to no provision in the alleged agreement for the sharing of any losses. Instead, there is nothing more than a conclusory allegation that any losses would be borne equally by the parties. To the contrary, the allegations in the complaint before us clearly state that any prospective losses were intended to be paid solely from defendant's share of the proceeds of the project. The failure to provide for the sharing of losses from the project is fatal to plaintiff's claim that a joint venture was created … .

Moreover, the complaint specifically alleged that management and control of the enterprise was to be completely vested in defendant, thus negating another element of a joint venture … . Slabakis v Schik, 2018 NY Slip Op 05962, First Dept 8-30-18

PARTNERSHIP LAW (JOINT VENTURE, COMPLAINT ALLEGING BREACH OF A JOINT VENTURE AGREEMENT SHOULD HAVE BEEN DISMISSED, TWO ESSENTIAL ELEMENTS OF A JOINT VENTURE, SHARING COSTS AND CONTROL, WERE ABSENT (FIRST DEPT))/CONTRACT LAW (JOINT VENTURE, COMPLAINT ALLEGING BREACH OF A JOINT VENTURE AGREEMENT SHOULD HAVE BEEN DISMISSED, TWO ESSENTIAL ELEMENTS OF A JOINT VENTURE, SHARING COSTS AND CONTROL, WERE ABSENT (FIRST DEPT))/JOINT VENTURE (COMPLAINT ALLEGING BREACH OF A JOINT VENTURE AGREEMENT SHOULD HAVE BEEN DISMISSED, TWO ESSENTIAL ELEMENTS OF A JOINT VENTURE, SHARING COSTS AND CONTROL, WERE ABSENT (FIRST DEPT))

August 30, 2018

Contract Law, Negligence

PLAINTIFF DID NOT ALLEGE OR DEMONSTRATE IN THE OPPOSING PAPERS THAT ANY OF THE ESPINAL EXCEPTIONS APPLIED TO DEFENDANT SNOW-REMOVAL CONTRACTOR IN THIS SLIP AND FALL CASE, DEFENDANT’S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the snow-removal contractor's (Critics Choice's) motion for summary judgment in this slip and fall case should have been granted. Because plaintiff did not allege a violation of any of the Espinal factors, Critics Choice's demonstration that plaintiff was not a party to the snow removal contract was sufficient to warrant summary judgment. In opposition, plaintiff did not raise a question of fact about any of the Espinal exceptions:

“A limited contractual undertaking to provide snow removal services generally does not render the contractor liable in tort for the personal injuries of third parties”… . Nevertheless, “[a] contractor may be held liable for injuries to a third party where, in undertaking to render services, the contractor entirely displaces the duty of the property owner to maintain the premises in a safe condition, the injured party relies on the contractor's continued performance under the agreement, or the contractor negligently creates or exacerbates a dangerous condition”… .

The Critics Choice defendants established their prima facie entitlement to judgment as a matter of law by demonstrating that the plaintiff was not a party to any snow removal contract … , and thus, they owed no duty of care to the plaintiff … . Since the plaintiff did not allege facts in his amended complaint or bill of particulars that would establish the possible applicability of any of the Espinal exceptions, the Critics Choice defendants, in establishing their prima facie entitlement to judgment as a matter of law, were not required to affirmatively demonstrate that these exceptions did not apply … . …

The plaintiff's conclusory contention that the Critics Choice defendants launched a force or instrument of harm by creating or exacerbating the icy condition that allegedly caused him to fall was insufficient to raise a triable issue of fact … . Laronga v Atlas-Suffolk Corp., 2018 NY Slip Op 05924, Second Dept 8-29-18

NEGLIGENCE (CONTRACT LAW, PLAINTIFF DID NOT ALLEGE OR DEMONSTRATE IN THE OPPOSING PAPERS THAT ANY OF THE ESPINAL EXCEPTIONS APPLIED TO DEFENDANT SNOW-REMOVAL CONTRACTOR IN THIS SLIP AND FALL CASE, DEFENDANT'S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))/CONTRACT LAW (NEGLIGENCE, PLAINTIFF DID NOT ALLEGE OR DEMONSTRATE IN THE OPPOSING PAPERS THAT ANY OF THE ESPINAL EXCEPTIONS APPLIED TO DEFENDANT SNOW-REMOVAL CONTRACTOR IN THIS SLIP AND FALL CASE, DEFENDANT'S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))/ESPINAL EXCEPTIONS (SNOW-REMOVAL CONTRACTOR, ONTRACT LAW, PLAINTIFF DID NOT ALLEGE OR DEMONSTRATE IN THE OPPOSING PAPERS THAT ANY OF THE ESPINAL EXCEPTIONS APPLIED TO DEFENDANT SNOW-REMOVAL CONTRACTOR IN THIS SLIP AND FALL CASE, DEFENDANT'S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))

