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EVERY CAUSE OF ACTION WAS ERRONEOUSLY DISMISSED AS TIME-BARRED; THE PROPER CRITERIA FOR DETERMINING THE CORRECT STATUTES OF LIMITATIONS DISCUSSED IN SOME DETAIL (SECOND DEPT).

​The Second Department, reversing Supreme Court, determined several causes of action including fraud, breach of fiduciary duty, breach of constructive trust, and breach of contract should not have been dismissed as time-barred:

“‘[W]here an allegation of fraud is essential to a breach of fiduciary duty claim, courts have applied a six-year statute of limitations under CPLR 213(8)'” … . * * * … [P]laintiffs discovered the alleged fraud in 2019 and the cause of action was timely commenced within two years. * * *

… [T]he statute of limitations on the cause of action for the imposition of a constructive trust did not begin to run until 2019, when [defendant] allegedly breached his promise … . …

“[I]n order to determine the statute of limitations applicable to an action for a declaratory judgment, a court must examine the substance of the action. Where it is determined that the parties’ dispute can be, or could have been, resolved in an action or proceeding for which a specific limitation period is statutorily required, that limitation period governs” … . * * *

… Supreme Court erred in concluding that the causes of action alleging fraud in the inducement and promissory estoppel are time-barred. The statute of limitations for those causes of action is six years … . …

The statute of limitations applicable to a breach of contract cause of action is six years (see CPLR 213[2]), “and begins at the time of the breach, even when no damage occurs until later, and even though the injured party may be ignorant of the existence of the wrong or injury” … . Statharos v Statharos, 2023 NY Slip Op 04226, Second Dept 8-9-23

Practice Point: Here the criteria for determining the applicable statute of limitations for breach of fiduciary duty, fraud, breach of constructive trust, declaratory judgment, promissory estoppel, fraud in the inducement and breach of contract are discussed in some detail.

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LYFT WAS NOT VICARIOUSLY LIABLE FOR THE ALLEGED SEXUAL ASSAULT BY A LYFT DRIVER; THE COMPLAINT DID NOT STATE A CAUSE OF ACTION FOR FRAUD BASED UPON THE ASSURANCES OF SAFETY ON LYFT’S WEBSITE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the vicarious liability and fraud causes of action against defendant Lyft, a livery cab service, should have been dismissed. The complaint alleged infant plaintiff used a mobile app to hire a Lyft driver, Singh, who began masturbating after she got in the car. The complaint failed to allege the driver was acting within the scope of his employment when the alleged sexual assault occurred. The complaint also failed to allege the elements of fraud based on the claim on the Lyft website that its service was safe and the drivers had been screened:

“[W]here an employee’s actions are taken for wholly personal reasons, which are not job related, the challenged conduct cannot be said to fall within the scope of employment” … . “A sexual assault perpetrated by an employee is not in furtherance of an employer’s business and is a clear departure from the scope of employment, having been committed for wholly personal motives” … . Here, assuming that Singh engaged in the sexual misconduct as alleged in the complaint, it is clear that such conduct was a departure from his duties as a Lyft driver and was committed solely for personal motives unrelated to Lyft’s business. As such, the sexual misconduct cannot be said to have been within the scope of employment … . Accordingly, the Supreme Court should have granted that branch of Lyft’s motion which was to dismiss the cause of action alleging vicarious liability under the doctrine of respondeat superior. …

“The elements of a cause of action for fraud require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages” … . “Each of the foregoing elements must be supported by factual allegations containing the details constituting the wrong sufficient to satisfy CPLR 3016(b)” … . “To establish causation, the plaintiff must show that defendant’s misrepresentation induced plaintiff to engage in the transaction in question (transaction causation) and that the misrepresentations directly caused the loss about which plaintiff complains (loss causation)” … .

