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HERE THE RIGHT OF FIRST REFUSAL IN THE ORIGINAL DEED DIVIDING THE PROPERTY INTO EIGHT PARTS WAS A VALID DEFENSE TO THE PARTITION ACTION; HOWEVER, IF DEEMED TO RUN WITH THE LAND, THE RIGHT OF FIRST REFUSAL VIOLATED THE RULE AGAINST PERPETUITIES (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the right of first refusal in the original deed which divided the property into eight parts was a valid defense to the partition action. However the right of first refusal could not be enforced because it violated the rule against perpetuities:

A right of first refusal . . . is a preemptive or contractual right to ‘receive an offer'” … . “[I]t is a restriction on the power of one party to sell without first making an offer of purchase to the other party upon the happening of a contingency” … . A reasonable, valid, and enforceable right of first refusal constitutes a good defense to a partition action … . However, with narrow exceptions not applicable here, rights of first refusal are subject to the rule against perpetuities and are thus invalid if it is possible for the future interests they represent to vest outside the prescribed time period (see EPTL 9-1.1[b] …).

Here, the 1966 deed demonstrates that the right of first refusal was for the benefit of the original grantees only … . Moreover, to the extent that the surrounding circumstances demonstrate an intent that the covenant should run with the land … , the restriction would violate the rule against perpetuities (see EPTL 9-1.1[b]…). Block 865 Lot 300, LLC v Baione, 2024 NY Slip Op 04189, Second Dept 8-14-24

Practice Point: A right of first refusal in a deed is a valid defense to a partition action.

Practice Point: Here the right of first refusal in the original deed applied only to the original grantees and, if deemed a covenant which runs with the land, it violated the rule against perpetuities.

 

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A DECEASED PARTY’S ADMISSIONS ARE NOT HEARSAY AS AGAINST THAT PARTY’S ESTATE AND SUPPORT THE PETITIONER-ESTATE’S CONSTRUCTIVE TRUST CLAIM; THE ATTORNEY FOR THE RESPONDENT ESTATE WAS PRESENT DURING DISCUSSIONS AT THE HEART OF THE CONSTRUCTIVE TRUST CLAIM AND MUST BE DISQUALIFIED UNDER THE ADVOCATE-WITNESS RULE (FIRST DEPT). ​

The First Department, reversing Surrogate’s Court, in a full-fledged opinion by Justice Friedman, determined summary judgment dismissing the constructive trust cause of action and denying the motion to disqualify counsel because he would necessarily be a witness should not have been granted. Mother, Isabel, alleged, as Medicaid planning, she transferred $1.6 million to her daughter, Jody, to be held by Jody during Isabel’s lifetime and then distributed equally among Jody and her two siblings. Jody, however, predeceased Isabel. Upon learning the accounts set up by Jody had only $255,000 in them, Isabel asserted a claim against Jody’s estate for $2 million. Subsequently Isabel died. The lawyer who represents Jody’s executor in the instant proceedings, Leibowitz, took notes during a telephone conference among himself, Isabel and Jody when the Medicaid planning transfer was discussed. The facts are too complex to fairly summarize here. Suffice to say that there was sufficient evidence that Jody had made admissions concerning the Medicaid planning agreement which is the basis for the constructive trust cause of action. Jody’s admissions are not excludable as hearsay against her estate. The First Department also concluded Leibowitz’s status as witness required his disqualification:

… [A]n admission by a party is admissible against that party, as an exception to the hearsay rule, as evidence of the matter asserted in the admission, whether or not the party’s statement was against his or her interest at the time the statement was made … . Moreover, “[a]dmissions of a testator or intestate are competent against the estate” … . Accordingly, admissions by Jody are competent evidence against Jody’s executor, the representative of her estate. * * *

… [T]he 2009 notes reflect that Leibowitz discussed with Jody and Isabel the transfers at issue in this case, and Robert [Isabel’s son and executor of her estate] may examine Leibowitz at trial about Jody’s statements to him concerning any agreements, understanding or promises between herself and Isabel relating to those transfers. While it cannot be determined at this juncture whether Leibowitz’s testimony will be of material assistance to Robert in proving his claim, it remains the case that Leibowitz discussed matters related to that claim with Jody, and his recollections of Jody’s statements will be admissible against Jody’s executor as admissions. Because Leibowitz should be a witness in this case, his continued representation of Jody’s executor in this proceeding violates the advocate-witness rule and disqualification pursuant to rule 3.7 of the Rules of Professional Conduct is appropriate. Matter of Newman, 2024 NY Slip Op 03544, First Dept 6-27-24

Practice Point:  A deceased party’s admissions are not hearsay as against that party’s estate.

