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PLAINTIFF ENTITLED TO PREJUDGMENT INTEREST AT THE STATUTORY RATE IN THIS CONVERSION ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff was entitled to interest at the statutory rate based on the value of the property at the time and place of conversion:

On a prior appeal in this action, this Court awarded summary judgment to the plaintiff, inter alia, on the cause of action to recover damages for conversion in the sum of $69,500, representing the amount of estate funds that were wrongfully converted by the defendant Rick Barrett. The Supreme Court subsequently entered an amended judgment that awarded the plaintiff the sum of $69,500 but failed to award prejudgment interest at the statutory rate of 9% per annum on that sum. The plaintiff appeals from so much of the amended judgment as failed to award prejudgment interest at the statutory rate on the $69,500 damages award.

“The usual measure of damages for conversion is the value of the property at the time and place of conversion, plus interest” … . Indeed, CPLR 5001(a) provides for the award of prejudgment interest upon sums awarded for the deprivation of or interference with another’s property, and relevant case law clearly establishes that such interest is properly awarded as part of the recovery on a cause of action sounding in conversion … . Moreover, interest is to be awarded at the statutory rate of 9% per annum … . Scotti v Barrett, 2018 NY Slip Op 07477, Second Dept 11-7-18

CONVERSION (PLAINTIFF ENTITLED TO PREJUDGMENT INTEREST AT THE STATUTORY RATE IN THIS CONVERSION ACTION (SECOND DEPT))/INTEREST (CONVERSION, PLAINTIFF ENTITLED TO PREJUDGMENT INTEREST AT THE STATUTORY RATE IN THIS CONVERSION ACTION (SECOND DEPT))/CPLR 5001 (PLAINTIFF ENTITLED TO PREJUDGMENT INTEREST AT THE STATUTORY RATE IN THIS CONVERSION ACTION (SECOND DEPT))

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PLAINTIFF RETAILER ATTEMPTED TO RECOVER PAYMENTS MADE TO A BANK STEMMING FROM THE HACKING OF MASTERCARD CREDIT CARD INFORMATION FROM THE RETAILER’S ACCOUNTS UNDER EQUITABLE SUBROGATION, MONEY HAD AND RECEIVED AND UNJUST ENRICHMENT THEORIES, COMPLAINT PROPERLY DISMISSED (SECOND DEPT). ​

The Second Department determined MasterCard’s motion to dismiss this equitable subrogation and unjust enrichment action by plaintiff (Jetro) stemming from the the alleged hacking or attempted hacking of MasterCard credit card information from Jetro computer systems was properly granted. MasterCard has a contract with PNC, a bank, which provided that MasterCard could recover assessments against PNC because of the hacking. Jetro was required to indemnify PNC for those assessments and sued MasterCard to recover the payments. There was no contract between MasterCard and Jetro, so the only possible viable causes of action were equitable subrogation, money had and received and unjust enrichment, which were rejected because of the terms of the relevant contracts:

Pursuant to the doctrine of equitable subrogation, where the ” property of one person is used in discharging an obligation owed by another or a lien upon the property of another, under such circumstances that the other would be unjustly enriched by the retention of the benefit thus conferred, the former is entitled to be subrogated to the position of the obligee or lien-holder'” …

Here, Jetro’s indemnification obligation, set forth in its contract with PNC, was based on Jetro’s own “acts or omissions” relating to a data breach incident. The indemnification clause in the PNC-Jetro contract is broader than the obligation of PNC toward MasterCard with respect to data breaches. According to the complaint, the PNC-Jetro contract obligated Jetro to indemnify PNC for any penalties imposed by MasterCard, “even in cases when MasterCard violated the Standards or otherwise violated the law by imposing the assessment[s] in question.” In light of these contractual provisions, even accepting the allegations of the complaint as true … , in undertaking to indemnify PNC, Jetro satisfied its separate and distinct obligation to PNC, and it is not equitably subrogated to the rights of PNC as against MasterCard … . …

“The essential elements of a cause of action for money had and received are (1) the defendant received money belonging to the plaintiff, (2) the defendant benefitted from receipt of the money, and (3) under principles of equity and good conscience, the defendant should not be permitted to keep the money” … . ” The elements of a cause of action to recover for unjust enrichment are (1) the defendant was enriched, (2) at the plaintiff’s expense, and (3) that it is against equity and good conscience to permit the defendant to retain what is sought to be recovered'” … .