Here, although the complaint alleges that the plaintiffs were aware of alleged representations on Lyft’s website that the Lyft service was safe to use, it fails to sufficiently specify which statements on Lyft’s website were false, and when those representations were made or accessed by the plaintiffs … . Moreover, the complaint fails to set forth any facts sufficient to show that any alleged misrepresentations on Lyft’s website regarding the safety of Lyft rides directly and proximately caused the plaintiffs’ alleged damages, which were otherwise alleged to have been caused directly by Singh’s sexual misconduct while operating the vehicle … . It is not sufficient to merely allege that the infant plaintiff would not have used the Lyft app but for Lyft’s alleged misrepresentations regarding safety … . Browne v Lyft, Inc., 2023 NY Slip Op 04102, Second Dept 8-2-23

Practice Point: In a complaint alleging the employer is vicariously liable for the acts of its employee, unless it is alleged the employee was acting within the scope of employment the cause of action will be dismissed. Here the alleged sexual assault by defendant Lyft driver was not alleged to be within the scope of the driver’s employment.

Practice Point: Here the plaintiff alleged she was sexually assaulted by defendant Lyft driver. The fraud cause of action alleged the assertions on Lyft’s website that the service was safe and the drivers were screened were false. That was not enough to state a cause of action for fraud.

 

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A SELLER OF REAL PROPERTY CAN REMAIN SILENT ABOUT DEFECTS IN THE PROPERTY BUT CANNOT TAKE STEPS TO THWART A BUYER’S DISCOVERY OF DEFECTS; HERE IT WAS ALLEGED THE SELLERS COVERED WATER DAMAGED WOOD WITH NEW PLYWOOD (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the complaint alleging the defendant sellers concealed water damage to the property should not have been dismissed. A seller of real property can remain silent about property defects (caveat emptor, buyer beware) but cannot act to thwart discovery of the defects. Here plaintiffs alleged the sellers put new plywood over wood damaged by water:

“New York adheres to the doctrine of caveat emptor and imposes no liability on a seller for failing to disclose information regarding the premises when the parties deal at arm’s length, unless there is some conduct on the part of the seller which constitutes active concealment” … . “If, however, some conduct (i.e., more than mere silence) on the part of the seller rises to the level of active concealment, a seller may have a duty to disclose information concerning the property” … . “To maintain a cause of action to recover damages for active concealment, the plaintiff must show, in effect, that the seller or the seller’s agents thwarted the plaintiff’s efforts to fulfill his [or her] responsibilities fixed by the doctrine of caveat emptor” … .

Here, accepting the facts alleged in the amended complaint as true, and according the plaintiffs the benefit of every possible favorable inference … , the amended complaint sufficiently states a cause of action to recover damages for fraud on the theory that the … defendants actively concealed extensive water damage to the property. The amended complaint, as amplified by an affidavit of one of the plaintiffs … , alleges, among other things, that the … defendants took measures to actively conceal the existence of leaks and water damage to the property, including placing new wood on top of rotten wood to hide the extent of the damage. The plaintiffs’ allegations, if true, might have thwarted the plaintiffs’ efforts to fulfill their responsibilities imposed by the doctrine of caveat emptor with respect to the property … . Striplin v AC&E Home Inspection Corp., 2023 NY Slip Op 03720, Second Dept 7-5-23

Practice Point: Although a seller of real estate can remain silent about defects in the property, a seller can not take steps to thwart a buyer’s discovery of defects.

 

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THE APPLICABLE STATUTES OF LIMITATIONS FOR DECLARATORY-JUDGMENT CAUSES OF ACTION DEPEND ON THE NATURE OF THE UNDERLYING ALLEGATIONS; HERE THE ALLEGATIONS SOUNDED IN FRAUD, UNJUST ENRICHMENT AND VIOLATIONS OF THE REAL PROPERTY LAW; ALL WERE TIME-BARRED (SECOND DEPT).

​The Second Department, revering Supreme Court, determined the declaratory judgment causes of action were time-barred according to the statutes of limitations applicable to the underlying allegations, i.e., fraud, unjust enrichment, Real Property Law (RPL) and Real Property Actions and Proceedings Law (RPAPL) causes of action:

“Actions for declaratory judgments are not ascribed a certain limitations period. The nature of the relief sought in a declaratory judgment action dictates the applicable limitations period. Thus, if the action for a declaratory judgment could have been brought in a different form asserting a particular cause of action, the limitations period applicable to the particular cause of action will apply” … . Here, the cause of action for declaratory relief could have been, and previously was, brought in the form of causes of action to recover damages for fraud and intentional misrepresentation. Since the instant action was commenced more than six years after the plaintiff allegedly was fraudulently induced to convey title to the property and more than two years from the discovery of the alleged fraud, the cause of action for declaratory relief was time-barred … .

