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“Wheel Stop” Is Open and Obvious

The First Department determined a “wheel stop” in a parking lot, over which plaintiff tripped, was open and obvious:

Defendants established their entitlement to judgment as a matter of law in this action where plaintiff was injured when she tripped and fell over a wheel stop in defendants’ parking lot in the early evening. Defendants submitted evidence showing that the wheel stop was an open and obvious condition and not inherently dangerous … . The evidence demonstrated that the wheel stop’s placement had been approved by the local zoning board, the parking lot lights had been set to turn on at 4:00 p.m., the lights were inspected daily and found to be in good condition on the following day, and there had been no prior complaints about the wheel stop or inadequate lighting.

In opposition, plaintiff failed to raise a triable issue of fact. Her claim that an optical illusion created by inadequate lighting made the wheel stop less visible is insufficient to raise a triable issue of fact, as her testimony established that she was looking toward her car at the time of the accident … . Moreover, a photograph marked at her deposition reveals that the portion of the curb on which plaintiff allegedly tripped was near a light post … . Plaintiff’s affidavit in which she claimed to have been unable to see the surface of the parking lot and wheel stop directly contradicts her earlier testimony and raises only a feigned issue of fact … . Abraido v 2001 Marcus Ave., LLC, 2015 NY Slip Op 02204, 1st Dept 3-19-15

 

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(1) The Effect of Minor Discrepancies Re: the Submissions Required by a Standby Letter of Credit (SLC) (2) The Criteria for Interpreting an SLC (3) the Nature of an SLC and (4) the “Independence Principle” as Applied to an SLC Discussed in Some Depth

The First Department, in a full-fledged opinion by Justice Andrias, reversed Supreme Court and determined the issuer of standby letters of credit (SLC) was required to honor them.  The opinion is detailed and fact-based.  Among the legal issues discussed are: (1) minor discrepancies re: the documents required to be submitted (for a drawdown) by the terms of an SLC do not violate the “strict compliance” rule; (2) how to interpret an SLC; (3) the nature of an SLC  (versus a guaranty); and (4) the “Independence Principle” which requires that an SLC be deemed separate and distinct from the other contractual agreements underlying the transaction:

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 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” … . * * *

There are three parties to an SLC: the applicant who requests the SLC; the beneficiary to whom payment is due upon the presentation of the documents required by the SLC; and the issuer which obligates itself to honor the SLC and make payment when presented with the documents the SLC requires. In turn, there are three corresponding agreements: the agreement between the applicant and the beneficiary, which creates the basis for the SLC; the agreement between the issuer and the applicant; and the SLC itself … .

“[A] fundamental principle governing these transactions is the doctrine of independent contracts, [which] provides that the issuing bank’s obligation to honor drafts drawn on a letter of credit by the beneficiary is separate and independent from any obligation of its customer to the beneficiary under the … contract and separate as well from any obligation of the issuer to its customer under their agreement” … .

From the beneficiary’s perspective, the independence principle makes a letter of credit superior to a normal surety bond or guaranty because the issuer is primarily liable and is precluded from asserting defenses that an ordinary guarantor could assert. Indeed, “a letter of credit would lose its commercial vitality if before honoring drafts the issuer could look beyond the terms of the credit to the underlying contractual controversy or performance between its customer and the beneficiary”… . BasicNet S.P.A. v CFP Servs. Ltd., 2015 NY Slip Op 02080, 1st Dept 3-17-15

 

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Even Though the People Indicated They Were Not Ready for Trial After Filing a Certificate of Readiness, the Presumption the Statement of Readiness Was Accurate and Truthful When Made Was Not Rebutted/How to Interpret a Plurality Opinion by the Court of Appeals Explained

The First Department determined the People’s off-calendar statement of readiness was not illusory and, therefore, the defendant’s speedy-trial motion was properly denied. The First Department explained how it interpreted the Court of Appeals decision in People v Sibbles, 22 NY3d 1174, which included two three-judge concurrences, one by Judge Lippman and one by Judge Graffeo:

The three judge concurrence by Chief Judge Lippman “would hold that, if challenged, the People must demonstrate that some exceptional fact or circumstance arose after their declaration of readiness so as to render them presently not ready for trial” at the next court appearance after filing the certificate (22 NY3d at 1178). Chief Judge Lippman found that the People’s desire to strengthen their case did not satisfy this requirement.