Here, the subject penalties were collected or retained by MasterCard pursuant to its contract with PNC, which then sought indemnification from Jetro pursuant to PNC’s separate contract with Jetro. We agree with the Supreme Court that the exercise by MasterCard of its purported contractual rights against PNC was independent of the determination by PNC to enforce its indemnification rights against Jetro. Therefore, it cannot be said that MasterCard unjustly benefitted from its action, or that it would be inequitable to allow it to retain the subject funds … . Jetro Holdings, LLC v MasterCard Intl., Inc., 2018 NY Slip Op 07418, Second Dept 11-7-18

CONTRACT LAW (PLAINTIFF RETAILER ATTEMPTED TO RECOVER PAYMENTS MADE TO A BANK STEMMING FROM THE HACKING OF MASTERCARD CREDIT CARD INFORMATION FROM THE RETAILER’S ACCOUNTS UNDER EQUITABLE SUBROGATION, MONEY HAD AND RECEIVED AND UNJUST ENRICHMENT THEORIES, COMPLAINT PROPERLY DISMISSED (SECOND DEPT))/EQUITABLE SUBROGATION (PLAINTIFF RETAILER ATTEMPTED TO RECOVER PAYMENTS MADE TO A BANK STEMMING FROM THE HACKING OF MASTERCARD CREDIT CARD INFORMATION FROM THE RETAILER’S ACCOUNTS UNDER EQUITABLE SUBROGATION, MONEY HAD AND RECEIVED AND UNJUST ENRICHMENT THEORIES, COMPLAINT PROPERLY DISMISSED (SECOND DEPT))/MONEY HAD AND RECEIVED  (PLAINTIFF RETAILER ATTEMPTED TO RECOVER PAYMENTS MADE TO A BANK STEMMING FROM THE HACKING OF MASTERCARD CREDIT CARD INFORMATION FROM THE RETAILER’S ACCOUNTS UNDER EQUITABLE SUBROGATION, MONEY HAD AND RECEIVED AND UNJUST ENRICHMENT THEORIES, COMPLAINT PROPERLY DISMISSED (SECOND DEPT))/UNJUST ENRICHMENT (PLAINTIFF RETAILER ATTEMPTED TO RECOVER PAYMENTS MADE TO A BANK STEMMING FROM THE HACKING OF MASTERCARD CREDIT CARD INFORMATION FROM THE RETAILER’S ACCOUNTS UNDER EQUITABLE SUBROGATION, MONEY HAD AND RECEIVED AND UNJUST ENRICHMENT THEORIES, COMPLAINT PROPERLY DISMISSED (SECOND DEPT))/CREDIT CARDS (PLAINTIFF RETAILER ATTEMPTED TO RECOVER PAYMENTS MADE TO A BANK STEMMING FROM THE HACKING OF MASTERCARD CREDIT CARD INFORMATION FROM THE RETAILER’S ACCOUNTS UNDER EQUITABLE SUBROGATION, MONEY HAD AND RECEIVED AND UNJUST ENRICHMENT THEORIES, COMPLAINT PROPERLY DISMISSED (SECOND DEPT))/HACKING (CREDIT CARDS, PLAINTIFF RETAILER ATTEMPTED TO RECOVER PAYMENTS MADE TO A BANK STEMMING FROM THE HACKING OF MASTERCARD CREDIT CARD INFORMATION FROM THE RETAILER’S ACCOUNTS UNDER EQUITABLE SUBROGATION, MONEY HAD AND RECEIVED AND UNJUST ENRICHMENT THEORIES, COMPLAINT PROPERLY DISMISSED (SECOND DEPT))

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QUESTION OF FACT WHETHER DEFENDANT WAS NEGLIGENT IN THIS REAR END COLLISION CASE, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion for summary judgment in this rear-end collision case should not have been granted. Plaintiff submitted defendant’s deposition in which defendant testified plaintiff stopped abruptly for no apparent reason:

A rear-end collision with a stopped or stopping vehicle establishes a prima facie case of negligence on the part of the operator of the rear vehicle, requiring that operator to rebut the inference of negligence by providing a nonnegligent explanation for the collision … . “A nonnegligent explanation includes, but is not limited to, sudden or unavoidable circumstances'” … .

