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Son of Sam Law Required Murderer’s Police Pension Be Paid to Daughter and Estate of the Murder Victim

The Second Department determined that the “Son of Sam Law” required that the pension to which a convicted murderer was entitled be paid to the estate of the murder victim.  The plaintiff is the daughter of the murder victim.  The murderer is plaintiff’s father. The father fraudulently transferred his pension rights to his second wife.  Plaintiff, individually and as the administrator of her mother’s estate, procured a wrongful death judgment against her father. The court affirmed Supreme Court’s ruling that the transfer of the pension to the father’s second wife was fraudulent under Florida law (where the transfer was made) and the “Son of Sam Law” trumped the Retirement and Social Security Law such that the father’s pension was payable to the plaintiff:

“Under the full faith and credit clause . . . , where collateral attack on the ground of fraud would be permitted in the courts of the foreign State in which the judgment had been rendered, our courts will entertain a similar challenge” … . Here, Florida law permits a collateral attack on the defendant’s transfer of his pension to [second wife] on the ground that it constituted a fraudulent transfer … . * * *

Next, we reject [the second wife’s] contention that the defendant’s pension is not subject to execution or attachment by virtue of section 110(2) of the Retirement and Social Security Law or under certain provisions of the Administrative Code of the City of New York (see Administrative Code of City of NY §§ 13-181, 13-212, 13-264). As [the second wife] correctly contends, section 110(2) of the Retirement and Social Security Law provides that the right of a person to a pension “[s]hall not be subject to execution, garnishment, attachment, or any other process whatsoever” (Retirement and Social Security Law § 110[2]). In 2001, however, the Legislature amended the Son of Sam law to subject the “[f]unds of a convicted person” to an action for damages by a crime victim, a crime victim’s representative, or certain other persons (L 2001, ch 62, § 1; see Executive Law § 632 a[1][a], [c], [d]; [3]). The phrase “funds of a convicted person” was broadly defined as “all funds and property received from any source” (Executive Law § 632 a[1][c] [emphasis added]).

We conclude, for the reasons stated by our colleagues in the Appellate Division, [3rd] Department [97 AD3d 235]…, that the defendant’s pension is subject to execution under the Son of Sam law. Both the clear statutory language and the legislative history of the 2001 amendments to the Son of Sam law evince the Legislature’s intent to permit crime victims to recover assets from convicted persons, including pensions, regardless of the source of the convicted person’s funds … . As the [3rd] Department concluded, a contrary holding would “directly thwart[ ] the Legislature’s stated intent of holding convicted criminals financially … . Kane v Galtiere, 2014 NY Slip Op 07476, 2nd Dept 11-5-14

 

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Post-Judgment Restraining Order Served On a New York Branch of a Foreign Bank, Pursuant to the Separate Entity Rule, Cannot Extend to Assets Held in Branches of the Bank Which Are Outside of New York

The Court of Appeals, in a full-fledged opinion by Judge Graffeo, over a dissenting opinion, answering a certified question from the Second Circuit, determined the “separate entity” rule prohibited a restraining order served on a New York branch of a bank from extending to assets in other branches of the bank which are outside New York.  Here a restraining order was served on a New York Branch of a foreign bank headquarted in the United Kingdom and the plaintiff sought to apply the restraining order to $30 million held in a branch of that bank in the United Arab Emirates:

The separate entity rule, as it has been employed by lower New York courts and federal courts applying New York law, provides that even when a bank garnishee with a New York branch is subject to personal jurisdiction, its other branches are to be treated as separate entities for certain purposes, particularly with respect to CPLR article 62 prejudgment attachments and article 52 postjudgment restraining notices and turnover orders. In other words, a restraining notice or turnover order served on a New York branch will be effective for assets held in accounts at that branch but will have no impact on assets in other branches… . * * *

In large measure, the underlying reasons that led to the adoption of the separate entity rule still ring true today. The risk of competing claims and the possibility of double liability in separate jurisdictions remain significant concerns, as does the reality that foreign branches are subject to a multitude of legal and regulatory regimes. By limiting the reach of a CPLR 5222 restraining notice in the foreign banking context, the separate entity rule promotes international comity and serves to avoid conflicts among competing legal systems … . And although Motorola suggests that technological advancements and centralized banking have ameliorated the need for the doctrine, courts have continued to recognize the practical constraints and costs associated with conducting a worldwide search for a judgment debtor's assets … . Motorola Credit Corp v Standard Chartered Bank, 2014 NY Slip Op 07199, CtApp 10-23-14