… [T]he second cause of action … seeks to void the defendant’s title to the property by virtue of the plaintiff’s claim that the plaintiff was fraudulently induced into conveying title to the defendant. Accordingly, this cause of action is governed by the six-year statute of limitations governing actions based upon fraud and, therefore, was untimely.

… [T]he cause of action to recover damages for unjust enrichment accrued … when the deed conveying title to the defendant was executed, and, therefore, this cause of action was also time-barred.

… [T]he cause of action alleging a violation of Real Property Law § 265-a was time-barred since it was commenced more than two years after recordation of the subject deed and more than six years after the alleged fraudulently induced conveyance. Mahabir v Snyder Realty Group, Inc., 2023 NY Slip Op 03342, Second Dept 6-21-23

Practice Point: The applicable statutes of limitations for declaratory-judgment causes of action depend on the nature of the underlying allegations. Here the underlying allegations sounded in fraud, unjust enrichment and Real Property Law causes of action. All were time-barred.

 

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THE FRAUDULENT-CONVEYANCE CAUSES OF ACTION INVOLVED CONNECTICUT PROPERTIES AND WERE TIME-BARRED IN CONNECTICUT; NEW YORK’S BORROWING STATUTE RENDERED THE ACTIONS TIME-BARRED IN NEW YORK (FIRST DEPT).

The First Department, reversing Supreme Court, determined the fraudulent-conveyances causes of action should have been dismissed as time-barred under New York’s borrowing statute. The properties which were conveyed are in Connecticut and the action is time-barred under Connecticut law:

Plaintiff’s claims are time-barred pursuant to CPLR 202, New York’s borrowing statute. Under CPLR 202, where a nonresident plaintiff asserts causes of action in a New York court, “the claim must be timely under both New York and the jurisdiction where the action accrued” … . “Consequently, . . . it is the shorter of the two states’ statutes of limitations that controls the timeliness of the action” … . For purposes of CPLR 202, “a cause of action accrues at the time and in the place of the injury” and “[w]hen an alleged injury is purely economic, the place of injury is usually where the plaintiff resides and sustains the economic impact of the loss” … .

Here, plaintiff is a resident of Connecticut and alleges only economic injury. Moreover, it does not dispute that, under Connecticut law, where the claims accrued for purposes of the borrowing statute, the statute of limitations for the asserted causes of action has expired (see Conn Gen Stat § 52-552j …). National Auditing Servs. & Consulting, LLC v Assa, 2023 NY Slip Op 03198, First Dept 6-13-23

Practice Point: Causes of action which accrued in another state must be timely under both that state’s and New York’s statutes of limitations.

 

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AN ORDER TO EFFECT SERVICE OF PROCESS IN A MANNER WHICH CANNOT BE COMPLIED WITH PRECLUDES PERSONAL JURISDICTION; PETITIONER DID NOT PRESENT SUFFICIENT EVIDENCE OF ELECTION FRAUD (SECOND DEPT).

The Second Department, reversing Supreme Court, determined: (1) the order to show cause specified a method of service which could not be complied with; therefore personal jurisdiction over Williams was not obtained: (2) election fraud on Williams part was not demonstrated:

Since the method of service provided in the order to show cause was jurisdictional in nature, and the affidavit of service is deficient on its face for identifying an address for mailing purportedly obtained from a document that did not exist, the court should have granted that branch of Williams’s motion which was, in effect, to dismiss the amended petition for lack of personal jurisdiction. …

“A candidate’s designating petition or independent nominating petition ‘will be invalidated on the ground of fraud if there is a showing that the entire petition is permeated with fraud'” … . “Absent permeation with fraud, a designating [or independent nominating] petition may be invalidated where the candidate has participated in or is chargeable with knowledge of the fraud” … . Here, Stark [petitioner] failed to meet her burden of demonstrating by clear and convincing evidence that the designating petition was permeated with fraud or that Williams participated in or was chargeable with knowledge of any fraud … . Matter of Stark v Williams, 2023 NY Slip Op 02583, Second Dept 5-11-23

Practice Point: If an order to show cause directs service of process to be made in a manner which cannot be complied with, personal jurisdiction is precluded even if the affidavit of service purports to have complied with the order.