The Supreme Court should have denied the plaintiff’s motion for summary judgment on the issue of liability. The plaintiff’s deposition testimony, submitted in support of the motion, demonstrated that her vehicle was struck in the rear while stopped on the exit ramp due to traffic conditions, thus raising an inference of the defendant driver’s negligence. However, the plaintiff’s submissions also included a transcript of the defendant driver’s deposition testimony, wherein he testified that the plaintiff’s vehicle came to an abrupt stop when there was no vehicular traffic in front of it on the exit ramp, and the two vehicles collided. Under these circumstances, the plaintiff’s motion papers presented a triable issue of fact as to whether the defendant driver was negligent in the happening of the subject accident … . Richter v Delutri, 2018 NY Slip Op 07475, Second Dept 11-7-18

NEGLIGENCE (TRAFFIC ACCIDENTS, REAR END COLLISION, QUESTION OF FACT WHETHER DEFENDANT WAS NEGLIGENT IN THIS REAR END COLLISION CASE, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT))/EVIDENCE (NEGLIGENCE, REAR END COLLISION, QUESTION OF FACT WHETHER DEFENDANT WAS NEGLIGENT IN THIS REAR END COLLISION CASE, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT))/TRAFFIC ACCIDENTS (REAR END COLLISION, QUESTION OF FACT WHETHER DEFENDANT WAS NEGLIGENT IN THIS REAR END COLLISION CASE, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT))/REAR END COLLISIONS ( QUESTION OF FACT WHETHER DEFENDANT WAS NEGLIGENT IN THIS REAR END COLLISION CASE, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT))

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QUESTION OF FACT WHETHER THE ABSENCE OF A SECOND HANDRAIL, A VIOLATION OF THE BUILDING CODE, WAS A PROXIMATE CAUSE OF PLAINTIFF’S SLIP AND FALL IN A STAIRWAY, DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined there was a question of fact whether the absence of a handrail on a stairway, a violation of the Building Code, was a proximate cause of plaintiff’s slip and fall. Therefore defendants motion for summary judgment should not have been granted:

… [P]laintiff argued … that the absence of a second handrail proximately caused her injuries. She submitted the affidavit of an engineering expert, who averred that the condition of the staircase violated various provisions of the 1984 New York State Fire Prevention and Building Code (hereinafter the Building Code). The plaintiff raised a triable issue of fact regarding the absence of a second handrail. There is no dispute that the staircase required a second handrail (see 9 NYCRR former 765.4[a][11]). Given the plaintiff’s deposition testimony that there was nothing to grasp when she reached for the partial wall to her left, coupled with conflicting evidence as to whether the partial wall complied with section 765.4(a)(11) of the Building Code, triable issues of fact exist as to whether the Building Code was violated and whether a violation of that section of the Building Code, if any, was a proximate cause of the plaintiff’s injuries … . Rakovsky v Rob-Lee Corp., 2018 NY Slip Op 07471, Second Dept 11-7-18

NEGLIGENCE (SLIP AND FALL, QUESTION OF FACT WHETHER THE ABSENCE OF A SECOND HANDRAIL, A VIOLATION OF THE BUILDING CODE, WAS A PROXIMATE CAUSE OF PLAINTIFF’S SLIP AND FALL IN A STAIRWAY, DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT))/EVIDENCE (NEGLIGENCE, SLIP AND FALL, QUESTION OF FACT WHETHER THE ABSENCE OF A SECOND HANDRAIL, A VIOLATION OF THE BUILDING CODE, WAS A PROXIMATE CAUSE OF PLAINTIFF’S SLIP AND FALL IN A STAIRWAY, DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT))/STAIRWAYS (SLIP AND FALL, QUESTION OF FACT WHETHER THE ABSENCE OF A SECOND HANDRAIL, A VIOLATION OF THE BUILDING CODE, WAS A PROXIMATE CAUSE OF PLAINTIFF’S SLIP AND FALL IN A STAIRWAY, DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT))/HANDRAILS (SLIP AND FALL, QUESTION OF FACT WHETHER THE ABSENCE OF A SECOND HANDRAIL, A VIOLATION OF THE BUILDING CODE, WAS A PROXIMATE CAUSE OF PLAINTIFF’S SLIP AND FALL IN A STAIRWAY, DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT))/HANDRAILS (STAIRWAYS, SLIP AND FALL, QUESTION OF FACT WHETHER THE ABSENCE OF A SECOND HANDRAIL, A VIOLATION OF THE BUILDING CODE, WAS A PROXIMATE CAUSE OF PLAINTIFF’S SLIP AND FALL IN A STAIRWAY, DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT))/SLIP AND FALL (QUESTION OF FACT WHETHER THE ABSENCE OF A SECOND HANDRAIL, A VIOLATION OF THE BUILDING CODE, WAS A PROXIMATE CAUSE OF PLAINTIFF’S SLIP AND FALL IN A STAIRWAY, DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT))

