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SUPREME COURT SHOULD NOT HAVE, SUA SPONTE, DETERMINED THE PROVISION OF AN “AGREEMENT OF PURCHASE AND SALE OF STOCK” WHICH CALLED FOR RECOVERY OF DOUBLE ATTORNEYS FEES BY THE PREVAILING PARTY IN LITIGATION WAS AN UNENFORCEABLE PENALTY (SECOND DEPT).

The Second Department determined Supreme Court should not have, sua sponte, held that the provision of the “Agreement of Purchase and Sale of Stock” (PSA) which awarded double attorney’s fees if litigation resulted from a breach was an unenforceable penalty. The decision, which includes legal analysis well worth reading, is a complex discussion of the covenant not to compete and the nonsolicitation agreement which is too detailed and fact-specific to summarize here. There is an extensive dissent. With respect to the “double attorney’s fees” provision, the court wrote:

We disagree with the Supreme Court’s sua sponte determination that the provision of the PSA, which, in the event of litigation, allows for a recovery of double the amount of attorneys’ fees expended by the substantially prevailing party, is an unenforceable penalty. When parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms … . Paragraph 10.11 of the PSA clearly sets forth the intent of the parties, two sophisticated businesspeople with the benefit of counsel, that, should litigation arise out of the PSA, the “substantially prevailing party” is entitled to two times reasonable attorneys’ fees. Where, as here, “there is no deception or overreaching” in the making of such agreement, the agreement should be enforced as written … . Moreover, while each party asserted in the Supreme Court, and asserts on appeal, that he should prevail and be treated as the prevailing party for the purpose of paragraph 10.11, neither party contended in the Supreme Court that the double attorneys’ fees provision of paragraph 10.11 should not be enforced. Loughlin v Meghji, 2020 NY Slip Op 05196, Second Dept 9-30-20

 

NASSAU COUNTY SUPREME COURT CANNOT VACATE A DEFAULT ORDER ISSUED BY NEW YORK COUNTY SUPREME COURT, DESPITE THE CHANGE OF VENUE FROM NEW YORK COUNTY TO NASSAU COUNTY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the Nassau County Supreme Court could not vacate the default order issued by New York County Supreme Court, even though New York County Supreme Court had granted a change of venue to Nassau County:

The Supreme Court, Nassau County, had no authority to vacate the order of the Supreme Court, New York County … . A motion to vacate an order must be addressed to the court that made the order (see CPLR 5015[a]), and no court other than the one that rendered the order may entertain a motion to vacate it … . In any event, contrary to the defendants’ contention, the Supreme Court, New York County, did not lack subject matter jurisdiction to issue the New York County default order one day after its order granting a change of venue to Nassau County, since the “Supreme Court is a court possessing State-wide jurisdiction and is competent to entertain a motion no matter where the underlying action is pending” … . London v 107 (160) Realty, LLC, 2020 NY Slip Op 05195, Second Dept 9-30-20

 

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LOST NOTE AFFIDAVIT INSUFFICIENT TO ESTABLISH STANDING; PROOF OF COMPLIANCE WITH RPAPL 1304 INSUFFICIENT; OUT OF STATE AFFIDAVIT LACKED A CERTIFICATE OF CONFORMITY; NEITHER PLAINTIFF NOR DEFENDANT ENTITLED TO SUMMARY JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff-bank’s motion for summary judgment in this foreclosure action should not have been granted. The lost note affidavit was insufficient to establish standing the proof of compliance with the notice requirements of RPAPL 1304 was insufficient and the out of state affidavit lacked a certificate of conformity. Defendants’ cross-motion for summary judgment, however, was properly denied:

… [T]he plaintiff failed to proffer evidence establishing that the note was assigned to it, and the affidavit of lost note submitted in support of its motion failed to establish the facts that prevented the plaintiff from producing the original note (see UCC 3-804 …). We also note that the out-of-state affidavit from the vice president of loan documentation for Wells Fargo lacked a certificate of conformity as required by CPLR 2309(c), although such defect by itself would not be fatal to the plaintiff’s motion ,,, ,

… [A]lthough the plaintiff submitted a copy of the 90-day notice purportedly sent to the defendants, it failed to submit an affidavit of service or other proof of mailing establishing that it properly served them by registered or certified mail and first-class mail in accordance with RPAPL 1304 … . …