 

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UGELL SHOULD NOT HAVE BEEN DISQUALIFIED AS A CANDIDATE FOR TOWN SUPERVISOR; THE FACT THAT UGELL IS A TOWN JUSTICE IS NOT DISQUALIFYING; ELECTION FRAUD MUST BE PROVEN BY CLEAR AND CONVINCING EVIDENCE, LACKING HERE (SECOND DEPT).

​The Second Department, reversing Supreme Court, determined Ugell, a town justice, should not have been disqualified as a candidate for town supervisor. The fact that Ugell is a town justice was not disqualifying. There was no clear and convincing evidence of election fraud:

The petitioners presented no basis to disqualify Ugell under Election Law § 6-122. The fact that Ugell is subject to the Rules Governing Judicial Conduct (22 NYCRR) part 100 as a Town Justice does not disqualify him from running for the office of Town Supervisor … .

“The proper evidentiary standard for proving fraud in an Election Law proceeding is clear and convincing evidence” … . “[A]s a general rule, a petition for an opportunity to ballot will be invalidated on the ground of fraud only if there is a showing that the entire petition is permeated with fraud” … . “The inclusion of a candidate’s name on a designating petition, without his or her consent, may constitute fraud”… . Here, in light of the conflicting and, in part, incredible testimony, the Supreme Court erred in determining that the petitioners established, by clear and convincing evidence, fraud so as to warrant invalidating the designating petition … . Moreover, the petitioners failed to establish, by clear and convincing evidence, “actual deception of the voters or members of the party involved” … . Matter of King v Ugell, 2023 NY Slip Op 02601, Second Dept 5-11-23

Practice Point: The fact that Ugell was a town justice did not disqualify him from running for town supervisor. Election fraud must be proven by clear and convincing evidence, lacking here.

 

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PLAINTIFFS COULD NOT DEMONSTRATE RELIANCE UPON THE INFLATED RENTS DESCRIBED IN THE FILED REGISTRATION STATEMENTS; THEREFORE THE COMPLAINT ALLEGING A FRAUDULENT SCHEME TO DEREGULATE APARTMENTS SHOULD HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Friedman, determined defendant landlord’s motion to dismiss the complaint alleging a fraudulent scheme to deregulate apartments should have been granted. The court found that the plaintiffs did not demonstrate the “reliance” element of fraud:

The primary question on this appeal is whether plaintiffs, who allege that the predecessor in interest of defendant 75-25 153rd Street, LLC initially registered an unlawfully inflated “legal regulated rent” for each of their apartments in 2007, have sufficiently alleged, in this action commenced in 2020, the perpetration of “a fraudulent scheme to deregulate” so as to avoid the bar of the four-year lookback rule and to allow recalculation of the legal rent on the base date (in 2016), utilizing the default formula referenced in Regina [35 NY3d 332], as a basis for overcharge damages. We hold that plaintiffs have failed to allege such a fraudulent scheme because neither plaintiffs nor their predecessors in interest could have reasonably relied upon the inflated legal regulated rents on the registration statements. As the Court of Appeals recognized in Regina [35 NY3d 332], reasonable reliance is as much an element of fraud in this context as in others (see id. at 356 n 7 [“Fraud consists of evidence of a representation of material fact, falsity, scienter, reliance and injury”] [emphasis added, internal quotation marks and brackets omitted]). As more fully explained below, the inflation of the legal regulated rents set forth on the publicly filed registration statements was evident from the registration statements themselves, negating the element of reliance as a matter of law. Burrows v 75-25 153rd St., LLC, 2023 NY Slip Op 01940, First Dept 4-13-23

Practice Point: In this action alleging the fraudulent deregulation of apartments, plaintiffs were unable to demonstrate reliance upon the inflated rents described in the registration statements. Therefore the complaint alleging a fraudulent scheme to deregulate apartments should have been dismissed.