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CONSTRUCTIVE NOTICE OF LIQUID ON THE FLOOR IN THIS SLIP AND FALL CASE NOT DEMONSTRATED WITH RESPECT TO THE BUILDING OWNER, NO ESPINAL FACTORS ALLEGED WITH RESPECT TO THE CLEANING SERVICE, DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the defendants’ motions for summary judgment in this slip and fall case should have been granted. Constructive notice of the liquid on the floor was not demonstrated with respect to the building owner (Berkshire) and none of the Espinal factors were alleged with respect to the cleaning service (Temco):

Here, the evidence submitted by Berkshire in support of its motion, including the transcript of the plaintiff’s deposition testimony, was sufficient to establish, prima facie, that Berkshire did not create the alleged hazardous condition or have actual or constructive notice of its existence for a sufficient period of time to have discovered and remedied it … . The plaintiff testified that when he traversed the accident site approximately 20 minutes before the incident, he did not see the condition that had caused him to slip. In opposition, the plaintiffs failed to raise a triable issue of fact.

With respect to Temco’s motion, “[g]enerally, a contractual obligation, standing alone, will not give rise to tort liability in favor of a third party” … . However, there are three exceptions to this general rule: (1) where the contracting party, in failing to exercise reasonable care in the performance of its duties, launches a force or instrument of harm or creates or exacerbates a hazardous condition; (2) where the plaintiff detrimentally relies on the continued performance of the contracting party’s duties; and (3) where the contracting party has entirely displaced the other party’s duty to maintain the premises safely… .

Here, Temco established its prima facie entitlement to judgment as a matter of law by demonstrating, prima facie, that the plaintiff was not a party to its cleaning services contract, and that it, thus, owed him no duty of care … . Since the plaintiffs did not allege facts in the complaint or bill of particulars that would establish the applicability of any of the Espinal exceptions, Temco was not required to affirmatively demonstrate that these exceptions were inapplicable in order to establish its prima facie entitlement to judgment as a matter of law … . Hagan v City of New York, 2018 NY Slip Op 07415, Second Dept 11-7-18

NEGLIGENCE (SLIP AND FALL, CONSTRUCTIVE NOTICE OF LIQUID ON THE FLOOR IN THIS SLIP AND FALL CASE NOT DEMONSTRATED WITH RESPECT TO THE BUILDING OWNER, NO ESPINAL FACTORS ALLEGED WITH RESPECT TO THE CLEANING SERVICE, DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))/SLIP AND FALL ( CONSTRUCTIVE NOTICE OF LIQUID ON THE FLOOR IN THIS SLIP AND FALL CASE NOT DEMONSTRATED WITH RESPECT TO THE BUILDING OWNER, NO ESPINAL FACTORS ALLEGED WITH RESPECT TO THE CLEANING SERVICE, DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))/ESPINAL FACTORS (SLIP AND FALL, SLIP AND FALL, CONSTRUCTIVE NOTICE OF LIQUID ON THE FLOOR IN THIS SLIP AND FALL CASE NOT DEMONSTRATED WITH RESPECT TO THE BUILDING OWNER, NO ESPINAL FACTORS ALLEGED WITH RESPECT TO THE CLEANING SERVICE, DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))/CONTRACT LAW (SLIP AND FALL, ESPINAL FACTORS, CONSTRUCTIVE NOTICE OF LIQUID ON THE FLOOR IN THIS SLIP AND FALL CASE NOT DEMONSTRATED WITH RESPECT TO THE BUILDING OWNER, NO ESPINAL FACTORS ALLEGED WITH RESPECT TO THE CLEANING SERVICE, DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))