Practice Point: An attorney who will be called as a witness for the opposing party must be disqualified under the advocate-witness rule.

 

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IN THIS TRAFFIC ACCIDENT CASE, THE COURT DID NOT HAVE JURISDICTION TO HEAR A MOTION TO DISMISS BROUGHT ON BEHALF OF THE DECEASED DEFENDANT BY DECEDENT’S FORMER ATTORNEYS WHO HAD NOT BEEN SUBSTITUTED FOR THE DECEDENT; PLAINTIFF’S MOTION TO HAVE DECEDENT’S DAUGHTER SUBSITITUTED AS A REPRESENTATIVE FOR THE DECEDENT REQUIRED NOTICE TO ALL PERSONS INTERESTED IN DECEDENT’S ESTATE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the death of the defendant in this traffic accident case divested the court of jurisdiction and the motion to dismiss by the decedent’s former attorneys, who had not been substituted for the decedent, should not have been considered by the court. The Appellate Division also noted that plaintiff’s motion to substitute decedent’s daughter as a representative for the decedent required notice to all persons interested in decedent’s estate:

“The death of a party divests the court of jurisdiction and stays the proceedings until a proper substitution has been made pursuant to CPLR 1015(a). Moreover, any determination rendered without such substitution will generally be deemed a nullity” .. . “The death of a party terminates his or her attorney’s authority to act on behalf of the deceased party” … . Although the determination of a motion pursuant to CPLR 1021 made by the successors or representatives of a party or by any party is an exception to a court’s lack of jurisdiction, here, the motion, inter alia, pursuant to CPLR 1021 to dismiss the complaint was made by the former attorneys for the decedent purportedly on behalf of the decedent. Since the former attorneys lacked the authority to act, the Supreme Court lacked jurisdiction to consider the motion … . Accordingly, so much of the order as granted the motion purportedly made on behalf of the decedent is a nullity.

Further, any motion pursuant to CPLR 1021 requires that notice be provided to persons interested in the decedent’s estate … . Here, the plaintiff failed to provide notice to persons interested in the decedent’s estate. Accordingly, the Supreme Court should have denied the plaintiff’s cross-motion with leave to renew upon service on persons interested in the decedent’s estate. Fazilov v Acosta, 2024 NY Slip Op 03470, Second Deppt 6-26-24

Practice Point: Here the defendant in a traffic accident case died. The decedent’s former attorneys did not have the authority to make a motion to dismiss and the court should not have considered it.​

Practice Point: Here plaintiff’s motion to have decedent’s daughter substituted for decedent required notice all persons interested in decedent’s estate.

 

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PLAINTIFF RAISED QUESTIONS OF FACT ABOUT THE EXISTENCE OF AN AGREEMENT WITH DEFENDANT ABOUT EACH HAVING 50% OWNERSHIP OF TWO RESTAURANTS; DEFENDANT USED THE RESOURCES FROM THOSE RESTAURANTS TO OPEN A THIRD; PLAINTIFF’S CONSTRUCTIVE TRUST AND UNJUST ENRICHMENT CAUSES OF ACTION SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff, in her affidavit, had raised questions of fact about the existence of a constructive trust and whether defendant was unjustly enriched. Plaintiff and defendant were in a romantic relationship. Plaintiff alleged she and defendant agreed two restaurants would be jointly owned but would be in defendant’s name for tax purposes. After the relationship ended, defendant had used the resources from the two restaurants to open a third:

“To prove unjust enrichment, a party must show that the other party was enriched at his or her expense, and it is against equity and good conscience to permit that person to retain what is sought to be recovered” … . In order to impose a constructive trust, a litigant is generally required to establish four elements by clear and convincing evidence: “(1) a fiduciary or confidential relationship; (2) an express or implied promise; (3) a transfer in reliance on the promise; and (4) unjust enrichment” … . However, the four “elements . . . serve only as a guideline, and a constructive trust may still be imposed . . . provided that those factors are substantially present” … . Further, there is no requirement that the alleged promise be expressly stated; rather, “a promise may be implied or inferred from the very transaction itself” … . Courts have also “extended the transfer element to include instances where funds, time and effort were contributed in reliance on a promise to share in some interest in property, even though no transfer actually occurred” … . Canas v Oshiro, 2023 NY Slip Op 05585, Second Dept 11-8-23

Practice Point: Here plaintiff and defendant were in a romantic (i.e., a confidential) relationship. The alleged oral agreement that they each had a 50% interest in two restaurants supported plaintiff’s action for constructive trust and unjust enrichment based upon defendant’s using the resources from the restaurants to open a third.

