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Bank Properly Reversed Wire Transfer to Plaintiff’s Account After Learning Payment Was Not Authorized by the Holder of the Account from Which the Money Was Transferred—Plaintiff, Which Had Provided the Fake Buyer with Products Ostensibly Purchased with the Funds Initially Transferred to Plaintiff’s Account, Was Not Entitled to Those Funds Because the Funds Had Been Properly Returned by the Defendant Banks Pursuant to the Wire-Transfer Provisions of the UCC

The Second Department determined summary judgment in favor of the defendant banks (TD Bank and Eastern Bank) was properly granted.  Plaintiff, Golden Door, sold watches worth $71,000 to a fake buyer after the money was wired from the ostensible buyer's (MHIC's) account at defendant Eastern Bank to plaintiff's account in defendant TD Bank.  It turned out that the wire transfer was the result of the “hacking” of ostensible buyer's account. When Eastern Bank was notified the buyer had not authorized the transfer, Eastern Bank notified TD Bank which then reversed the transfer of the $71,000. Plaintiff sued for the $71,000.  The Second Department found that, under the wire-transfer provisions of the UCC, plaintiff was not entitled to the $71,000:

Under Article 4-A, a funds transfer is initiated by a “payment order,” which is an instruction from the person making the payment (the “originator”), to a “receiving” or “intermediary” bank to transfer the funds to the bank account of the beneficiary, normally in the “beneficiary's bank” (UCC 4-A-103, 4-A-104). Here, MHIC was indicated as the originator, Eastern Bank was the receiving bank, Golden Door was the beneficiary, and TD Bank was the beneficiary's bank.

Under Article 4-A, “a beneficiary's bank accepts a payment order when the bank pays the beneficiary by crediting the beneficiary's account and notifying the beneficiary of the right to withdraw the credit” (…see UCC 4-A-209[a]; 4-A-405[1][i]). Once the beneficiary's bank accepts the payment order, a cancellation of the order is not effective unless the beneficiary's bank agrees and, as relevant here, the order was unauthorized in the first place (see UCC 4-A-211[3][b]…). “If the payment order is cancelled . . . the beneficiary's bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution” (UCC 4-A-211[3][b]). Once cancelled, “the acceptance [of the payment order] is nullified and no person has any right or obligation based on the acceptance” (UCC 4-A-211[5], Comment 4, Case #1).

In support of their motion for summary judgment dismissing the complaint, the defendants established prima facie that the cancellation of the payment order was effective. The defendants submitted evidence that TD Bank, the beneficiary's bank, agreed to the cancellation, and that MHIC had not authorized the transfer (see UCC 4-A-211[3][b], Comment 1). The defendants further established prima facie that TD Bank was authorized to recover payment from Golden Door in the amount of the cancelled transfer in accordance with the “law governing mistake and restitution” (UCC 4-A-211[3][b]). The applicable doctrine of restitution is the “discharge for value” rule. Under that rule, ” [a] creditor of another or one having a lien on another's property who has received from a third person any benefit in discharge of the debt or lien, is under no duty to make restitution therefor, although the discharge was given by mistake of the transferor as to his interests or duties, if the transferee made no misrepresentation and did not have notice of the transferor's mistake'” (…quoting Restatement of Restitution § 14[1]). Although Golden Door had made no misrepresentation, the defendants established that Golden Door had notice that the transfer from MHIC was given by “mistake,” or was unauthorized. Specifically, the transfer order indicated that the transferor was MHIC, which was not Golden Door's “customer,” was not indebted to Golden Door, and had no apparent relationship with it or its “customer” (see UCC 4-A-211, Comment 4, Cases #2-#4…). Accordingly, Golden Door could not, under the discharge for value rule, retain the funds that had been transferred into its account. In opposition to the defendants' prima facie showing, Golden Door failed to raise a triable issue of fact. Golden Door V & I Inc v TD Bank, 2014 NY Slip Op 08960, 2nd Dept 12-24-14


 

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Elevator Company Which Agrees to Keep Elevator in a Safe Operating Condition May Be Liable to Injured Passenger

The Second Department reversed Supreme Court finding an elevator company which agreed to maintain an elevator in a safe condition may be liable to an injured passenger:

“An elevator company which agrees to maintain an elevator in safe operating condition may be liable to a passenger for failure to correct conditions of which it has knowledge or failure to use reasonable care to discover and correct a condition which it ought to have found” … . Here, the defendant submitted maintenance records for the subject elevator, including work tickets for a period of approximately one year preceding the plaintiff’s accident and a “callout report,” which indicated that approximately six months before the accident, the defendant was called to repair the alarm bell. The defendant also submitted the plaintiff’s deposition transcript, wherein he testified that, prior to his accident, there were times when the alarm bell and strobe light did not activate and that two other individuals had been struck on the head by the gate prior to his accident. Thus, the defendant’s submissions failed to establish, prima facie, that it did not have actual or constructive notice concerning the defective operation of the elevator’s gate, alarm bell, and strobe light … . Since the defendant failed to establish its prima facie entitlement to judgment as a matter of law, its motion should have been denied regardless of the sufficiency of the plaintiff’s opposition papers … . Papapietro v Knoe Inc, 2014 NY Slip Op 08817, 2nd Dept 12-17-14

 

Although There Was Evidence the Plaintiff Failed to Yield the Right-of-Way, There Was a Triable Question of Fact Whether Defendant Could Have Taken Steps to Avoid the Collision