The defendants’ bare denial of receipt of the RPAPL 1304 notice, without more, was insufficient to establish their prima facie entitlement to judgment as a matter of law … . Trust v Moneta, 2020 NY Slip Op 05181, Second Dept 9-30-20

 

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AFTER CONVERTING THE ARTICLE 78 PETITION TO A COMPLAINT THE JUDGE SHOULD NOT HAVE TREATED THE MOTION TO DISMISS AS A SUMMARY JUDGMENT MOTION WITHOUT NOTIFYING THE PARTIES (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the judge, after converting the article 78 petition to a complaint, should not have, sua sponte, dismissed the complaint without notifying the parties:

… [T]he Supreme Court denied the Comptroller’s motion to dismiss, and, pursuant to CPLR 103(c), converted the article 78 petition into a complaint asserting a declaratory judgment cause of action. Upon reaching the merits of the plaintiff’s complaint, the court sua sponte denied the plaintiff declaratory relief and directed dismissal of the complaint. …

Upon converting the article 78 petition into a complaint, the Supreme Court erred in reaching the merits of the complaint, and directing its dismissal. Having converted the petition to a complaint, the court could only reach the merits by giving the parties adequate notice that it was going to treat the defendant’s pre-answer motion to dismiss as one for summary judgment (see CPLR 3211[c] …). The defendant had not served an answer to either the petition or the complaint, and therefore, any motion for summary judgment would have been premature (see CPLR 3212[a]). Moreover, the record does not establish that the parties deliberately charted a summary judgment course … . Under these circumstances, the court’s determination on the merits of the complaint was premature. Matter of Gorelick v Suffolk County Comptroller’s Off., 2020 NY Slip Op 05048, Second Dept 9-23-20

 

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THE EXCESS INSURANCE CARRIER WAS NOT BARRED FROM RECOVERY OF THE AMOUNT IT CONTRIBUTED TO THE SETTLEMENT OF A PERSONAL INJURY ACTION BY THE VOLUNTARY PAYMENT DOCTRINE; THE EXCESS INSURANCE CARRIER’S BREACH-OF-THE-COVENANT-OF-GOOD-FAITH ACTION AGAINST THE PRIMARY CARRIER PROPERLY SURVIVED SUMMARY JUDGMENT (SECOND DEPT).

The Second Department determined the excess insurance carrier, MetLife, could maintain an action against the primary liability carrier, GEICO, for breach of the implied covenant of good faith and fair dealing, alleging bad faith. GEICO  unsuccessfully argued the voluntary payment doctrine barred MetLife from recovering the amount it contributed to the settlement of the personal injury action stemming from an auto accident:

“The voluntary payment doctrine ‘bars recovery of payments voluntarily made with full knowledge of the facts, and in the absence of fraud or mistake of material fact or law'” … . However, the voluntary payment doctrine does not bar an excess insurance carrier, such as MetLife, that contributed to a settlement of an underlying action from seeking to recover its settlement contribution from a primary insurance carrier, such as GEICO, based on the primary carrier’s alleged bad faith. Despite an excess insurance carrier’s decision to contribute to a settlement, an excess insurance carrier may later maintain an action against a primary insurance carrier for breaching its duty of good faith in defending and settling claims over which it exercised exclusive control, provided that the excess insurance carrier reserved its rights against the primary insurance carrier at the time of the settlement … . An insurer may be held liable for breaching its duty of good faith … , and a primary liability insurer owes an excess insurance carrier the same duty of good faith as the primary liability insurer owes its insureds … . Metropolitan Prop. & Cas. Ins. Co. v GEICO Gen. Ins. Co., 2020 NY Slip Op 05045, Second Dept 9-23-20

 

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SUPREME COURT SHOULD NOT HAVE DISMISSED THIS DENTAL MALPRACTICE ACTION ON THE GROUND THE PLAINTIFFS’ EXPERT WAS NOT QUALIFIED TO RENDER AN OPINION; ANY WEAKNESSES IN THE EXPERT’S AFFIDAVIT WENT TO ITS WEIGHT NOT ITS ADMISSIBILITY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined this dental malpractice action should not have been dismissed. The weaknesses in plaintiffs’ expert’s affidavit went to the weight of her opinion as evidence, not its admissibility:

The Supreme Court granted that branch of the motion, determining that the defendant demonstrated his prima facie entitlement to judgment as a matter of law dismissing the dental malpractice cause of action insofar as asserted against him, and that the expert affirmation submitted by the plaintiffs in opposition lacked probative value because the plaintiffs’ expert was not qualified to render an opinion as to the applicable standard of care. …

… [T]he affirmation of the plaintiffs’ expert was sufficient to demonstrate his qualifications to render opinions as to the applicable standard of care and, under these circumstances, raised triable issues of fact as to whether the defendant deviated from that standard and whether any such deviation was a proximate cause of [plaintiff’s] injuries … . “Any lack of skill or expertise that the plaintiff’s expert may have had goes to the weight of his or her opinion as evidence, not its admissibility” … . The parties’ conflicting expert opinions raised questions of credibility for the trier of fact … . Lesniak v Huang, 2020 NY Slip Op 05044, Second Dept 9-23-20

 

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ORDER PROHIBITING DEFENDANT HUSBAND FROM DISPARAGING PLAINTIFF WIFE TO THIRD PARTIES WAS AN UNCONSTITUTIONAL PRIOR RESTRAINT OF SPEECH; ORDER SHOULD BE MODIFIED TO PROHIBIT DISPARAGING PLAINTIFF TO PLAINTIFF’S PATIENTS (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the order issued in this divorce proceeding prohibiting defendant husband from discussing, demeaning or disparaging plaintiff wife to third parties was an unconstitutional prior restraint of speech. Plaintiff, a psychologist, wanted to prohibit defendant from talking to her patients. The Second Department held the order should be modified to limit the prohibition disparaging plaintiff to plaintiff’s patients:

The defendant correctly contends that the portion of the order granting that branch of the plaintiff’s motion which was for an order directing the defendant not to discuss, demean, or disparage the plaintiff to any third parties, including but not limited to the plaintiff’s patients, was an unconstitutional prior restraint on speech. A prior restraint on speech is a law, regulation or judicial order that suppresses speech on the basis of the speech’s content and in advance of its actual expression … . Any imposition of prior restraint, whatever the form, bears a “heavy presumption against its constitutional validity, and a party seeking to obtain such a restraint bears a correspondingly heavy burden of demonstrating justification for its imposition” … . An injunctive order issued in the area of First Amendment rights must be couched in the narrowest terms that will accomplish the pin-pointed objective permitted by constitutional mandate and the essential needs of the public order … . The order must be tailored as precisely as possible to the exact needs of the case … . Here, the Supreme Court’s prior restraint on speech was overbroad, and not tailored as precisely as possible to the exact needs of this case. The plaintiff, a psychologist, was concerned about damage to her professional reputation due to the defendant’s allegedly demeaning statements to her patients. The court’s objective can be achieved by modifying the order to provide only that the defendant shall not discuss, demean, or disparage the plaintiff to her patients … . Karantinidis v Karantinidis, 2020 NY Slip Op 05039, Second Dept 9-23-20

 

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THE STATE HAS NOT PREEMPTED A MUNICIPALITY’S ABILITY TO REGULATE THE PROCESSING OF WASTE; THEREFORE, EVEN THOUGH THE STATE HAD ISSUED A PERMIT ALLOWING THE PROCESSING OF 500 TONS OF WASTE PER DAY, THE VILLAGE’S ACTION FOR A PERMANENT INJUNCTION REDUCING THE ALLOWED AMOUNT OF WASTE SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the village’s request for a preliminary injunction limiting the amount of waste that could be processed by defendant recycling company was properly denied, but the action seeking a permanent injunction should not have been dismissed. The Department of Environmental Conservation (DEC) had issued a temporary emergency permit allowing the defendant to process 1100 tons of waste per day and the defendant applied to make 1100 tons per day permanent. The village sought an injunction imposing the 2008 limit of 370 tons per day. While the preliminary injunction was pending, the DEC issued a permit imposing a daily waste limit of 500 tons per day, which obviated the need for the preliminary injunction. But, because the state has not preempted the ability of a municipality to regulate the amount of waste, the permanent injunction action should not have been dismissed:

… [T]he Supreme Court erred in determining, in effect, that it did not have the authority to issue declaratory or injunctive relief limiting the maximum amount of waste that could be processed at the facility in an amount less than that permitted by the DEC. Indeed, “the State has not preempted local legislation of issues related to municipal solid waste management” … . Thus, the DEC’s issuance of the 2016 renewal permit did not per se preclude the court from considering the merits of the causes of action asserted in the Village’s complaint. * * *

… [A]s a practical matter, the DEC’s issuance of the [500 ton per day] permit largely obviated the need for an order preliminarily enjoining the defendants … . … However, the Supreme Court had an insufficient legal or factual basis, at this preliminary stage, to deny the Village’s request for permanent injunctive relief precluding [defendant] from exceeding the 2008 limits. Indeed, if the Village is ultimately able to establish, at trial, that the defendants breached the terms of a prior agreement entered into between the Village and [defendant], or that the facility’s operation in excess of the 2008 limits constitutes a nuisance, or that the facility is operating in violation of the Village’s zoning code, then the Village may well be entitled to permanent injunctive relief as an appropriate remedy … . Incorporated Vil. of Lindenhurst v One World Recycling, LLC, 2020 NY Slip Op 05037, Second Dept 9-23-20

 

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A PARTY’S ADMISSION IN AN UNCERTIFIED POLICE REPORT IS NO LONGER ADMISSIBLE IN THE 2ND DEPARTMENT AND DECISIONS TO THE CONTRARY SHOULD NO LONGER BE FOLLOWED (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Connolly, reversing Supreme Court, noting prior decisions to the contrary should no longer be followed, determined a party’s hearsay admission in an uncertified police report is not admissible. Therefore, plaintiff’s motion for summary judgment in this rear-end collision case should not have been granted:

At the first level of hearsay, the report itself must be admissible. A properly certified police accident report is admissible where “the report is made based upon the officer’s personal observations and while carrying out police duties” … . CPLR 4518(c) provides that the foundation for the admissibility of, inter alia, the records of a department or bureau of a municipal corporation or of the state may be laid through a proper certification … . CPLR 4518(c) “is governed by the same standards as the general business record exception” … . Thus, the certification must “set forth” … that the record “was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter” (CPLR 4518[a]). * * *

Although a line of cases from our Court held that an uncertified police report constitutes inadmissible hearsay … , a separate line of cases anomalously espoused a carve-out to that rule, holding that a party’s admission in an uncertified police report is admissible against that party. Although a party’s admission is an exception to the hearsay rule … , it is not logically consistent to hold that such admission may be received into evidence where the business record containing the purported admission is not itself in admissible form. Stated differently, a party’s admission contained within a police accident report may not be bootstrapped into evidence if a proper foundation for the admissibility of the report itself has not been laid. Yassin v Blackman, 2020 NY Slip Op 05090, Second Dept 9-23-20

 

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EVIDENCE SUBMITTED IN PLAINTIFF BANK’S REPLY PAPERS PROPERLY CONSIDERED; THE BANK’S PROOF OF COMPLIANCE WITH THE NOTICE REQUIREMENTS OF THE MORTGAGE AGREEMENT WAS INSUFFICIENT; THE BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank’s reply papers were properly considered but plaintiff did not submit sufficient proof that a condition precedent in the mortgage agreement, re: notice of default, was complied with:

… [T]he Supreme Court providently exercised its discretion in considering the affidavit of the plaintiff’s employee Jeremiah Herberg, which was submitted with the plaintiff’s papers in opposition to the defendant’s cross motion and in further support of its motion … . Although “‘[a] party moving for summary judgment generally cannot meet its prima facie burden by submitting evidence for the first time in reply . . . , there are exceptions to the general rule, including . . . when the other party is given an opportunity to respond to the reply papers'” … . Here, the defendant had the opportunity to address the Herberg affidavit in her reply papers in further support of her own cross motion.

However, the plaintiff failed to establish, prima facie, that it complied with the condition precedent contained in section 22 of the mortgage agreement regarding the notice of default. The plaintiff’s submissions did not establish that the notice was sent by first class mail or actually delivered to the notice address, as required by the terms of the mortgage agreement … . Furthermore, Herberg’s affidavit failed to lay a proper foundation for the admission of records concerning the plaintiff’s mailing of the notices of default (see CPLR 4518[a] …). Wells Fargo Bank, N.A. v McKenzie, 2020 NY Slip Op 05086, Second Dept 9-23-20

 

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