 

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THE EXECUTOR WAS ENTITLED TO A HEARING ON HIS OBJECTIONS TO THE FEES AND DISBURSEMENTS AWARDED THE GUARDIAN OF DECEDENT’S PERSON AND PROPERTY; THE EXECUTOR WAS ENTITLED TO DISCOVERY PURSUANT TO CPLR 408 IN THE SPECIAL PROCEEDING (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the executor of decedent’s estate (Oppedisano) was entitled to a hearing and discovery with respect to the fess and disbursements awarded to the guardian of decedent’s person and property:

… [T]here are disputed issues of fact as to the accuracy and completeness of the guardian’s final account, and whether the guardian failed to adequately investigate the alleged misappropriation of the decedent’s assets and should be denied fees and/or surcharged for breaching his fiduciary duties. Under such circumstances, the Supreme Court erred in denying Oppedisano’s objections to the guardian’s final account without conducting a hearing … .

Pursuant to CPLR 408, leave of court generally is required for disclosure in a special proceeding … . Insofar as discovery tends to prolong a case, and therefore is inconsistent with the summary nature of a special proceeding, such disclosure is granted only where it is demonstrated that there is need for such relief … . When leave of court is granted, disclosure takes place in accordance with CPLR 3101(a), which generally provides that “[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action” … . The Court of Appeals has interpreted the phrase “material and necessary” liberally as requiring, upon request, disclosure “of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason” … . * * *

Oppedisano demonstrated that the requested disclosure was material and necessary to establishing his objections that the guardian’s final account was inaccurate and/or incomplete and that the guardian breached his fiduciary duties and should be denied fees and/or surcharged, and there was no contravening demonstration that the proposed discovery would be prejudicial or unduly burdensome, would violate confidentiality, or would unduly delay the case. Matter of Giuliana M. (DeCarolis), 2023 NY Slip Op 05262, Second Dept 10-18-23

Practice Point: Here the executor was entitled to a hearing on his objections to the fees and disbursements awarded decedent’s guardian and was entitled to discovery pursuant to CPLR 408. In a special proceeding discovery is by leave of court.

 

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THE FIVE-YEAR DELAY BETWEEN PLAINTIFF-DECEDENT’S DEATH AND THE MOTION TO SUBSTITUTE AN ADMINISTRATOR DID NOT WARRANT DISMISSAL OF THE ACTION; DECEDENT HAD BEEN AWARDED SUMMARY JUDGMENT ON LIABILITY IN THIS TRAFFIC-ACCIDENT CASE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the four year delay in appointment of an administrator and the addition one year in moving for substitution in this traffic accident case did not warrant dismissal of the action:

… [T]he approximately four-year delay in obtaining letters of administration followed by an approximately one-year delay in moving for substitution shows a lack of diligence … . However, even if the “explanation for the delay is not satisfactory, the court may still grant the motion for substitution if there is no showing of prejudice and there is potential merit to the action, in light of the strong public policy in favor of disposing of matters on the merits” … .

Here, where the decedent was awarded summary judgment on the issue of liability against the defendants, the action has potential merit … . Further, the defendants provided mere “conclusory allegations of prejudice based solely on the passage of time” … . This record reflects that the defendants will suffer little or no prejudice as a result of the delay, particularly because this case, which is set for a trial on damages only, is likely to turn on medical records and an extant deposition transcript … . Hemmings v Rolling Frito-Lay Sales, LP, 2023 NY Slip Op 05125, Second Dept 10-11-23

Practice Point: Plaintiff had been awarded summary judgment on liability in this traffic accident case. Plaintiff died and there was a five-year delay before the motion to substitute an administrator. The action should not have been dismissed.

 

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HERE THE BENEFICIARY OF THE WILL WAS IN A CONFIDENTIAL RELATIONSHIP WITH THE DECEDENT AND THE WILL WAS PREPARED BY AN ATTORNEY ASSOCIATED WITH THE BENEFICIARY; THE UNDUE INFLUENCE OBJECTIONS SHOULD NOT HAVE BEEN DISMISSED (FOURTH DEPT).

The Fourth Department, reversing (modifying) Surrogate’s Court, determined the objections to probate of the will alleging undue influence should not have been dismissed. Here the will was prepared by an attorney for a beneficiary of the will:

“Generally, [t]he burden of proving undue influence . . . rests with the party asserting its existence . . . . Where, however, there was a confidential or fiduciary relationship between the beneficiary and the decedent, [a]n inference of undue influence arises which requires the beneficiary to come forward with an explanation of the circumstances of the transaction . . . , i.e., to prove the transaction fair and free from undue influence” … . Here, there are questions of fact whether the will’s sole beneficiary and her husband were in confidential relationships with decedent and, if so, whether the will was free from undue influence, which preclude judgment as a matter of law.