SUPREME COURT SHOULD NOT HAVE GRANTED PLAINTIFF PERMISSION TO SERVE AN AMENDED COMPLAINT AND SIMULTANEOUSLY AWARDED PLAINTIFF SUMMARY JUDGMENT ON SEVERAL CAUSES OF ACTION, THE AMENDED COMPLAINT SUPERSEDES THE ORIGINAL AND MUST BE ANSWERED BEFORE FURTHER PROCEEDINGS (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined Supreme Court should not have simultaneously granted plaintiff permission to amend the complaint and granted summary judgment on several causes of action. An amended complaint supersedes the original complaint and should be answered before any further proceedings:

… Supreme Court should not have awarded the plaintiff summary judgment on the issue of liability on the first, third, and fourth causes of action in the amended complaint, while simultaneously allowing the plaintiff to serve the amended complaint … . “When an amended complaint has been served, it supersedes the original complaint and becomes the only complaint in the case” … . “Since an amended complaint supplants the original complaint, it would unduly prejudice a defendant if it were bound by an original answer when the original complaint has no legal effect” … . As a result, “an amended complaint should ordinarily be followed by an answer” … . Here, the court should not have awarded the plaintiff summary judgment on the issue of liability on the causes of action in the amended complaint before the defendant had answered the amended complaint … . R&G Brenner Income Tax Consultants v Gilmartin, 2018 NY Slip Op 07470, Second Dept 11-7-18

CIVIL PROCEDURE (SUPREME COURT SHOULD NOT HAVE GRANTED PLAINTIFF PERMISSION TO SERVE AN AMENDED COMPLAINT AND SIMULTANEOUSLY AWARDED PLAINTIFF SUMMARY JUDGMENT ON SEVERAL CAUSES OF ACTION, THE AMENDED COMPLAINT SUPERSEDES THE ORIGINAL AND MUST BE ANSWERED BEFORE FURTHER PROCEEDINGS (SECOND DEPT))/AMENDED COMPLAINT (SUPREME COURT SHOULD NOT HAVE GRANTED PLAINTIFF PERMISSION TO SERVE AN AMENDED COMPLAINT AND SIMULTANEOUSLY AWARDED PLAINTIFF SUMMARY JUDGMENT ON SEVERAL CAUSES OF ACTION, THE AMENDED COMPLAINT SUPERSEDES THE ORIGINAL AND MUST BE ANSWERED BEFORE FURTHER PROCEEDINGS (SECOND DEPT))

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DAMAGES FOR FRAUD SHOULD HAVE BEEN BASED UPON OUT OF POCKET LOSS, NOT PROFITS THAT WOULD HAVE BEEN EARNED ABSENT THE FRAUD, EVEN THOUGH RESPONDENT WAS ENTITLED TO MORE DAMAGES UNDER THE OUT OF POCKET RULE, NO RELIEF CAN BE AFFORDED TO THE NONAPPEALING PARTY (SECOND DEPT).

The Second Department determined that the trial court used the wrong criteria for assessing damages for fraud, but further determined the damages should be reduced and, even though the respondent was entitled to a higher damages award, no relief could be afforded to a nonappealing party. Damages for fraud must be based on out-of-pocket losses, not profits that would have been earned absent the fraud:

“The true measure of damage is indemnity for the actual pecuniary loss sustained as the direct result of the wrong” … . Under this rule, the loss is computed by ascertaining the “difference between the value of the bargain which a plaintiff was induced by fraud to make and the amount or value of the consideration exacted as the price of the bargain”… . Damages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained … . Under the out-of-pocket rule, there can be no recovery of profits which would have been realized in the absence of fraud … . Global Granite Sales Corp. v Sabovic, 2018 NY Slip Op 07414, Second Dept 11-7-18