August 29, 2018

Contract Law, Foreclosure

“NOTWITHSTANDING” CLAUSE IN THE ADDENDUM TO THE NOTE CONTROLS, THE ADDENDUM REQUIRED THAT THE MONTHLY PAYMENTS ON THE NOTE START BEFORE THE DATE DESCRIBED IN THE NOTE ITSELF (SECOND DEPT).

The Second Department determined the order and judgment of foreclosure was properly granted. The court explained that an addendum to the note, which included the phrase “notwithstanding anything to the contrary set forth in the Note,” controlled. Based on the language of the addendum, appellants were required to make monthly payments during the construction period. Appellants had argued that, under the terms of the Note, no payments were required until the construction was complete:

“[A] written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms” … . “Where the terms of an agreement are unambiguous, interpretation is a question of law for the court” … . “A written contract will be read as a whole, and every part will be interpreted with reference to the whole; and if possible it will be so interpreted as to give effect to its general purpose” … . It is important not to distort the meaning of a writing by placing “excessive emphasis . . . upon particular words or phrases” … .

Here, pursuant to the note, Todd Amus agreed that he would “pay interest beginning on the Permanent Loan Commencement Date,” i.e., January 1, 2010, and would “make these payments every month until [he had] paid all the principal and interest and any other charges” he might owe under the note. However, Todd Amus also executed the note addendum, which was incorporated into and “deemed to amend and supplement the Note,” and in which he agreed to its terms “[n]otwithstanding anything to the contrary set forth in the Note.” IndyMac Venture, LLC v Amus, 2018 NY Slip Op 05920, Second Dept 8-29-18

CONTRACT LAW (“NOTWITHSTANDING” CLAUSE IN THE ADDENDUM TO THE NOTE CONTROLS, THE ADDENDUM REQUIRED THAT THE MONTHLY PAYMENTS ON THE NOTE START BEFORE THE DATE DESCRIBED IN THE NOTE ITSELF (SECOND DEPT))/FORECLOSURE (“NOTWITHSTANDING” CLAUSE IN THE ADDENDUM TO THE NOTE CONTROLS, THE ADDENDUM REQUIRED THAT THE MONTHLY PAYMENTS ON THE NOTE START BEFORE THE DATE DESCRIBED IN THE NOTE ITSELF (SECOND DEPT))/NOTWITHSTANDING CLAUSE (CONTRACT LAW, “NOTWITHSTANDING” CLAUSE IN THE ADDENDUM TO THE NOTE CONTROLS, THE ADDENDUM REQUIRED THAT THE MONTHLY PAYMENTS ON THE NOTE START BEFORE THE DATE DESCRIBED IN THE NOTE ITSELF (SECOND DEPT))

August 29, 2018

Civil Procedure, Contract Law

SIX-MONTH CONTRACTUAL STATUTE OF LIMITATIONS EXPIRED BEFORE THE CLAIM ACCRUED AND WILL NOT BE ENFORCED TO PRECLUDE PAYMENT ON THE CLAIM (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Mazzarelli, reversing Supreme Court, determined that plaintiff's suit for payment on a contract was not precluded by the six-month statute of limitations in the contract. Plaintiff AWI contracted with defendant Whitestone to provide security at construction sites. Both Whitestone and AWI were named in a prevailing wage class action commenced by AWI workers. Whitestone, pursuant to a contractual provision, refused to pay AWI until the wage action was resolved. The case was not resolved within the six-month limitations period:

[AWI argues] on appeal that the contractual limitations provision is unenforceable because it enables the scenario where, even though a claim has not accrued by the time six months have passed since the last time physical work was performed, it is still time-barred. AWI is essentially arguing that, in light of Whitestone's stated position that payment was not due to AWI until such time as the Wage Action was resolved, it should not have been subjected to the “catch-22” of having to file a lawsuit to toll the statute of limitations where the claim was not yet ripe for adjudication. AWI analogizes to Executive Plaza, LLC v Peerless Ins. Co. (22 NY3d 511 [2014]). In that case, the defendant insurer issued a fire policy to the plaintiff insured which required the plaintiff to commence suit under the policy within two years of a fire. The policy further required the plaintiff, if seeking to recover replacement cost, to forbear on making any such claim until the property had actually been replaced. When the plaintiff's property burned down, it diligently acted to replace the property, but it recognized that the process would take more than two years. In an effort to protect its rights, it commenced an action on the two-year anniversary of the fire. The defendant successfully moved to dismiss the action as premature. When the replacement was complete, the plaintiff commenced a new action. The defendant removed the action to federal district court and moved to dismiss on statute of limitations grounds. After the court granted the motion, the Second Circuit certified a question to the Court of Appeals asking whether the limitations period was enforceable.

