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EQUITABLE ACTION SEEKING RESCISSION BASED UPON FRAUD NEED NOT ALLEGE PECUNIARY LOSS.

The First Department, in a full-fledged opinion by Justice Tom, determined a triable issue of fact had been raised about whether defendant made misrepresentations in a contract for a condominium such that the contract could be rescinded. Defendant agreed the condominium was to be used for residential purposes, but sought to operate a day care center on the premises. The court noted that pecuniary damages need not be alleged in an equitable action to rescind a contract based upon fraud:

 

Fraud sufficient to support the rescission requires only a misrepresentation that induces a party to enter into a contract resulting in some detriment, and “unlike a cause of action in damages on the same ground, proof of scienter and pecuniary loss is not needed” … . Thus, the fourth cause of action alleging that misrepresentations in defendant’s purchase application induced plaintiff to forgo exercise of its right of first refusal has a sound basis in the record, and Supreme Court properly concluded that a triable issue is presented. Board of Mgrs. of the Soundings Condominium v Foerster, 2016 NY Slip Op 01273, 1st Dept 2-23-16

 

CONTRACT LAW (RESCISSION FOR MISREPRESENTATIONS NEED NOT BE SUPPORTED BY AN ALLEGATION OF PECUNIARY LOSS)/RESCISSION (ACTION FOR RESCISSION BASED UPON MISREPRESENTATIONS NEED NOT ALLEGE PECUNIARY LOSS)/FRAUD (ACTION FOR RESCISSION OF A CONTRACT BASED UPON MISREPRESENTATIONS NEED NOT ALLEGE PECUNIARY LOSS)/DAMAGES (ACTION FOR RESCISSION OF A CONTRACT BASED UPON MISREPRESENTATIONS NEED NOT ALLEGE PECUNIARY LOSS)

PROCEDURES MANDATED BY THE CHILD SUPPORT STANDARD ACTS NOT FOLLOWED; SUPREME COURT’S ORDER MODIFIED.

The First Department, in a full-fledged opinion by Justice Gische, determined Supreme Court did not follow the statutory requirements of the Child Support Standards Act (CSSA) and modified Supreme Court’s order. Supreme Court directed plaintiff-father to pay 100% of private school tuition for the child, and further ordered that plaintiff-father pay 100% of the cost of extracurricular, weekend and summer activities for the child. The First Department determined, under the CSSA, the extracurricular, weekend and summer activities should have been factored into child support. The court further determined that, because father and mother never married and lived together for only four months, the discussions between mother and father about private school for the child were not a sufficient ground for ordering father to pay for private school. The private school and extracurricular weekend and summer activities portions of Supreme Court’s order were vacated. The court explained the procedural requirements of the CSSA as follows:

The CSSA first requires a calculation of child support amount (Domestic Relations Laws 240 [1-b] [b][3]). It then allows for the payment of certain categories of enumerated add on expenses, prorated according to the parents’ relative incomes. The add on expenses permitted are expressly stated within the statute, with their own specific standards and considerations justifying the making of such an award. The add on expenses expressly addressed in the CSSA are: (1) child care expenses when a custodial parent is working, looking for work and/or engaged in an educational or training program that will lead to employment (Family Court Act § 413[1][c][4]; Domestic Relations Law § 240[1-b][c][4],[6]); (2) health insurance and unreimbursed medical expenses (Family Court Act § 413[1][c][5]; Domestic Relations Law § 240[1-b][c][5]; and (3) educational expenses (Family Court Act § 413[1][c][7]; Domestic Relations Law § 240[1-b][7]). Not expressly delineated as add on expenses in the statute are summer, extra curricular and/or weekend activities. Basic child support, when calculated properly, is presumed to meet all the child’s basic needs. Thus, the expenses of leisure, extracurricular and enrichment activities, such as after school clubs, sporting activities, etc., are usually not awarded separately, but are encompassed within the basic child support award. That is not to say that a court cannot order a parent to pay for these expenses over and above basic child support. If a court does so, however, it is a deviation from the basic statutory formula and requires an analysis under the commonly referred to paragraph “f” factors. Pursuant to Domestic Relations Law § 240 [1-b][f] (Family Court Act § 413[1][f]) “[u]nless the court finds that the non-custodial parent[‘s] pro-rata share of the basic child support obligation is unjust or inappropriate, which finding shall be based upon consideration of [certain] factors” enumerated in the CSSA, the child support calculation under the statute is presumptively correct. There are 10 enumerated factors to consider before deviating. They include the financial resources of the parties and child, the health, needs and aptitude of the child; the standard of living the child would have enjoyed had the household not been dissolved; tax consequences; nonmonetary contributions that a parent makes; educational needs of either parent; disparity in income of the parents; other child support obligation of the non-custodial parent; extraordinary expenses incurred in visitation and any other factor that the court finds relevant (Family Court Act § [1][f]; Domestic Relations Law § 240[1-b][f]). Although all the factors do not have to present, the court needs to articulate its reasons for making such a deviation from basic child support and relate those reasons to the statutory paragraph f factors … . Michael J.D. v Carolina E.P., 2016 NY Slip Op 01252, 1st Dept 2-18-16