Further, where, as here, “a will has been prepared by an attorney associated with a beneficiary, an explanation is called for, and it is a question of fact . . . as to whether the proffered explanation is adequate” … . Matter of Cher, 2023 NY Slip Op 05062, Fourth Dept 10-6-23

Practice Point: Here issues of fact re: undue influence were raised by the beneficiary’s confidential relationship with the decedent and by association between the beneficiary and the attorney who drafted the will.

 

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PLAINTIFF’S DECEDENT’S COUNSEL IN THIS SLIP AND FALL CASE DID NOT SEEK LETTERS OF ADMINISTRATION FOR FIVE YEARS AFTER PLAINTIFF’S DECEDENT’S DEATH; THE ACTION SHOULD HAVE BEEN DISMISSED PURSUANT TO CPLR 1021 (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the slip and fall action should have been dismissed. The slip and fall occurred in 2013. The plaintiff died in 2015.and the letters of administration were issued in 2021. Plaintiff’s attorney’s failure to move for substitution of a representative within a reasonable time warranted dismissal:

CPLR 1021 provides as follows: “A motion for substitution may be made by the successors or representatives of a party or by any party . . . . If the event requiring substitution occurs before final judgment and substitution is not made within a reasonable time, the action may be dismissed as to the party for whom substitution should have been made, however, such dismissal shall not be on the merits unless the court shall so indicate . . . . [I]f the event requiring substitution is the death of a party, and timely substitution has not been made, the court, before proceeding further, shall, on such notice as it may in its discretion direct, order the persons interested in the decedent’s estate to show cause why the action or appeal should not be dismissed” (emphasis added).

In determining reasonableness, a court should consider the plaintiff’s diligence in seeking substitution, prejudice to the other parties, and whether the action is shown to have potential merit … . Here, the unexplained, more than five-year delay in seeking letters of administration shows a lack of diligence … . Further, no demonstration of a potentially meritorious cause of action was made. Neither the attorney affirmation, complaint, bill of particulars, nor supplemental bill of particulars constituted an affidavit of merit, as counsel had no personal knowledge of the facts of this case … . Since an affidavit of merit was not submitted and no reasonable justification for the delay in petitioning for letters of administration was provided, the Supreme Court should have granted that branch of Nargis’s motion which was pursuant to CPLR 1021 to dismiss the complaint insofar as asserted against it … . Mesniankina v 302 BBA, LLC2023 NY Slip Op 04765, Second Dept 9-27-23

Practice Point: If your client dies and you wait five years before substituting an administrator for the decedent, you risk dismissal pursuant to CPLR 1021.

 

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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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THE PARTY SEEKING A CONTEMPT FINDING DID NOT DEMONSTRATE PREJUDICE FROM THE FAILURE TO COMPLY WITH ONE COURT ORDER AND THE OTHER COURT ORDER DID NOT EXPRESS AN UNEQUIVOCAL MANDATE; CONTEMPT FINDING REVERSED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the evidence did not support a contempt finding against the trustee of a special needs trust (Wiltshire). The guardian of the incapacitated person (Daniels) demonstrated that Wiltshire failed to provide an accounting and failed to promptly pay certain expenses, but the proof of Wiltshire’s alleged failure to comply with a court order was not sufficient to support a contempt finding. For instance, it was not demonstrated that Daniels was prejudiced by Wiltshire’s inaction:

“In order to find that contempt has occurred in a given case, it must be determined that a lawful order of the court, clearly expressing an unequivocal mandate, was in effect. It must appear, with reasonable certainty, that the order has been disobeyed. Moreover, the party to be held in contempt must have had knowledge of the court’s order. . . . Finally, prejudice to the right of a party to the litigation must be demonstrated” . “The burden of proof is on the proponent of a contempt motion, and the contempt must be established by clear and convincing evidence” … .

Here, Daniels did not establish that she was prejudiced in any way by Wiltshire’s failure to furnish an accounting of the SNT in violation of the … so-ordered stipulation … . Moreover, the [other] order directed Wiltshire to pay Daniels’s guardianship fees from the SNT, but did not provide a deadline for the payment. That order thus did not clearly express an unequivocal mandate which would support holding Wiltshire in contempt of court … . Matter of Serena W., 2023 NY Slip Op 03797, Second Dept 7-12-23

Practice Point: A party seeking a contempt finding must demonstrate prejudice from the failure to comply with a court order.

Practice Point: In order to support a contempt finding, the subject order must include an unequivocal mandate which was not obeyed.

 

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