 

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THE ATTORNEY AFFIDAVIT SUBMITTED IN SUPPORT OF THE SUMMARY JUDGMENT MOTION WAS WITHOUT EVIDENTIARY VALUE; THE DEFICIENCIES IN THE ORIGINAL SUBMISSION CANNOT BE CURED IN REPLY; FAILURE TO REGISTER AN APARTMENT WITH THE CITY DHCR AND INCREASING THE RENT DO NOT DEMONSTRATE A FRAUDULENT SCHEME TO DEREGULATE (FIRST DEPT). ​

The First Department, reversing Supreme court, determined: (1) the summary judgment motion should have been supported by plaintiff’s affidavit, not the attorney’s affidavit; (2) papers submitted in reply cannot be used to remedy deficiencies in the original submission; and (3), to demonstrate a fraudulent scheme to deregulate an apartment, it is not enough to show the landlord did not register the apartment with the NYC Division of Housing and Community Renewal (DHCR) and increased the rent:

CPLR 3212(b) states, “A motion for summary judgment shall be supported by affidavit . . . The affidavit shall be by a person having knowledge of the facts.” Plaintiff failed to submit an affidavit. While he submitted his attorney’s affirmation, “[s]uch an affirmation . . . is without evidentiary value” … . Although plaintiff submitted his complaint, it is not verified, so it cannot be used in lieu of an affidavit (see CPLR 105[u] …).

… [I]n Ampim v 160 E. 48th St. Owner II LLC (208 AD3d 1085 [1st Dept 2022]), [we] said, “an increase in rent and failure to register [an] apartment with . . . DHCR . . ., standing alone, are insufficient to establish a colorable claim of a fraudulent scheme to deregulate the apartment” … .

… Plaintiff failed to demonstrate an increase in rent, or that landlord misrepresented the legal regulated rent … .

Plaintiff did show an increase in rent through documents submitted in reply. However, a movant may not use reply papers “to remedy . . . basic deficiencies in [his] prima facie showing” … . Tribbs v 326-338 E 100th LLC, 2023 NY Slip Op 01950, First Dept 4-13-23

Practice Point: The attorney affidavit submitted in support of the summary judgment motion was not based on first-hand knowledge and therefore had no evidentiary value.

Practice Point: Re: a summary judgment motion, deficiencies in the original submissions cannot be cured in reply.

Practice Point: Failure to register an apartment with the NYC DHCR coupled with raising the rent do not demonstrate a fraudulent scheme to deregulate.

 

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WHEN PURELY ECONOMIC INJURY IS ALLEGED, THE CAUSE OF ACTION ACCRUES WHERE THE PLAINTIFF RESIDES; HERE PLAINTIFF RESIDED IN FLORIDA AND, PURSUANT TO NEW YORK’S BORROWING STATUTE, THE FLORIDA STATUTE OF LIMITATIONS APPLIED, RENDERING THE FRAUDULENT-TRANSFER ACTION UNTIMELY (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the borrowing statute required that the Florida statute of limitations for an action alleging the fraudulent transfer of property be applied, rendering the action time-barred. Plaintiff, a Florida resident, alleged the transfer of property in New York, by defendant, a New York resident, was fraudulent in that it rendered the defendant judgment proof. The Third Department determined the injury occurred in Florida, not New York:

… [T]he parties dispute the applicability of CPLR 202, New York’s “borrowing” statute, which … provides that “[w]hen a nonresident sues on a claim that accrued outside of New York, the cause of action must be commenced within the time period provided by New York’s statute of limitations, as well as the statute of limitations in effect in the jurisdiction where the cause of action in fact accrued” … . “[A] cause of action accrues at the time and in the place of the injury . . . in tort cases involving the interpretation of CPLR 202” … . Relevant here, “[w]hen an alleged injury is purely economic, the place of injury usually is where the plaintiff resides and sustains the economic impact of the loss” … .

While plaintiff asks that we draw a distinction between tort and contract matters as it pertains to the principle that locates his economic harm — and thus accrual of his various causes of action — in his state of residence, we find little support for that premise. Although the tortious act may have occurred when the property was transferred in this state, that does not establish that the accompanying injury to plaintiff was also felt in this state or that the cause of action accrued here … . Erdely v Estate of Airday, 2023 NY Slip Op 01827, Third Dept 4-6-23

Practice Point: Here plaintiff, a Florida resident, alleged defendant, a New York resident, fraudulently transferred New York property, making defendant judgment proof. Because plaintiff alleged purely economic injury (the inability to collect money judgments), the injury occurred where plaintiff resided. Therefore, pursuant to New York’s borrowing statute, the Florida statute of limitations applied, rendering the action untimely.

 

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