FAMILY LAW (REQUIREMENTS OF CHILD SUPPORT STANDARDS ACT NOT MET BY SUPREME COURT, ORDER MODIFIED)/CHILD SUPPORT STANDARDS ACT (REQUIREMENTS OF CHILD SUPPORT STANDARDS ACT NOT MET BY SUPREME COURT, ORDER MODIFIED)

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COMMON INTEREST PRIVILEGE MAY APPLY TO SUBPOENAED DOCUMENTS.

The First Department determined Supreme Court should have conducted an in camera review of documents sought from Morgan Stanley by the petitioner to see whether the documents are privileged under a “common interest privilege.”  Even though a third party, NaturEner, was privy to the documents, and despite a debtor-creditor relationship between Morgan Stanley and NaturEner, because Morgan Stanley and NaturEner shared a common interest in the underlying contract dispute, the common interest privilege may apply:

The common interest privilege is an exception to the rule that the presence of a third party will waive a claim that a communication is confidential. It requires that the communication otherwise qualify for protection under the attorney-client privilege and that it be made for the purpose of furthering a legal interest or strategy common to the parties asserting it … .

We find that Morgan Stanley and NaturEner shared a common interest in their desire to have plaintiff comply with its contractual obligations under the Rim Rock agreements. The fact that respondent and defendant were in a debtor-creditor relationship did not make their interests adverse in all matters and at all times … . Under the circumstances, the court should have ordered an in camera inspection, the limited relief requested in the petition … . Matter of San Diego Gas & Elec. Co. v Morgan Stanley Senior Funding, Inc., 2016 NY Slip Op 01238, 1st Dept 2-18-16

CIVIL PROCEDURE (COMMON INTEREST PRIVILEGE MAY APPLY TO SUBPOENAED DOCUMENTS, PARTIES COOPERATING IN LAWSUIT)/COMMON INTEREST PRIVILEGE (PARTIES COOPERATING IN LAWSUIT)/PRIVILEGE (COMMON INTEREST PRIVILEGE, PARTIES COOPEERATING IN LAWSUIT)

DEFENDANTS DEMONSTRATED SIDEWALK DEFECT WAS TRIVIAL.

The First Department determined defendants were entitled to summary judgment in this slip and fall case because the sidewalk defect was trivial:

 

Defendants established their entitlement to judgment as a matter of law, in this action where plaintiff alleges that she was injured when she tripped and fell on a long crack between pavement flags in a walkway that was between two buildings owned by defendants. Defendants submitted evidence, including deposition testimony, an affidavit of an inspector who measured the crack as 1/4″ deep, and photographs, demonstrating that the subject defect was trivial and thus, not actionable … . The photographs show that the crack was in the middle of the walkway, in a well-illuminated location, and was not hidden or covered in any way so as to make it difficult to see and identify as a hazard … .