The Court of Appeals held that it was not. While recognizing the inherent reasonableness of contractually truncated statutes of limitations, the Court held that “[a] limitation period' that expires before suit can be brought is not really a limitation period at all, but simply a nullification of the claim” … . * * *

.. [W]we find that, under the circumstances, the limitations period cannot serve to bar AWI's claim … . AWI Sec. & Investigators, Inc. v Whitestone Constr. Corp., 2018 NY Slip Op 05907, First Dept 8-23-18

CIVIL PROCEDURE (SIX-MONTH CONTRACTUAL STATUTE OF LIMITATIONS EXPIRED BEFORE THE CLAIM ACCRUED AND WILL NOT BE ENFORCED TO PRECLUDE PAYMENT ON THE CLAIM (FIRST DEPT))/STATUTE OF LIMITATIONS (CONTRACT LAW, SIX-MONTH CONTRACTUAL STATUTE OF LIMITATIONS EXPIRED BEFORE THE CLAIM ACCRUED AND WILL NOT BE ENFORCED TO PRECLUDE PAYMENT ON THE CLAIM (FIRST DEPT))/CONTRACT LAW (STATUTE OF LIMITATIONS, SIX-MONTH CONTRACTUAL STATUTE OF LIMITATIONS EXPIRED BEFORE THE CLAIM ACCRUED AND WILL NOT BE ENFORCED TO PRECLUDE PAYMENT ON THE CLAIM (FIRST DEPT))

August 23, 2018

Civil Procedure, Contract Law, Fraud, Real Estate

REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF THE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT).

The Second Department, modifying Supreme Court, determined defendant's motion to dismiss causes of action for specific performance and reformation of a real estate purchase contract should have been granted. However the motion to dismiss the fraudulent misrepresentation cause of action was properly denied. The Second Department determined the limitation of remedies in the real estate contract constituted documentary evidence justifying dismissal pursuant to CPLR 3211(a)(1). The requirements for sufficiently pleading a cause of action for fraudulent misrepresentation were explained as well:

“To succeed on a motion to dismiss based upon documentary evidence 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” … . “An unambiguous contract provision may qualify as documentary evidence under CPLR 3211(a)(1)” … . Here, the parties' contract, which limited the plaintiff's remedies in the event that the defendants were unable to clear defects in title, established a complete defense as a matter of law to the first and third causes of action, seeking specific performance and reformation of the contract based upon mutual mistake, respectively … . …

Where a cause of action is based on a misrepresentation or fraud, “the circumstances constituting the wrong shall be stated in detail” (CPLR 3016[b]). Here, the complaint sufficiently stated a cause of action to recover damages for fraudulent misrepresentation by alleging that the defendants misrepresented that they owned 42-55 27th Street and had the right to convey it, that they made this representation despite knowing that it was false, and that the plaintiff reasonably relied upon the representation to his detriment. Hiu Ian Cheng v Salguero, 2018 NY Slip Op 05831, Second Dept 8-22-18

CIVIL PROCEDURE (MOTION TO DISMISS ON DOCUMENTARY EVIDENCE, REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF A REAL ESTATE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT))/CPLR 3211 (MOTION TO DISMISS ON DOCUMENTARY EVIDENCE, REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF A REAL ESTATE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT))/CONTRACT LAW (MOTION TO DISMISS ON DOCUMENTARY EVIDENCE, REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF A REAL ESTATE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT))/REAL ESTATE (MOTION TO DISMISS ON DOCUMENTARY EVIDENCE, REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF A REAL ESTATE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT))/FRAUD (MOTION TO DISMISS ON DOCUMENTARY EVIDENCE, REAL ESTATE CONTRACT LIMITING REMEDIES CONSTITUTED DOCUMENTARY EVIDENCE SUFFICIENT TO WARRANT DISMISSAL OF CAUSES OF ACTION FOR SPECIFIC PERFORMANCE AND REFORMATION OF A REAL ESTATE PURCHASE CONTRACT, PLEADING REQUIREMENTS FOR FRAUDULENT MISREPRESENTATION EXPLAINED (SECOND DEPT))