FRAUD (DAMAGES FOR FRAUD SHOULD HAVE BEEN BASED UPON OUT OF POCKET LOSS, NOT PROFITS THAT WOULD HAVE BEEN EARNED ABSENT THE FRAUD, EVEN THOUGH RESPONDENT WAS ENTITLED TO MORE DAMAGES UNDER THE OUT OF POCKET RULE, NO RELIEF CAN BE AFFORDED TO THE NONAPPEALING PARTY (SECOND DEPT))/DAMAGES (FRAUD, DAMAGES FOR FRAUD SHOULD HAVE BEEN BASED UPON OUT OF POCKET LOSS, NOT PROFITS THAT WOULD HAVE BEEN EARNED ABSENT THE FRAUD, EVEN THOUGH RESPONDENT WAS ENTITLED TO MORE DAMAGES UNDER THE OUT OF POCKET RULE, NO RELIEF CAN BE AFFORDED TO THE NONAPPEALING PARTY (SECOND DEPT))/APPEALS  (FRAUD, (DAMAGES FOR FRAUD SHOULD HAVE BEEN BASED UPON OUT OF POCKET LOSS, NOT PROFITS THAT WOULD HAVE BEEN EARNED ABSENT THE FRAUD, EVEN THOUGH RESPONDENT WAS ENTITLED TO MORE DAMAGES UNDER THE OUT OF POCKET RULE, NO RELIEF CAN BE AFFORDED TO THE NONAPPEALING PARTY (SECOND DEPT))/OUT OF POCKET LOSS (FRAUD, DAMAGES FOR FRAUD SHOULD HAVE BEEN BASED UPON OUT OF POCKET LOSS, NOT PROFITS THAT WOULD HAVE BEEN EARNED ABSENT THE FRAUD, EVEN THOUGH RESPONDENT WAS ENTITLED TO MORE DAMAGES UNDER THE OUT OF POCKET RULE, NO RELIEF CAN BE AFFORDED TO THE NONAPPEALING PARTY (SECOND DEPT))/PROFITS (FRAUD, DAMAGES FOR FRAUD SHOULD HAVE BEEN BASED UPON OUT OF POCKET LOSS, NOT PROFITS THAT WOULD HAVE BEEN EARNED ABSENT THE FRAUD, EVEN THOUGH RESPONDENT WAS ENTITLED TO MORE DAMAGES UNDER THE OUT OF POCKET RULE, NO RELIEF CAN BE AFFORDED TO THE NONAPPEALING PARTY (SECOND DEPT))

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MOTION TO DISMISS THE COMPLAINT IN THIS FORECLOSURE ACTION FOR FAILURE TO TIMELY SERVE WITHIN THE 120 DAY WINDOW SHOULD HAVE BEEN GRANTED, CRITERIA FOR ALLOWING LATE SERVICE EXPLAINED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants’ motion pursuant to CPLR 306-b to dismiss the complaint in this foreclosure action (with regard to defendant Joseph) because it was not served within 120 days of filing should have been granted. The court explained the criteria for allowing extra time to serve:

As relevant here, CPLR 306-b provides that “[s]ervice of the summons and complaint . . . shall be made within one hundred twenty days after the commencement of the action.” Further, “[i]f service is not made upon a defendant within the time provided in this section, the court, upon motion, shall dismiss the action without prejudice as to that defendant, or upon good cause shown or in the interest of justice, extend the time for service.” ” Good cause’ and interest of justice’ are two separate and independent statutory standards” … . “To establish good cause, a plaintiff must demonstrate reasonable diligence in attempting service” … . “If good cause for an extension is not established, courts must consider the interest of justice’ standard of CPLR 306-b” … , which “requires a careful judicial analysis of the factual setting of the case and a balancing of the competing interests presented by the parties” … . “Unlike an extension request premised on good cause, a plaintiff [seeking an extension in the interest of justice] need not establish reasonably diligent efforts at service as a threshold matter” … . “However, the court may consider diligence, or lack thereof, along with any other relevant factor in making its determination, including expiration of the statute of limitations, the potentially meritorious nature of the cause of action, the length of delay in service, the promptness of a plaintiff’s request for the extension of time, and prejudice to defendant” … . “No one factor is determinative—the calculus of the court’s decision is dependent on the competing interests of the litigants and a clearly expressed desire by the Legislature that the interests of justice be served” … .