In opposition, plaintiff failed to raise a triable issue of fact as to whether the crack in the walkway constituted a dangerous condition under the circumstances. She provided no affidavit of a person who had measured the crack, but only her own and her daughter’s estimates of its depth. Garcia v 549 Inwood Assoc., LLC, 2016 NY Slip Op 01249, 1st Dept 2-18-16

 

NEGLIGENCE (SIDEWALK DEFECT TRIVIAL)/SLIP AD FALL (SIDEWALK DEFECT TRIVIAL)/TRIVIAL DEFECT (SIDEWALK CRACK)

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LANDLORD’S FAILURE TO PROCURE TOWN RENTAL PERMIT IS NOT A DEFENSE TO THE LANDLORD’S ACTION TO COLLECT RENT.

The First Department determined the landlord’s failure to procure a rental permit in accordance with the Town Code did not provide the tenant, Fairfield, with a defense to the landlord’s action to collect rent:

 

… [P]laintiff does not dispute that it failed to comply with the provisions of the Town of Southampton Code that, as enacted in 2008, require an owner to obtain a $200 biennial rental permit before the rental period commences or within 30 days after receiving actual notice from the Town of the failure to comply (see §§ 270-5[A][1]; 270-8[A]; 270-13). However, under the circumstances, the Town Code does not provide a defense to plaintiff’s claims against the Fairchild defendants, because it “does not provide expressly that its violation will deprive the parties of their right to sue on the contract, and the denial of relief is wholly out of proportion to the requirements of public policy or appropriate individual punishment” … . While the Town Code addresses matters affecting public welfare, it does not expressly preclude [*2]an owner from bringing a lawsuit to collect rent, it imposes relatively minor sanctions to redress violations, and it allows the owner to cure a default after receiving actual notice of a violation (Town Code §§ 270-5; 270-13; 270-19). We conclude that the Fairchild defendants, having occupied the premises and raised a patently inadequate forgery defense, should not be permitted to rely on the provisions of the Town Code “as a sword for personal gain rather than a shield for the public good,” i.e., to avoid payment of rent due under the lease … or enforcement of the absolute and unconditional guaranty given by Fairchild to induce plaintiff to enter into the lease … . 1424 Millstone Rd., LLC v James B. Fairchild, LLC, 2016 NY Slip Op 01250, 1st Dept 2-18-16

 

LANDLORD-TENANT (LANDLORD’S FAILURE TO PROCURE A TOWN RENTAL PERMIT IS NOT A DEFENSE TO THE LANDLORD’S ACTION TO COLLECT RENT)/MUNICIPAL LAW (LANDLORD’S FAILURE TO PROCURE A TOWN RENTAL PERMIT IS NOT A DEFENSE TO THE LANDLORD’S ACTION TO COLLECT RENT)

PLAINTIFF ENTITLED TO SUMMARY JUDGMENT ON LABOR LAW 240 (1) CLAIM EVEN WHEN NOT FREE FROM NEGLIGENCE.

The First Department, over an extensive dissent, determined plaintiff was entitled to summary judgment on his Labor Law 240 (1) claim, noting that comparative negligence on the part of the plaintiff is not a defense. Plaintiff alleged he was operating a forklift lifting bricks to be placed on a scaffold when the forklift pitched forward and catapulted him over the front of the machine:

 

We agree with the motion court that plaintiff is entitled to summary judgment on his Labor Law § 240 claim. Plaintiff was using the prime mover to hoist a load; if the prime mover pitched forward due to the force of gravity, it failed to offer adequate protection and Labor Law § 240(1) applies … . Similarly, if the accident occurred because either the prime mover or scaffold could not support the weight of the brick load, the accident also resulted from the application of the force of gravity to the load during the hoisting operation, and Labor Law § 240(1) applies … . * * *

“[T]he Labor Law does not require a plaintiff to have acted in a manner that is completely free from negligence” … . On the contrary, that plaintiff may have negligently lowered the pallet, as the dissent posits, makes no possible difference to the outcome here, as “[n]egligence, if any, of the injured worker is of no consequence” … . Rather, the law is clear that “if a statutory violation is a proximate cause of an injury, the plaintiff cannot be solely to blame for it” … . Here, the failure to provide a proper hoisting device to protect plaintiff violated Labor Law § 240(1). Somereve v Plaza Constr. Corp., 2016 NY Slip Op 01236, 1st Dept 2-18-16

 

LABOR LAW (PLAINTIFF ENTITLED TO SUMMARY JUDGMENT ON LABOR LAW 240 (1) CLAIM EVEN WHEN NOT FREE FROM NEGLIGENCE)

COVERAGE AT ISSUE WAS THE SUBJECT OF A POLICY EXCLUSION (WHICH WAS THEN ADDED BACK IN BY AN ENDORSEMENT); BECAUSE THE COVERAGE WAS NOT OUTSIDE THE SCOPE OF THE POLICY A TIMELY DISCLAIMER WAS REQUIRED.