August 22, 2018

Contract Law, Negligence

DEFENDANT WHICH BUILT THE SWIMMING POOL, DEFENDANT WHICH INSTALLED THE POOL LINER, AND DEFENDANT OWNERS OF THE POOL, WERE NOT ENTITLED TO SUMMARY JUDGMENT IN THIS SWIMMING POOL INJURY CASE, PLAINTIFF WAS INJURED WHEN HE DOVE IN AND STRUCK HIS CHIN IN A SHALLOW AREA (SECOND DEPT).

The Second Department determined defendants' motions for summary judgment in this swimming pool injury case was properly denied. Plaintiff was injured when he dove into the pool allegedly unaware of a shallow area near the deep area. The builder of the pool and the installer of the pool liner (the Bertolino defendants), as well as the owners of the pool (the Olsen defendants), were sued. The Bertolino defendants could be liable based upon their contracts with the owners because it was alleged the pool was negligently designed and constructed by them. There also was a question of fact whether the condition was readily observable (raising the duty to protect or warn on the part of the owners):

With respect to the Bertolino defendants, generally, a contractual obligation of a third party does not give rise to liability in tort to persons not a party to the contract… . An exception exists, however, where the contractor created a dangerous condition or increased the risk of harm to others in its undertaking … . Here, the plaintiff's allegation that the Bertolino defendants negligently designed and constructed the subject pool by incorporating the allegedly dangerous condition falls within this exception … . Moreover, the Bertolino defendants failed to establish, prima facie, that the alleged condition was not dangerous or that it did not unreasonably increase the risk of harm to those diving off the side of the pool, even though, as their expert opined, it was located outside the “diving water envelope,” which the expert described as the “area without constructed intrusions” … . …

As to the Olsen defendants, “[t]he owner of a private residential swimming pool has a duty to maintain the pool in a reasonably safe condition in view of all the circumstances, including the likelihood of injury to others, the seriousness of the injury and the burden of avoiding the risk” … . “What accidents are reasonably foreseeable, and what preventive measures should reasonably be taken, are ordinarily questions of fact” … . However, there is no duty to protect or warn of conditions that are not inherently dangerous and that are readily observable by the reasonable use of one's senses … . Here, the Olsen defendants, who did not deny notice of the allegedly dangerous condition, failed to establish, prima facie, that the condition at issue was not inherently dangerous and that it was readily observable by the reasonable use of one's senses … . Grosse v Olsen, 2018 NY Slip Op 05829. second Dept 8-22-18

NEGLIGENCE (SWIMMING POOL, DEFENDANT WHICH BUILT THE SWIMMING POOL, DEFENDANT WHICH INSTALLED THE POOL LINER, AND DEFENDANT OWNERS OF THE POOL, WERE NOT ENTITLED TO SUMMARY JUDGMENT IN THIS SWIMMING POOL INJURY CASE, PLAINTIFF WAS INJURED WHEN HE DOVE IN AND STRUCK HIS CHIN IN A SHALLOW AREA (SECOND DEPT))CONTRACT LAW (TORT LIABILITY TO NON-PARTY, SWIMMING POOL, DEFENDANT WHICH BUILT THE SWIMMING POOL, DEFENDANT WHICH INSTALLED THE POOL LINER, AND DEFENDANT OWNERS OF THE POOL, WERE NOT ENTITLED TO SUMMARY JUDGMENT IN THIS SWIMMING POOL INJURY CASE, PLAINTIFF WAS INJURED WHEN HE DOVE IN AND STRUCK HIS CHIN IN A SHALLOW AREA (SECOND DEPT))/SWIMMING POOLS (NEGLIGENCE, CONTRACT LAW, DEFENDANT WHICH BUILT THE SWIMMING POOL, DEFENDANT WHICH INSTALLED THE POOL LINER, AND DEFENDANT OWNERS OF THE POOL, WERE NOT ENTITLED TO SUMMARY JUDGMENT IN THIS SWIMMING POOL INJURY CASE, PLAINTIFF WAS INJURED WHEN HE DOVE IN AND STRUCK HIS CHIN IN A SHALLOW AREA (SECOND DEPT))