The plaintiff failed to establish that it exercised reasonably diligent efforts in attempting to effect proper service of process upon Joseph and, thus, failed to show good cause … . Further, the plaintiff failed to establish that an extension of time was warranted in the interest of justice … . Where the plaintiff’s delay in serving a defendant is protracted, and the defendant has no notice of the action for a protracted period of time, an inference of substantial prejudice arises …  The plaintiff failed to rebut the inference of substantial prejudice that arose due to its protracted delay in serving Joseph, as it failed to come forward with any proof that Joseph had notice of this action prior to being served more than 5½ years after the action was commenced … . Moreover, the plaintiff failed to explain its more than six-month delay in moving for relief pursuant to CPLR 306-b after it effectuated service upon Joseph … . Under theses circumstances, the plaintiff failed to establish its entitlement to an extension of time to serve Joseph under the interest of justice standard … , and its motion should have been denied. Wells Fargo Bank, NA v Barrella, 2018 NY Slip Op 07486, Second Dept 11-7-18

FORECLOSURE (MOTION TO DISMISS THE COMPLAINT IN THIS FORECLOSURE ACTION FOR FAILURE TO TIMELY SERVE WITHIN THE 120 DAY WINDOW SHOULD HAVE BEEN GRANTED, CRITERIA FOR ALLOWING LATE SERVICE EXPLAINED (SECOND DEPT))/CIVIL PROCEDURE (MOTION TO DISMISS THE COMPLAINT IN THIS FORECLOSURE ACTION FOR FAILURE TO TIMELY SERVE WITHIN THE 120 DAY WINDOW SHOULD HAVE BEEN GRANTED, CRITERIA FOR ALLOWING LATE SERVICE EXPLAINED (SECOND DEPT))/CPLR 306-b MOTION TO DISMISS THE COMPLAINT IN THIS FORECLOSURE ACTION FOR FAILURE TO TIMELY SERVE WITHIN THE 120 DAY WINDOW SHOULD HAVE BEEN GRANTED, CRITERIA FOR ALLOWING LATE SERVICE EXPLAINED (SECOND DEPT))

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STATEMENTS IN A NEWSPAPER ARTICLE ABOUT PLAINTIFF’S DIVORCE WHICH REFERRED TO PLAINTIFF’S CONVICTION STEMMING FROM A BOILER ROOM PENNY STOCK OPERATION WERE ABSOLUTELY PRIVILEGED UNDER THE CIVIL RIGHTS LAW (SECOND DEPT).

The Second Department determined the defamation action against a newspaper was properly dismissed. A newspaper article about plaintiff’s divorce referred to plaintiff’s criminal conviction stemming from a “boiler room” penny-stock operation and stating that plaintiff “tried to use his old tricks to swindle his estranged wife out of millions of dollars…”. Plaintiff stock operation inspired the movie “Boiler Room:”

“Civil Rights Law § 74 is an affirmative defense to a claim of defamation” … . That section provides that “[a] civil action cannot be maintained against any person, firm or corporation, for the publication of a fair and true report of any judicial proceeding, legislative proceeding or other official proceeding” (Civil Rights Law § 74). The privilege afforded by this statute is absolute “and is not defeated by the presence of malice or bad faith” … . “This absolute privilege applies only where the publication is a comment on a judicial, legislative, or other official proceeding . . . and is a fair and true’ report of that proceeding” … .

As to the threshold requirement that the publication purport to comment on a judicial, legislative, or other official proceeding, if the context in which the statements are made makes it impossible for the ordinary viewer, listener, or reader to determine whether the defendant was reporting on a judicial or other official proceeding, the absolute privilege does not apply … .

As to the requirement that the publication be a fair and true report of the official proceeding, the Court of Appeals has recognized that “newspaper accounts of legislative or other official proceedings must be accorded some degree of liberality” … . Accordingly, “[w]hen determining whether an article constitutes a fair and true’ report, the language used therein should not be dissected and analyzed with a lexicographer’s precision”… . Rather, “[f]or a report to be characterized as fair and true’ within the meaning of the statute, thus immunizing its publisher from a civil suit sounding in libel, it is enough that the substance of the article be substantially accurate”… .

Here, the subject newspaper article explicitly stated that it was describing the divorce action commenced against the plaintiff by his former wife … . Furthermore, the defendants’ documentary evidence established, as a matter of law, that the disputed language in the newspaper article was a “fair and true” report of the factual findings made in the divorce action … . Contrary to the plaintiff’s contention, “the inaccuracies cited by the plaintiff were not so egregious as to remove the article from the protection of Civil Rights Law § 74” … . Gillings v New York Post, 2018 NY Slip Op 07413, Second Dept 11-7-18