The First Department, reversing Supreme Court, determined the insurance coverage at issue was the subject of a policy exclusion which required a timely disclaimer. The disclaimer was deemed untimely and ineffective. The plaintiff city was an additional insured on a general liability policy issued by defendant insurance company. The city was a defendant in a lawsuit alleging negligence by the Administration for Children’s Services resulting in the abuse and death of decedent. The policy excluded coverage for “abuse or molestation” but an endorsement added that coverage back in. The First Department noted that if “abuse or molestation” was outside the scope of the policy, no disclaimer would have been necessary. However, because “abuse or molestation” coverage was eliminated by a policy exclusion (and then added back in) a timely disclaimer was mandatory:

 

When a claim falls outside the scope of an insurance policy’s coverage portion, a disclaimer of coverage is unnecessary because the policy did not contemplate coverage in the first instance and requiring coverage for a failure to disclaim in such instances “would create coverage where it never existed” … . By contrast, when a refusal to provide coverage is based on a policy exclusion, a timely disclaimer of coverage is necessary to invoke the policy exclusion … . Here, abuse and molestation claims occurring during the policy period but not reported until afterwards were eliminated from coverage by the exclusion but not added back in by the endorsement, and thus required a disclaimer (id. ), which defendant failed to timely provide. City of New York v Granite State Ins. Co., 2016 NY Slip Op 01124, 1st Dept 2-16-16

 

INSURANCE LAW (COVERAGE EXCLUDED FROM POLICY AND ADDED BACK IN BY ENDORSEMENT REQUIRED TIMELY DISCLAIMER)/POLICY EXCLUSION (INSURANCE, COVERAGE EXCLUDED FROM POLICY AND ADDED BACK IN BY ENDORSEMENT REQUIRED TIMELY DISCLAIMER)/DISCLAIMER (INSURANCE, COVERAGE EXCLUDED FROM POLICY AND ADDED BACK IN BY ENDORSEMENT REQUIRED TIMELY DISCLAIMER)

ANALYTICAL FRAMEWORK FOR DE FACTO MERGER OF NONPROFIT CORPORATIONS FASHIONED BY THE COURT.

The First Department determined questions of fact were raised about whether there was a de facto merger of two nonprofit corporations. If a de facto merger is found in the sale of a corporation, the liabilities of the seller become the liabilities of the buyer. Because the established “de facto merger” law does not address nonprofits (which have no “owners”), the First Department fashioned a “nonprofit de facto merger” analytical framework:

Since, unlike for-profit corporations, nonprofits do not have owners, we hold that continuity of ownership is not a sine qua non of de facto merger of nonprofits, as it is for a finding of a de facto merger of for-profits … . Thus, it is necessary to examine the other elements of de facto merger.

Plaintiffs satisfied the second and third elements, “cessation of ordinary business operations and the dissolution of the selling corporation as soon as possible after the transaction,” and “the buyer’s assumption of the liabilities ordinarily necessary for the uninterrupted continuation of the seller’s business”… . …

Triable issues of fact exist as to the fourth element of de facto merger, “continuity of management, personnel, physical location, assets and general business operation”… . Ring v Elizabeth Found. for the Arts, 2016 NY Slip Op 01127, 1st Dept 2-16-16

CORPORATION LAW (DE FACTO MERGER OF NONPROFIT CORPORATIONS, ANALYTICAL FRAMEWORK)/DE FACTO MERGER (DE FACTO MERGER OF NONPROFIT CORPORATIONS, ANALYTICAL FRAMEWORK)/NONPROFIT CORPORATIONS (DE FACTO MERGER OF NONPROFIT CORPORATIONS, ANALYTICAL FRAMEWORK)

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CITY IS NOT LIABLE FOR ACCIDENT WHICH OCCURRED WHEN AN UNLICENSED CAR-WASH ATTENDANT WAS DRIVING A POLICE VAN.