August 22, 2018

Contract Law, Insurance Law

BUSINESS PURSUITS EXCLUSION IN THE HOMEOWNER’S INSURANCE POLICY DID NOT APPLY BECAUSE THE FIRE WOULD HAVE OCCURRED IRRESPECTIVE OF THE OPERATION OF THE BUSINESS, A RESPITE HOME FOR ELDERLY AND SPECIAL NEEDS ADULTS, THREE OF THE RESIDENTS DIED IN THE FIRE STARTED BY CHILDREN PLAYING IN THE GARAGE (THIRD DEPT)

The Third Department determined that an exclusion in defendant-insurer's policy applied and coverage for the death's of three residents of a respite home for the elderly and special needs adults should not have been disclaimed. The respite home was a private residence. The homeowners' son, who was 11, and other children, were playing with a gas grill in the garage and a fire started, killing the three residents. Although the policy excluded coverage for business-related injuries, incidents that would have occurred irrespective of the presence of the business were covered:

It is undisputed that the act of the insureds' son and the other children in playing with the gas grill lighter and accelerants was the impetus for the fire. Although the insureds' negligence in operating their business — i.e., the failure to have an adequate fire evacuation plan — may have been a contributing cause of decedents' deaths, it cannot be said as matter of law that the fire also was not a contributing cause. In other words, the fire would have occurred regardless of the insureds' business operations, thereby rendering the exception to the business pursuits exclusion applicable. Because the record discloses that decedents' deaths were not caused solely by acts that fell wholly within the business pursuits exclusion, defendant cannot escape its indemnity obligations with respect to decedents' deaths … . Waddy v Genessee Patrons Coop. Ins. Co., 2018 NY Slip Op 05794, Third Dept 8-15-18

INSURANCE LAW (BUSINESS PURSUITS EXCLUSION IN THE INSURANCE POLICY DID NOT APPLY BECAUSE THE FIRE WOULD HAVE OCCURRED IRRESPECTIVE OF THE OPERATION OF THE BUSINESS, A RESPITE HOME FOR ELDERLY AND SPECIAL NEEDS ADULTS, THREE OF THE RESIDENTS DIED IN THE FIRE STARTED BY CHILDREN PLAYING IN THE GARAGE (THIRD DEPT))/BUSINESS PURSUITS EXCLUSION (INSURANCE LAW, BUSINESS PURSUITS EXCLUSION IN THE INSURANCE POLICY DID NOT APPLY BECAUSE THE FIRE WOULD HAVE OCCURRED IRRESPECTIVE OF THE OPERATION OF THE BUSINESS, A RESPITE HOME FOR ELDERLY AND SPECIAL NEEDS ADULTS, THREE OF THE RESIDENTS DIED IN THE FIRE STARTED BY CHILDREN PLAYING IN THE GARAGE (THIRD DEPT))/CONTRACT LAW (INSURANCE LAW, BUSINESS PURSUITS EXCLUSION IN THE INSURANCE POLICY DID NOT APPLY BECAUSE THE FIRE WOULD HAVE OCCURRED IRRESPECTIVE OF THE OPERATION OF THE BUSINESS, A RESPITE HOME FOR ELDERLY AND SPECIAL NEEDS ADULTS, THREE OF THE RESIDENTS DIED IN THE FIRE STARTED BY CHILDREN PLAYING IN THE GARAGE (THIRD DEPT))

August 16, 2018

Attorneys, Civil Procedure, Contract Law, Family Law

HUSBAND’S ATTORNEY SHOULD NOT HAVE BEEN DISQUALIFIED ON THE GROUND SHE WOULD BE A WITNESS FOR THE WIFE, PLENARY ACTION SEEKING TO SET ASIDE A PRENUPTIAL AGREEMENT PROPERLY JOINED WITH DIVORCE ACTION, INTERIM ATTORNEY’S FEES NOT AVAILABLE FOR THE ACTION TO SET ASIDE THE PRENUPTIAL AGREEMENT (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined (1) husband's counsel should not have been disqualified on the ground she would be a witness, (2) the plenary action seeking to set aside the prenuptial agreement on grounds of duress, coercion, undue influence and unconscionabiltiy is properly joined with the divorce action, (3) and interim attorney's fees are not available for the action to set aside the prenuptial agreement:

Rule 3.7 of the Rules of Professional Conduct… provides that, unless certain exceptions apply, “[a] lawyer shall not act as advocate before a tribunal in a matter in which the lawyer is likely to be a witness on a significant issue of fact” … . In order to disqualify counsel on the ground that he or she may be called as a witness, a party moving for disqualification must demonstrate that (1) the testimony of the opposing party's counsel is necessary to his or her case, and (2) such testimony would be prejudicial to the opposing party… . Here, the wife failed to demonstrate that [the attorney's] testimony will be necessary to her case … . …