The three judge concurrence by Judge Graffeo “would decide th[e] case on a narrower basis” (22 NY3d at 1179). While recognizing established precedent that the requirement of actual readiness under CPL 30.30 “will be met unless there is proof that the readiness statement did not accurately reflect the People’s position'”(id. at 1180, quoting People v Carter, 91 NY2d 795, 799 [1998]) and that “there is a presumption that a statement of readiness is truthful and accurate” (22 NY3d at 1180), Judge Graffeo found the statement of readiness “illusory” because “[t]he People initially declared that they were ready for trial on February 22 but within days sought copies of the injured officer’s medical records,” admitted at the next calendar call that they “were not in fact ready to proceed because they were continuing their investigation” and that they “needed to examine the medical records to decide if they would pursue introduction of the records into evidence at trial”, and then “gave no explanation for the change in circumstances between the initial statement of readiness and the[ir] subsequent admission that the[y] … were not ready to proceed without the medical records” (22 NY3d at 1181).

Following analogous precedent pertaining to plurality opinions by the United States Supreme Court, we apply the narrower approach of Judge Graffeo, which leaves intact well- settled law that a post-certificate assertion that the People are not ready does not, by itself, vitiate the previously filed certificate of readiness … . * * *

[Here], unlike, Sibblies, there is no “proof that the readiness statement did not accurately reflect the People’s position,” so as to render the prior statement of readiness illusory (Sibblies, 22 NY3d at 1180 …). Rather, defense counsel merely speculated that the certificate of readiness was illusory because the People announced that they were not ready at the next court appearance after it was filed, which is insufficient to rebut the presumption that the certificate of readiness was accurate and truthful … . People v Brown, 2015 NY Slip Op 02042, 1st Dept 3-17-15

 

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Criteria for Balancing the Need for a Public Trial and First Amendment Rights (Freedom of the Press) With the Defendant’s Right to a Fair Trial Discussed in Some Detail—Here the Court’s Sealing of Some Records and Closures of the Courtroom Reflected a Proper Discretionary Balance

The First Department, in a detailed decision, determined Supreme Court had properly balanced the requirement that a criminal trial be open to the public and the defendant’s right to a fair trial.  Because the court properly used its discretion to balance the two concerns neither mandamus nor prohibition was an available remedy.  The decision is worth reading—many of the issues discussed are not noted here:

The First Amendment guarantees the public and the press a qualified right of access to criminal trials … . This right must be kept in balance with the compelling interest of the defendant’s Sixth Amendment right to a fair trial and the right to privacy of prospective jurors … . The public’s right of access may be limited where there is a compelling governmental interest and closure is narrowly tailored to serve that interest … .

New York’s approach to courtroom closure is “comparable to the federal analysis” … . The press is not imbued with any special right of access, and while it possesses “the same right of access as the public,” it has no right to information about a trial that is “greater” or “superior” to that of the general public … . A ” trial judge has an affirmative constitutional duty to minimize the effects of prejudicial pretrial publicity'” … . Decisions to seal or disclose records fall within the inherent power of the court to control the records of its own proceedings … . While a court must guarantee that the defendant receives a fair trial, it must do so in a manner that balances the interests of “the defendant, jurors, witnesses, attorneys and the public at large” … . Matter of Daily News, L.P. v Wiley, 2015 NY Slip Op 02010, 3rd Dept 3-12-15

 

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Mandamus to Compel Proceedings Properly Sought to Compel the NYC Housing Authority to Consider Requests for Increases in “Section 8” Rent Subsidies (A Ministerial Act), But a Particular Result Could Not Be Compelled (Because Exercise of Discretion Involved)