 

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Insufficient Proof of an Agreement to Assume a Mortgage at the Time Deed Transferred

The Second Department determined that the writings were insufficient to demonstrate the grantee agreed to assume a mortgage at the time the deed was transferred:

General Obligations Law § 5-705 provides, in relevant part, that “[n]o grantee of real property shall be liable upon any indebtedness secured by a mortgage” unless, “simultaneously with the conveyance,” the grantee executes a writing before a notary agreeing to assume and pay the mortgage debt. Here, it is clear from the allegations in the complaint and attached exhibits that the defendants did not execute a notarized written agreement to assume the mortgage allegedly held by the plaintiff at the time the properties were conveyed … . Thus, General Obligations Law § 5-705 bars the plaintiff from recovering on the theory that the defendants agreed to assume his existing mortgage on the properties as alleged in the complaint. Furthermore, [recovery] is also barred by the statute of frauds because an agreement to answer for the debt of another must be in writing (see General Obligations Law § 5-701[a][2]). Contrary to the plaintiff’s contention, the various writings attached to the complaint, taken together, were insufficient to memorialize the existence of an agreement … . Dahan v Weiss, 2014 NY Slip Op 05767, 2nd Dept 8-13-14

 

Purchaser of Mortgage Was Not a “Bona Fide Encumbrancer”—Another Previously Filed Mortgage Was the Operative Mortgage

The Second Department determined Deutsche Bank did not “win the race” to the recording office (so as to cut off another filed mortgage) and was not a “bona fide encumbrancer” because the person living in the mortgaged premises and paying taxes on the property was not consistent with Deutsche Bank’s mortgage:

“[T]o cut off a prior lien, such as a mortgage, the purchaser must have no knowledge of the outstanding lien and win the race to the recording office” … . * * *

” [W]here a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with [what] he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser'” … . “Similarly, a mortgagee is under a duty to make an inquiry where it is aware of facts that would lead a reasonable, prudent lender to make inquiries of the circumstances of the transaction at issue'” … . ” Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish'” … . Mortgage Elec Registration Sys Inc v Pagan, 2014 NY Slip Op 05309, 2nd Dept 7-16-14

 

Attributes of Equitable Mortgage Explained

In affirming the denial of plaintiff’s motion for summary judgment based upon allegations of the existence of an equitable mortgage, the Fourth Department explained the attributes of an equitable mortgage:

“Equity generally will keep an encumbrance alive, or consider it extinguished, as will best serve the purposes of justice’ ” … . “The whole doctrine of equitable mortgages is founded upon [the] cardinal maxim of equity which regards that as done which has been agreed to be done, and ought to have been done” … .

” [A]n equitable mortgage may be constituted by any writing from which the intention so to do may be gathered, and an attempt to make a legal mortgage, which fails for the want of some solemnity, is valid in equity’ ” … . “While [a] court will impose an equitable mortgage where the facts surrounding a transaction evidence that the parties intended that a specific piece of property is to be held or transferred to secure an obligation’ . . . , it is necessary that an intention to create such a charge clearly appear from the language and the attendant circumstances’ ” . .. . Canandaigua Natl Bank & Trust Co v Palmer, 2014 NY Slip Op 05263, 4th Dept 7-11-14

 

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All Ambiguities Re: Letters of Credit Resolved Against the Issuer—“Independence Principle” Applied—Beneficiaries of Letters of Credit Entitled to Payment

In a full-fledged opinion by Justice Andrias, the First Department reversed Supreme Court and determined plaintiffs were entitled to payment as beneficiaires of irrevocable standby letters of credit.  The opinion is detailed and meticulously resolved all ambiguities in the relevant documents against the issuer of the letters of credit.  The opinion includes an extended discussion of the “independence principle” in this context.  With respect to the basic analytical principles to be applied, the court wrote:

Under New York law, in order to recover on its claim that the issuer wrongfully refused to honor its request to draw down on a letter of credit, the beneficiary must prove that it strictly complied with the terms of the letter of credit … . “The corollary to the rule of strict compliance is that the requirements in letters of credit must be explicit, and that all ambiguities are construed against the [issuer]” … . The reasoning is that “[s]ince the beneficiary must comply strictly with the requirements of the letter, it must know precisely and unequivocally what those requirements are” … . “Where a letter of credit is fairly susceptible of two constructions, one of which makes it fair, customary and one which prudent men would naturally enter into, while the other makes it inequitable, the former interpretation must be preferred to the latter, and a construction rendering the contract possible of performance will be preferred to one which renders its performance impossible or meaningless” … . * * *

In November 2000, the independence principle was codified in a general revision of article 5 of the UCC. UCC 5—103(d) now provides that:

“[r]ights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.”

The doctrine of independent contracts, as codified in UCC article 5, allows the letter of credit to provide ” a quick, economic and trustworthy means of financing transactions for parties not willing to deal on open accounts'”… . “Only staunch recognition of this principle by the issuers and the courts will give letters of credit the continuing vitality that arises from the certainty and speed of payment under letters of credit” … .BasicNet SpA v CFP Servs Ltd, 2014 NY Slip Op 04585, 1st Dept 6-19-14

 

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Accelerated Relief Pursuant to CPLR 3213 (Judgment In Lieu of Complaint) Should Not Have Been Granted—the Document at Issue Did Not Include a Promise to Pay On Demand or at a Definite Time

The Second Department determined Supreme Court should not have granted accelerated relief pursuant to CPLR 3213 because the document describing the loan did not include a provision requiring payment on demand or at a definite time:

Pursuant to CPLR 3213, a party may obtain accelerated relief by moving for summary judgment in lieu of complaint, provided that the action is “based upon an instrument for the payment of money only or upon any judgment” (CPLR 3213…). “A promissory note is an instrument for the payment of money only, provided that it contains an unconditional promise by the borrower to pay the lender over a stated period of time” … . An instrument does not qualify for accelerated relief under CPLR 3213 “if outside proof is needed, other than simple proof of nonpayment or a similar de minimis deviation from the face of the document” … .

Therefore, a plaintiff makes a prima facie showing of entitlement to judgment as a matter of law pursuant to CPLR 3213 by showing that the defendant executed the subject instrument, the instrument contains an unconditional promise to repay the plaintiff upon demand or at a definite time, and the defendant failed to pay in accordance with the instrument’s terms … .

Here, the record does not support the Supreme Court’s determination that the Document reflects the defendant’s unconditional promise to repay the borrowed sum upon demand or at definite time … . Von Fricken v Schaefer, 2014 NY Slip Op 04479, 2nd Dept 6-18-14

 

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Constructive Trust Cause of Action Sufficiently Pled/Dismissal “With Prejudice” Not Allowed—Doctrine of Res Judicata Does Not Apply—a Dismissal for Failure to State a Cause of Action Is Not On the Merits

The Second Department determined Supreme Court should not have dismissed the constructive trust cause of action.  The court further determined that the conversion, constructive fraud and breach of contract causes of action were properly dismissed for failure to state a cause of action, but should not have been dismissed “with prejudice.”  With respect to the constructive trust and the dismissal with prejudice, the court wrote:

The equitable remedy of a constructive trust may be imposed ” [w]hen property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest'” … . “The elements of a cause of action to impose a constructive trust are (1) the existence of a confidential or fiduciary relationship, (2) a promise, (3) a transfer in reliance thereon, and (4) unjust enrichment” … . “To achieve equity and avoid unjust enrichment, the courts apply these factors flexibly rather than rigidly” … .