“The trial court has broad discretion in determining whether to order consolidation”(… see CPLR 602[a]). The interests of justice and judicial economy are better served by consolidation or a joint trial in those cases where the actions share material questions of law or fact … . A motion to consolidate or join for trial should be granted absent a showing of prejudice to a substantial right by a party opposing the motion … . …

The Supreme Court should not have awarded the wife interim counsel fees in the sum of $10,000 pursuant to Domestic Relations Law § 237, as that statute does not permit the recovery of fees for legal work performed on nonmatrimonial matters, including where, as here, a party seeks an award of counsel fees incurred in an action to set aside a prenuptial agreement … . Lombardi v Lombardi, 2018 NY Slip Op 05758, Second Dept 8-15-18

FAMILY LAW (HUSBAND'S ATTORNEY SHOULD NOT HAVE BEEN DISQUALIFIED ON THE GROUND SHE WOULD BE A WITNESS FOR THE WIFE, PLENARY ACTION SEEKING TO SET ASIDE A PRENUPTIAL AGREEMENT PROPERLY JOINED WITH DIVORCE ACTION, INTERIM ATTORNEY'S FEES NOT AVAILABLE FOR THE ACTION TO SET ASIDE THE PRENUPTIAL AGREEMENT (SECOND DEPT))/ATTORNEYS (FAMILY LAW, HUSBAND'S ATTORNEY SHOULD NOT HAVE BEEN DISQUALIFIED ON THE GROUND SHE WOULD BE A WITNESS FOR THE WIFE, PLENARY ACTION SEEKING TO SET ASIDE A PRENUPTIAL AGREEMENT PROPERLY JOINED WITH DIVORCE ACTION, INTERIM ATTORNEY'S FEES NOT AVAILABLE FOR THE ACTION TO SET ASIDE THE PRENUPTIAL AGREEMENT (SECOND DEPT))/CIVIL PROCEDURE (HUSBAND'S ATTORNEY SHOULD NOT HAVE BEEN DISQUALIFIED ON THE GROUND SHE WOULD BE A WITNESS FOR THE WIFE, PLENARY ACTION SEEKING TO SET ASIDE A PRENUPTIAL AGREEMENT PROPERLY JOINED WITH DIVORCE ACTION, INTERIM ATTORNEY'S FEES NOT AVAILABLE FOR THE ACTION TO SET ASIDE THE PRENUPTIAL AGREEMENT (SECOND DEPT))/CPLR 602 (HUSBAND'S ATTORNEY SHOULD NOT HAVE BEEN DISQUALIFIED ON THE GROUND SHE WOULD BE A WITNESS FOR THE WIFE, PLENARY ACTION SEEKING TO SET ASIDE A PRENUPTIAL AGREEMENT PROPERLY JOINED WITH DIVORCE ACTION, INTERIM ATTORNEY'S FEES NOT AVAILABLE FOR THE ACTION TO SET ASIDE THE PRENUPTIAL AGREEMENT (SECOND DEPT))/CONTRACT LAW (PRENUPTIAL AGREEMENT, HUSBAND'S ATTORNEY SHOULD NOT HAVE BEEN DISQUALIFIED ON THE GROUND SHE WOULD BE A WITNESS FOR THE WIFE, PLENARY ACTION SEEKING TO SET ASIDE A PRENUPTIAL AGREEMENT PROPERLY JOINED WITH DIVORCE ACTION, INTERIM ATTORNEY'S FEES NOT AVAILABLE FOR THE ACTION TO SET ASIDE THE PRENUPTIAL AGREEMENT (SECOND DEPT))/PRENUPTIAL AGREEMENT (HUSBAND'S ATTORNEY SHOULD NOT HAVE BEEN DISQUALIFIED ON THE GROUND SHE WOULD BE A WITNESS FOR THE WIFE, PLENARY ACTION SEEKING TO SET ASIDE A PRENUPTIAL AGREEMENT PROPERLY JOINED WITH DIVORCE ACTION, INTERIM ATTORNEY'S FEES NOT AVAILABLE FOR THE ACTION TO SET ASIDE THE PRENUPTIAL AGREEMENT (SECOND DEPT))