The First Department, in a full-fledged opinion by Justice Richter, determined that Article78/mandamus-to-compel proceedings were properly brought by owners of rental-properties against the NYC Housing Authority seeking rulings re: increased and suspended “Section 8” rent subsidies. The court held that the property-owners could compel the NYCHA to consider its requests (a ministerial act), but could not compel any specific result (an exercise of discretion).  The action was deemed timely because the NYCHA had never denied the requests, therefore the four-month statute never started running.  With respect increased subsidies, the court wrote:

An article 78 mandamus proceeding may be brought to compel an agency “to perform a duty enjoined upon it by law” (CPLR 7803[1]). It is well-settled that a mandamus to compel “applies only to acts that are ministerial in nature and not those that involve the exercise of discretion” … . Thus, “the petitioner must have a clear legal right to the relief demanded and there must exist a corresponding nondiscretionary duty on the part of the administrative agency to grant that relief” … .

Supreme Court properly found that the determination of the amount of any increase in the Section 8 subsidy is not purely ministerial but a matter entrusted to NYCHA’s discretion. An owner cannot receive a rent increase unless NYCHA first determines the reasonable rent (24 CFR 982.507[a][2][i]). In doing so, NYCHA is required to compare the unit’s rent to comparable unassisted units and must consider a myriad of discretionary factors, including location, quality, size, type and age of the unit, and any services, utilities and amenities provided (24 CFR 982.507[b]). Because the determination of the amount of any rental increase involves the exercise of discretion, it is not subject to mandamus. * * *

Although the eventual determination of reasonable rent will be the product of NYCHA’s judgment, the agency does not enjoy similar discretion to not make a decision at all on the rent increase requests. The applicable regulation, relied upon by NYCHA, provides that before any rent increase is allowed, NYCHA “must redetermine the reasonable rent” (24 CFR 982.507[a][2][i] [emphasis added]; see also 24 CFR 982.519[a] [under regulation relied upon by petitioners, NYCHA must annually adjust rent at owner’s request]). Upon the proper submission of a request for rent increase, NYCHA must process the request and come to a determination, whether adverse to petitioners’ position or not. NYCHA cannot leave petitioners in limbo, neither granting nor denying their requests, many of which have been pending for a significant amount of time. Thus, the petition states a claim for mandamus relief to the extent it seeks an order directing NYCHA to make a determination with respect to the rent increase requests … . Matter of Flosar Realty LLC v New York City Hous. Auth., 2015 NY Slip Op 01906, 1st Dept 3-10-15

 

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Rebuttal Evidence Re: a Defense that Was Not Asserted Should Not Have Been Allowed (Harmless Error)/Partial Closure of Courtroom During Testimony of Undercover Officers Proper

The First Department, over a dissent, determined that, although Supreme Court erred when it allowed the prosecution to reopen its case to present rebuttal evidence, the error was harmless in this bench trial. Defense counsel had mentioned an agency defense to the drug-sale charge, but then explained that the only defense raised at trial was defendant’s complete noninvolvement. Under those circumstances evidence rebutting the agency defense, which was never asserted, should not have been allowed. The First Department also held that Supreme Court properly closed the courtroom during the testimony of undercover officers.  With regard to the partial closure of the courtroom, the First Department wrote:

The Hinton hearing court, which closed the courtroom for the testimony of two undercover officers and which offered to permit family members or other persons designated by defendant to enter, properly exercised its discretion in rejecting defense counsel’s proposal that a court officer screen members of the general public who sought to enter during the testimony. The court concluded that this suggestion would have been impracticable because there was no additional court officer available to be posted outside the courtroom, and because in any event the officer would frequently have to interrupt the testimony to report the presence of persons seeking to enter. Therefore, under the circumstances presented, defendant’s proposal was not a “reasonable alternative[] to closing the proceeding” … . People v Mallard, 2015 NY Slip Op 01882, 1st Dept 3-10-15

 

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Criteria for (Upward) Departure from the Risk Level Assessed by the Board of Sex Offenders Explained