Here, the plaintiff sufficiently alleged the existence of a confidential or fiduciary relationship with the defendants. The parties were related through marriage, and the plaintiff and Atanasio, along with their respective spouses, pooled their resources in order to purchase the residential property and the boat … . Further, the plaintiff sufficiently pleaded the elements of a promise and a transfer in reliance on the promise. He alleged that, before he sold the defendants his interest in the property in November 2005, the defendants promised to reimburse him for the expenditures he made for the property and boat as long as he continued making those payments for one year after the sale of his interest. In reliance on this alleged promise and his confidential relationship with the defendants, he transferred his interest in the property to the defendants, and thereafter continued to make expenditures in connection with the property and boat. Finally, his allegations that he made all expenditures for the property and boat during a period of 7½ years, and that the defendants refused to reimburse him, despite being co-owners of the property and boat and notwithstanding their promise, were sufficient to plead the unjust enrichment element necessary to the imposition of a constructive … .

…Supreme Court, upon dismissing the second, third, and fourth causes of action, improperly did so “with prejudice.” A dismissal for failure to state a cause of action based on the insufficiency of the allegations in the pleading is not a dismissal on the merits, and does not bar the adequate repleading of the claim in a subsequent action… . Canzona v Atanasio, 2014 NY Slip Op 04458, 2nd Dept 6-18-14

In a related case, the Second Department noted that, because a dismissal for failure to state a cause of action is not on the merits, the doctrine of res judicata does not apply.  Canzona v Atanasio, 2014 NY Slip Op 04459, 2nd Dept 6-18-14

 

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General Language—“Disposition”—Limited in Scope by More Specific Words—“Sale or Transfer”

The First Department, over a dissent, determined that the rules of contract interpretation did not allow the collection of a “transaction fee” by plaintiff financial advisor with respect to the defendant’s purchase of notes in anticipation of the purchase of a mine.  When the financing for the mine fell through, the defendant sold back the notes in accordance with the purchase agreement with the seller of the notes.  The plaintiff sought a “transaction fee” for that transaction:

…[T]he motion court unreasonably construed the parties’ agreement in arriving at the conclusion that plaintiff was entitled to a “transaction fee” in connection with defendant’s aborted acquisition of a participation interest in the notes. The letter agreement provides that plaintiff is entitled to a “transaction fee” following the consummation or closing of a “transaction,” which it defines as the “sale, transfer or other disposition . . . [of] a portion of the assets, businesses or securities of [defendant].” The acquisition in question was admittedly not a “sale” or “transfer.” Nor can it be considered a “disposition,” as plaintiff contends. The term “disposition” does not appear in isolation in the agreement, but as a catch-all at the end of the phrase “sale, transfer or other disposition.” Thus, under the principle of ejusdem generis, the general language “or other disposition” must be construed as limited in scope by the more specific words “sale” and “transfer” that preceded it … . Miller Tabak + Co LLC v Senetek PLC, 2014 NY Slip Op 04418, 1st Dept 6-17-14

 

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English Judgment Enforceable by New York Courts Without Demonstration of Subject Matter Jurisdiction or Ownership of Property in New York

The First Department determined a judgment rendered in England was enforceable by New York courts without any need to demonstrate subject matter jurisdiction over the underlying matter or the ownership of property in New York.  In addition, the court noted that the imposition of post-judgment interest on the foreign judgment by New York courts was found appropriate:

…New York adopted the Uniform Foreign Country Money-Judgments Recognition Act as CPLR article 53 …, which was intended to codify and clarify existing case law applicable to the recognition of foreign country money judgments based on principles of international comity, “and, more importantly, to promote the efficient enforcement of New York judgments abroad by assuring foreign jurisdictions that their judgments would receive streamlined enforcement here” … .

Generally, a foreign country judgment is “conclusive between the parties to the extent that it grants or denies recovery of a sum of money” (CPLR 5303), “unless a ground for nonrecognition under CPLR 5304 is applicable” … . CPLR 5304(a) provides that “[a]; foreign country judgment is not conclusive if the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law” (subd [1]) or “the foreign court did not have personal jurisdiction over the defendant” (subd [2]). CPLR 5304(b) permits nonrecognition on eight other grounds. Significantly, “in proceeding under article 53, the judgment creditor does not seek any new relief against the judgment debtor, but instead merely asks the court to perform its ministerial function of recognizing the foreign country money judgment and converting it into a New York judgment” … . Abu Dhabi Commercial Bank PJSC v Saad Trading, 2014 NY Slip Op 03767, 1st Dept 5-27-14

 

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