August 15, 2018

Contract Law, Foreclosure, Real Estate, Real Property Law

DESPITE THE TERMS OF THE REAL PROPERTY PURCHASE CONTRACT, WHICH PURPORTED TO REQUIRE THE DEFENDANT PURCHASER TO FORFEIT ALL MONTHLY PAYMENTS WHICH HAD BEEN MADE AND VACATE THE PROPERTY UPON DEFAULT, DEFENDANT HAD ACQUIRED EQUITABLE TITLE TO THE PROPERTY, PLAINTIFFS’ ONLY AVAILABLE REMEDIES ARE TO BRING AN ACTION TO FORECLOSE OR AN ACTION FOR THE PURCHASE PRICE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that plaintiffs, who had effectively taken back a mortgage on property sold to defendant, could not enforce the purchase contract which purported to declare the contract null and void and require the defendant to vacate the property upon default. Defendant, by making substantial monthly payments pursuant to the contract, had acquired equitable title to the property. Plaintiffs only available remedies are foreclosure or an action at law for the purchase price:

A rider to the [purchase] contract contained a provision providing that in the event the defendant defaulted in making payments under the contract and failed to cure, and that said default resulted in the plaintiffs' inability to pay an existing mortgage on the property, the defendant forfeited all monies paid as liquidated damages, the contract was deemed null and void, and the premises were to be vacated in good condition. * * *

“The execution of a contract for the purchase of real estate and the making of a partial payment gives the contract vendee equitable title to the property” … . “[T]he vendor merely holds the legal title in trust for the vendee, subject to the vendor's equitable lien for the payment of the purchase price in accordance with the terms of the contract” … . Accordingly, the vendee under a land sale contract has acquired an interest in the property that must be extinguished before the vendor can resume possession, notwithstanding whether a provision in the contract provides that in the event of the vendee's uncured default in payment, the vendor has the right to declare the contract terminated and repossess the premises… . A vendor may not enforce his rights by an action in ejectment, but must instead proceed to foreclose the vendee's equitable title or bring an action at law for the purchase price … .

The defendant, having executed a contract for the purchase of property from the plaintiffs, and having made substantial payments to the plaintiffs pursuant to the contract, held equitable title to the property… . Under these circumstances, upon the defendant's default in making payments under the contract, the plaintiffs could not seek relief pursuant to the provision of the rider that provided for the contract to be deemed null and void, the premises vacated, and the defendant to forfeit all monies paid as liquidated damages. The plaintiffs were required to proceed to foreclose the defendant's equitable title or bring an action at law for the purchase price … . Russell v Pisana, 2018 NY Slip Op 05789, Second Dept 8-15-18

FORECLOSURE (DESPITE THE TERMS OF THE REAL PROPERTY PURCHASE CONTRACT, WHICH PURPORTED TO REQUIRE THE DEFENDANT PURCHASER TO FORFEIT ALL MONTHLY PAYMENTS WHICH HAD BEEN MADE AND VACATE THE PROPERTY UPON DEFAULT, DEFENDANT HAD ACQUIRED EQUITABLE TITLE TO THE PROPERTY, PLAINTIFFS' ONLY AVAILABLE REMEDIES ARE TO BRING AN ACTION TO FORECLOSE OR AN ACTION FOR THE PURCHASE PRICE (SECOND DEPT))/REAL PROPERTY LAW (DESPITE THE TERMS OF THE REAL PROPERTY PURCHASE CONTRACT, WHICH PURPORTED TO REQUIRE THE DEFENDANT PURCHASER TO FORFEIT ALL MONTHLY PAYMENTS WHICH HAD BEEN MADE AND VACATE THE PROPERTY UPON DEFAULT, DEFENDANT HAD ACQUIRED EQUITABLE TITLE TO THE PROPERTY, PLAINTIFFS' ONLY AVAILABLE REMEDIES ARE TO BRING AN ACTION TO FORECLOSE OR AN ACTION FOR THE PURCHASE PRICE (SECOND DEPT))/REAL ESTATE (DESPITE THE TERMS OF THE REAL PROPERTY PURCHASE CONTRACT, WHICH PURPORTED TO REQUIRE THE DEFENDANT PURCHASER TO FORFEIT ALL MONTHLY PAYMENTS WHICH HAD BEEN MADE AND VACATE THE PROPERTY UPON DEFAULT, DEFENDANT HAD ACQUIRED EQUITABLE TITLE TO THE PROPERTY, PLAINTIFFS' ONLY AVAILABLE REMEDIES ARE TO BRING AN ACTION TO FORECLOSE OR AN ACTION FOR THE PURCHASE PRICE (SECOND DEPT))/CONTRACT LAW (REAL ESTATE, DESPITE THE TERMS OF THE REAL PROPERTY PURCHASE CONTRACT, WHICH PURPORTED TO REQUIRE THE DEFENDANT PURCHASER TO FORFEIT ALL MONTHLY PAYMENTS WHICH HAD BEEN MADE AND VACATE THE PROPERTY UPON DEFAULT, DEFENDANT HAD ACQUIRED EQUITABLE TITLE TO THE PROPERTY, PLAINTIFFS' ONLY AVAILABLE REMEDIES ARE TO BRING AN ACTION TO FORECLOSE OR AN ACTION FOR THE PURCHASE PRICE (SECOND DEPT))