The First Department determined the SORA court properly departed from the recommendation by the Board of Sex Offenders (the Board) that defendant be assessed a level one sex offender.  The defendant had communicated in an Internet chat room with a police officer posing as a 13-year-old girl. Upward departure (to level two) was deemed warranted because, although there was no actual victim, the defendant’s behavior indicated he posed a risk to young girls and might re-offend. The court explained when departure from the Board’s recommendation is warranted:

The court concluded that the Board’s allocation to defendant of risk level one was inadequate and determined him to be a risk level two. The court stated, in relevant part:

“I don’t think this level would be appropriate for somebody who might re-engage in this conduct because the next person that he’s in contact with could very well be a real child and that person would be victimized, and I don’t think that this qualifies under the lowest level. This is not like one single, you know, inadvertent contact with somebody. This is a relationship that he attempted to develop, and as if over the period of days he got more and more explicit, counsel, indicated to her what he wanted to do, all the while thinking she’s a 13 year-old girl. I don’t believe that this risk score or the Board’s recommendation accurately reflects even the risk of his re-offending, counsel, or the harm that would be caused if he did re-offend, which are the two factors that the court is supposed to weigh in assessing his risk.” …

Although the Board’s assessment of a risk level is presumed to be correct, the reviewing court is to consider it as only a recommendation from which it, as an exercise of its discretion, can depart if there is clear and convincing evidence that a departure is warranted (…Correction Law 168-n[3]). The court’s analysis is not limited to tallying up points it believes the Board did not assess; rather, the court can adjust the risk level upwards if it determines that there are “aggravating factors not adequately accounted for in the [RAI]” … . This rule derives from the Board’s “Risk Assessment Guidelines and Commentary,” (the Guidelines), which note that “an objective instrument, no matter how well designed, will not fully capture the nuances of every case. Not to allow for departures would, therefore, deprive the Board or a court of the ability to exercise sound judgment and to apply its expertise to the offender” … . Conversely, as noted, the Board’s determinations are presumptive, and not to be routinely overturned … .  People v Macchia, 2015 NY Slip Op 01883, 1st Dept 3-10-15

 

 

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Trustee’s Settlement of Claims Against Countrywide/Bank of America Stemming from Sale of Mortgage-Backed Securities Approved

The First Department, in a full-fledged opinion by Justice Saxe, determined the trustee properly exercised its discretion in settling the claims stemming from mortgage-backed securities sold by Countrywide Home Loans between 2004 and 2008. Countywide was subsequently purchased by Bank of America (BofA). The First Department explained the courts’ powers re: reviewing the settlement under CPLR Article 77:

The ultimate issue for determination here is whether the trustee’s discretionary power was exercised reasonably and in good faith … . It is not the task of the court to decide whether we agree with the Trustee’s judgment; rather, our task is limited to ensuring that the trustee has not acted in bad faith such that his conduct constituted an abuse of discretion … .

We agree with Supreme Court that the Trustee did not abuse its discretion or act unreasonably or in bad faith in embarking on the settlement here. The Trustee acted within its authority throughout the process, and there is no indication that it was acting in self-interest or in the interests of BofA rather than those of the certificateholders.

Importantly, “if a trustee has selected trust counsel prudently and in good faith, and has relied on plausible advice on a matter within counsel’s expertise, the trustee’s conduct is significantly probative of prudence” (Restatement [Third] of Trusts § 77, Comment b[2]). While reliance on the advice of counsel may not always be the end of the analysis regarding a claimed breach of trust — it is possible for a trustee to specifically seek out legal advice that would support the trustee’s desired course of conduct, or there may be other circumstances establishing that it was unreasonable to follow the legal advice (id.) — a party challenging the decisions of a trustee who followed the advice of a highly-regarded specialist in the relevant area of law can prevail only upon a showing that, based on the particular circumstances, the reliance on such counsel’s assessment was unreasonable and in bad faith. Court approval of the settlement does not require that the court agree with counsel’s judgment or assessment; all that is required is a determination that it was reasonable for the Trustee to rely on counsel’s expert judgment. Matter of Bank of N.Y. Mellon, 2015 NY Slip Op 01880, 1st Dept 3-5-15

 