DEFAMATION (STATEMENTS IN A NEWSPAPER ARTICLE ABOUT PLAINTIFF’S DIVORCE WHICH REFERRED TO PLAINTIFF’S CONVICTION STEMMING FROM A BOILER ROOM PENNY STOCK OPERATION WERE ABSOLUTELY PRIVILEGED UNDER THE CIVIL RIGHTS LAW (SECOND DEPT))/CIVIL RIGHTS LAW (DEFAMATION, STATEMENTS IN A NEWSPAPER ARTICLE ABOUT PLAINTIFF’S DIVORCE WHICH REFERRED TO PLAINTIFF’S CONVICTION STEMMING FROM A BOILER ROOM PENNY STOCK OPERATION WERE ABSOLUTELY PRIVILEGED UNDER THE CIVIL RIGHTS LAW (SECOND DEPT))/PRIVILEGE (DEFAMATION, STATEMENTS IN A NEWSPAPER ARTICLE ABOUT PLAINTIFF’S DIVORCE WHICH REFERRED TO PLAINTIFF’S CONVICTION STEMMING FROM A BOILER ROOM PENNY STOCK OPERATION WERE ABSOLUTELY PRIVILEGED UNDER THE CIVIL RIGHTS LAW (SECOND DEPT))/NEWSPAPER (DEFAMATION, STATEMENTS IN A NEWSPAPER ARTICLE ABOUT PLAINTIFF’S DIVORCE WHICH REFERRED TO PLAINTIFF’S CONVICTION STEMMING FROM A BOILER ROOM PENNY STOCK OPERATION WERE ABSOLUTELY PRIVILEGED UNDER THE CIVIL RIGHTS LAW (SECOND DEPT))

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THE DEFENSE OF LACK OF STANDING WAS NOT RAISED IN THE ANSWER AND WAS THEREFORE WAIVED, JUDGE SHOULD NOT HAVE, SUA SPONTE, DISMISSED THE COMPLAINT ON THAT GROUND (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion for a default judgment and an order of reference should have been granted. By not raising lack of standing as a defense in the answer, the defense was waived. Supreme Court did not have the authority to, sua sponte, deny plaintiff’s motion on that ground:

… [U]nder this Court’s well-established precedent, as articulated in Wells Fargo Bank Minn., N.A. v Mastropaolo (42 AD3d 239), the defense of lack of standing is waived if not raised by the defendant in an answer or pre-answer motion to dismiss. Accordingly, by failing to answer the complaint or to make a pre-answer motion to dismiss the complaint, the defendants waived the defense of lack of standing … . Under the circumstances of this case, we remit the matter to the Supreme Court, Kings County, for further proceedings before a different Justice. Wells Fargo Bank, N.A. v Halberstam, 2018 NY Slip Op 07485, Second Dept 11-7-18

FORECLOSURE (THE DEFENSE OF LACK OF STANDING WAS NOT RAISED IN THE ANSWER AND WAS THEREFORE WAIVED, JUDGE SHOULD NOT HAVE, SUA SPONTE, DISMISSED THE COMPLAINT ON THAT GROUND (SECOND DEPT))/STANDING (FORECLOSURE, THE DEFENSE OF LACK OF STANDING WAS NOT RAISED IN THE ANSWER AND WAS THEREFORE WAIVED, JUDGE SHOULD NOT HAVE, SUA SPONTE, DISMISSED THE COMPLAINT ON THAT GROUND (SECOND DEPT))/CIVIL PROCEDURE (FORECLOSURE, STANDING, THE DEFENSE OF LACK OF STANDING WAS NOT RAISED IN THE ANSWER AND WAS THEREFORE WAIVED, JUDGE SHOULD NOT HAVE, SUA SPONTE, DISMISSED THE COMPLAINT ON THAT GROUND (SECOND DEPT))/JUDGES (SUA SPONTE DISMISSAL, FORECLOSURE, THE DEFENSE OF LACK OF STANDING WAS NOT RAISED IN THE ANSWER AND WAS THEREFORE WAIVED, JUDGE SHOULD NOT HAVE, SUA SPONTE, DISMISSED THE COMPLAINT ON THAT GROUND (SECOND DEPT))/SUA SPONTE (THE DEFENSE OF LACK OF STANDING WAS NOT RAISED IN THE ANSWER AND WAS THEREFORE WAIVED, JUDGE SHOULD NOT HAVE, SUA SPONTE, DISMISSED THE COMPLAINT ON THAT GROUND (SECOND DEPT))

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