August 15, 2018

Contract Law, Employment Law

COVENANT NOT TO COMPETE WHICH EFFECTIVELY PRECLUDED DEFENDANT SURGEON FROM PRACTICING MEDICINE IN METROPOLITAN NEW YORK WAS INVALIDATED, ARGUMENT FOR PARTIAL ENFORCEMENT REJECTED, CRITERIA EXPLAINED (SECOND DEPT).

The Second Department determined a covenant not to compete which prohibited defendant surgeon from practicing within a ten-mile radius of his former employer was unreasonable and was properly invalidated. The argument that the covenant should be partially enforced was rejected as well:

“Agreements restricting an individual’s right to work or compete are not favored and thus are strictly construed” … ” [A] restrictive covenant will only be subject to specific enforcement to the extent that it is reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee'” … . The determination of whether a restrictive covenant is reasonable involves the application of a three-pronged test. “A restraint is reasonable only if it: (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public” … . The “violation of any prong renders the covenant invalid” … . “With agreements not to compete between professionals . . . [courts] have given greater weight to the interests of the employer in restricting competition within a confined geographical area” … . That said, “the application of the test of reasonableness of employee restrictive covenants focuses on the particular facts and circumstances giving context to the agreement” … . “The rationale for the differential application of the common-law rule of reasonableness . . . was that professionals are deemed to provide unique or extraordinary'” services … .

Here, the defendants made a prima facie showing that the provision of the covenant prohibiting Andrade for a period of two years from practicing surgery of any kind, within a 10-mile radius of all of the plaintiff’s offices and affiliated hospitals, even those at which he had never worked, was geographically unreasonable, because it effectively barred him from performing surgery, his chosen field of medicine, in the New York metropolitan area … . …

Contrary to the plaintiff’s contention, the Supreme Court did not err in declining to modify the covenant rather than invalidating it. The determination of whether an overly broad restrictive covenant should be enforced to the extent necessary to protect an employer’s legitimate interest involves “a case specific analysis, focusing on the conduct of the employer in imposing the terms of the agreement” … . Partial enforcement may be justified if an employer demonstrates, in addition to having a legitimate business interest, “an absence of overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct” … . “Factors weighing against partial enforcement are the imposition of the covenant in connection with hiring or continued employment—as opposed to, for example, imposition in connection with a promotion to a position of responsibility and trust—the existence of coercion or a general plan of the employer to forestall competition, and the employer’s knowledge that the covenant was overly broad”… . Long Is. Minimally Invasive Surgery, P.C. v St. John’s Episcopal Hosp., 2018 NY Slip Op 05674, Second Dept 8-8-18

EMPLOYMENT LAW (COVENANT NOT TO COMPETE WHICH EFFECTIVELY PRECLUDED DEFENDANT SURGEON FROM PRACTICING MEDICINE IN METROPOLITAN NEW YORK WAS INVALIDATED, ARGUMENT FOR PARTIAL ENFORCEMENT REJECTED, CRITERIA EXPLAINED (SECOND DEPT))/CONTRACT LAW (EMPLOYMENT LAW, COVENANT NOT TO COMPETE WHICH EFFECTIVELY PRECLUDED DEFENDANT SURGEON FROM PRACTICING MEDICINE IN METROPOLITAN NEW YORK WAS INVALIDATED, ARGUMENT FOR PARTIAL ENFORCEMENT REJECTED, CRITERIA EXPLAINED (SECOND DEPT))/COVENANT NOT TO COMPETE (EMPLOYMENT LAW, COVENANT NOT TO COMPETE WHICH EFFECTIVELY PRECLUDED DEFENDANT SURGEON FROM PRACTICING MEDICINE IN METROPOLITAN NEW YORK WAS INVALIDATED, ARGUMENT FOR PARTIAL ENFORCEMENT REJECTED, CRITERIA EXPLAINED (SECOND DEPT))

August 8, 2018