Release Applied to Claims Unknown at the Time the Release Was Signed and to Claims Among Parties on the Same Side of the Underlying Lawsuit

The First Department determined the language of the release was broad enough to include claims not known to exist at the time the release was signed and claims among parties on the same side in the suit:

According to the language of the agreement, the release broadly barred “all and/or any” claims “arising from” or “resulting from” or “in connection with” “any act [etc.] concerning [the Fund].” This Court has actually construed similar broad language to bar fraud claims relating to the subject matter where the signatories to the agreement did not specifically refer to, or even know about, those fraud claims before executing their release … . Similarly, courts have given effect to releases even when the releasors are subjectively unaware of the precise claims they are releasing … .

* * *  … [T]he language in the release simply states that “each Party . . . irrevocably and fully releases and forever discharges each other Party.” Had the parties wanted to release only specific individuals or entities, the agreement provided the language by which the parties could have done so. Thus, the release here at issue makes clear that each individual party released each other individual party regardless of the position in which those parties stood at the time they signed the release. Long v O’Neill, 2015 NY Slip Op 01733, 1st Dept 3-3-15

 

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Merger Doctrine and “As Is” Clause Did Not Bar Suit/Fraud-Based Causes of Action Did Not Duplicate Breach of Contract Cause of Action

The First Department, in a full-fledged opinion by Justice Mazzarelli, over a dissent, determined, in the context of a motion to dismiss for failure to state a cause of action, the merger doctrine did not apply to a contract for the sale of an apartment building, the fraud and fraudulent misrepresentations causes of action were not duplicative of the breach of contract cause of action (which was time-barred), and sufficient allegations for piercing the corporate veil had been pled.  The opinion is detailed because of the complicated facts and cannot fairly be summarized here.  With respect to the merger doctrine and the fraud-based causes of action, the court wrote:

The merger doctrine in a real estate transaction provides that once the deed is delivered, its terms are all that survive and the purchaser is barred from prosecuting any claims arising out of the contract … . The only exception to this rule is where the parties clearly intended that the particular provision of the contract supporting the claim would survive the delivery of the deed … . Further, an “as is” clause in a contract to sell real property will ordinarily bar a claim for breach of contract … . Plaintiff argues that the merger doctrine does not apply here because of the latent nature of the defects at issue. It further contends that its allegations of deceptive behavior on Seller’s part to mask the true condition of the building render the “as is” clause inoperable.

Although plaintiff cites trial court opinions identifying a latency exception to the merger doctrine, the concept has not been adopted by any of the Appellate Divisions or by the Court of Appeals … , and we are not adopting it here. Nevertheless, the merger doctrine is inapplicable in this case. Although the crux of the action is undoubtedly that plaintiff took title to a seriously defective building, the specific allegations in the complaint are that Seller breached the contract by failing to abide by those provisions designed to permit plaintiff to gain a true understanding of the condition of the property. …[E]ach of those representations was explicitly intended by the parties not to merge into the deed.

Further, since the breach of contract cause of action is addressed to these representations, and not to the condition of the building itself, the presence of the “as is” clause is no bar to the claim. Additionally, while the “as is” clause states that Seller has made no representations as to “any other matter or thing affecting or relating to the property,” it carries the caveat that this is “except as specifically set forth to the contrary in this agreement” (emphasis omitted). Thus, the three specific representations which plaintiff alleges were breached trump the “as is” clause. To the extent that plaintiff asserts fraud claims not directly related to the three surviving representations, the merger doctrine still does not apply (West 90th Owners Corp. v Schlechter, 137 AD2d 456, 459 [1st Dept 1988] [“fraud is a recognized exception to the merger doctrine”). * * *

Where “allegations of intentional fraud, though parallel in many respects to the breach of contract claim, include claims of fraudulent misrepresentations made by defendants which induced them to enter into the contract and close on the property, they are not merely redundant of the breach of contract claim . . . [and a] fraud cause of action is sustainable” … . TIAA Global Invs., LLC v One Astoria Sq. LLC, 2015 NY Slip Op 01768, 1st Dept 3-3-15

 

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