The First Department, reversing Supreme Court, determined the city’s motion for summary judgment in this car-accident case should have been granted. Plaintiff was struck by a police van driven by an unlicensed car-wash attendant. The city was not liable for negligently entrusting the vehicle to the unlicensed driver because, inter alia, there was no duty to make sure the attendant had a license before handing over the keys to him. In addition, the city was not vicariously liable as the owner of the van pursuant to Vehicle and Traffic Law 388. Police vehicles are statutorily exempt from such liability. Plaintiff argued that the exemption did not apply because the van was not being “operated” by the police department at the time of the accident. The First Department held that “operated” in this context means “to exercise power over,” and not “driven:”

 

Plaintiff’s argument that the NYPD traffic van does not qualify as a “police vehicle,” because it was not being “operated by the police department” at the time of the accident, but, rather, was being “operated” by the car wash attendant, assumes that the term “operated” means “to cause to function” (Merriam- Webster Online Dictionary, http://beta.merriam-webster.com/dictionary/operate [accessed Jan. 27, 2016]) or is a substitute for the word “driven.” This ignores the common use of the term “operated” as an intransitive verb meaning “to exert power or influence” (id.). Under plaintiff’s interpretation, a police vehicle would not qualify as such under Vehicle and Traffic Law § 132-a, unless it was being driven by “the police department,” which strains common sense, since a police department cannot be the driver of a vehicle.

More importantly, plaintiff’s interpretation would strip the exemption provided to police vehicles in Vehicle and Traffic Law § 388(2) of its force and effect. Vehicle and Traffic Law § 388 specifically contemplates that someone, other than the vehicle’s owner, is driving the vehicle when an injury occurs. If “police vehicles” are only exempted when an owner or owner equivalent is driving, there would be no need for the exemption in Vehicle and Traffic Law § 388(2). This interpretation is untenable as it would render the police vehicle exemption in Vehicle and Traffic Law § 388(2) meaningless … . Guevara v Ortega, 2016 NY Slip Op 01106, 1st Dept 2-16-16

 

NEGLIGENCE (CITY NOT LIABLE FOR ACCIDENT WHICH OCCURRED WHEN UNLICENSED CAR-WASH ATTENDANT WAS DRIVING POLICE VAN)/MUNICIPAL LAW (CITY NOT LIABLE FOR ACCIDENT WHICH OCCURRED WHEN UNLICENSED CAR-WASH ATTENDANT WAS DRIVING POLICE VAN)/VEHICLE AND TRAFFIC LAW (CITY NOT LIABLE FOR ACCIDENT WHICH OCCURRED WHEN UNLICENSED CAR-WASH ATTENDANT WAS DRIVING POLICE VAN)

DEFENDANTS DID NOT DEMONSTRATE LACK OF NOTICE OF DANGEROUS CONDITION, SUMMARY JUDGMENT PROPERLY DENIED.

The First Department determined the defendants in a slip and fall case were not entitled to summary judgment because they did not affirmatively demonstrate a lack of notice of the icy condition:

 

Defendants did not demonstrate that they lacked constructive notice of the icy condition since they did not proffer an affidavit or testimony based on personal knowledge as to when its employees last inspected the driveway or as to the driveway’s condition prior to the accident … . The testimony of defendants’ branch manager as to his usual and customary practice of inspecting the premises each morning does not satisfy defendants’ burden of showing that they lacked notice of the alleged condition of the driveway prior to the accident, as there was no evidence to show that the manager’s customary practice was followed on the day of the accident … . Singh v Citibank, N.A., 2016 NY Slip Op 01120, 1st Dept 2-16-16

 

NEGLIGENCE (SLIP AND FALL, DEFENDANTS FAILED TO AFFIRMATIVELY DEMONSTRATE LACK OF NOTICE OF DANGEROUS CONDITION)/SLIP AND FALL (DEFENDANTS FAILED TO AFFIRMATIVELY DEMONSTRATE LACK OF NOTICE OF DANGEROUS CONDITION)

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