The Second Department reversed Supreme Court finding that, although there was evidence failed to yield the right-of-way in violation of Vehicle & Traffic Law 1142 (a), defendant (Tiao) failed to demonstrate the absence of comparative fault on his part:

A driver who has the right-of-way is entitled to anticipate that other drivers will obey traffic laws that require them to yield (see Vehicle and Traffic Law § 1141…). Moreover, a driver is negligent where he has failed to see that which through proper use of his senses he should have seen … . At the same time, a driver traveling with the right-of-way may nevertheless be found to have contributed to the happening of the accident if he or she did not use reasonable care to avoid the accident … . “There can be more than one proximate cause of an accident” …, and the issue of comparative fault is generally a question for the jury to decide … . Thus, a movant seeking summary judgment is required to make a prima facie showing that he or she is free from comparative fault … .

In support of their motion, the defendants relied upon, inter alia, the deposition transcripts of the plaintiff and Tiao. While the defendants submitted evidence that the plaintiff failed to yield the right-of-way to their vehicle in violation of Vehicle and Traffic Law § 1142(a), their submissions in support of their motion failed to establish Tiao’s freedom from comparative fault and that the plaintiff’s violation was the sole proximate cause of the accident… . Tiao recalled at his deposition that, prior to entering the intersection, when he was about five to eight feet therefrom, he observed the plaintiff’s vehicle stopped at the stop sign on 72nd Street. Thereafter, he testified that three to four seconds elapsed between his seeing the plaintiff’s vehicle initially and the collision. Tiao did not testify as to the movement of the plaintiff’s vehicle from the point he initially observed it to the point of impact between the vehicles, and he admitted that he could not recall where he was looking at the point of impact. He further admitted that he did not take any evasive action to avoid the impact with the plaintiff’s vehicle in the intersection. Based on Tiao’s testimony, the defendants failed to eliminate all triable issues of fact as to whether Tiao took reasonable care to avoid the collision with the plaintiff’s vehicle in the intersection… . Arias v Tiao, 2014 NY Slip Op 08796, 2nd Dept 12-17-14

Similar issue and result in Canales v Arichabala, 2014 NY Slip Op 08803, 2nd Dept 12-17-14

 

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Question of Fact Raised About Whether Contract for the Installation of Marble Staircase Landings Gave Rise to Tort Liability to Third Party (Plaintiff) Stemming from the Collapse of a Landing

The Second Department determined a question of fact had been raised about whether a contract for the installation of marble staircase landings (by defendant Suli) gave rise to tort liability for injury to plaintiff resulting from the collapse of the landing:

Ordinarily, the breach of a contractual obligation is not sufficient in and of itself to impose tort liability upon the promisor to noncontracting parties … . However, a party who enters into a contract to render services may be said to have assumed a duty of care and, thus, would be potentially liable in tort to third persons when the contracting party, in failing to exercise reasonable care in the performance of its duties, launches an instrument of harm or creates or exacerbates a hazardous condition … . Here, Suli demonstrated its prima facie entitlement to judgment as a matter of law by presenting evidence that it properly installed the marble slab, that it never received any complaints about the work prior to the accident, and that no defects in the marble were observed prior to the accident. However, in opposition, the plaintiff and the building defendants raised a triable issue of fact as to whether Suli created the hazardous condition that caused the accident through the affidavit of an experienced marble setter and installer. That expert explained that marble could weaken over time due to stress fractures, and opined that Suli should have supported the marble slab with an additional “angle iron” in the center of the slab, and that Suli’s failure to do so was a substantial contributing factor in the happening of the accident … . Torres v 63 Perry Realty LLC, 2014 NY Slip Op 08830, 2nd Dept 12-17-14

 

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Abutting Landowners Are Not Required, Pursuant to the NYC Administrative Code, to Remove Ice and Snow from Pedestrian Ramps—The Ramps Are Not Part of the Sidewalk

In reversing Supreme Court, the Second Department explained that pedestrian ramps are not part of the sidewalk and therefore abutting landowners are not required to remove ice and snow from a pedestrian ramp:

“Administrative Code of the City of New York § 7-210, which became effective September 14, 2003, shifted tort liability for injuries arising from a defective sidewalk from the City of New York to the abutting property owner” … . “However, pedestrian ramps are not part of the sidewalk for the purpose of imposing liability on abutting landowners pursuant to that provision” … . Stanziale v City of New York, 2014 Slip Op 08825, 2nd Dept 12-17-14

 

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Condition Precedent to Arbitration Re: a Hit-and-Run Accident Involving an Unidentified Vehicle Is Physical Contact with Unidentified Vehicle—Lack of Proof of Physical Contact Justified Permanent Stay of Arbitration

The Second Department noted that a condition precedent to an arbitration based upon a hit-and-run accident involving an unidentified vehicle is physical contact.  Here there was insufficient evidence of physical contact with the unidentified vehicle:

The appellant sought uninsured motorist benefits under a policy of insurance issued by the petitioner for physical injuries allegedly sustained by him in a hit-and-run accident. The petitioner commenced this proceeding pursuant to CPLR article 75 to permanently stay arbitration of the claim.

Physical contact is a condition precedent to an arbitration based upon a hit-and-run accident involving an unidentified vehicle (see Insurance Law § 5217…). “The insured has the burden of establishing that the loss sustained was caused by an uninsured vehicle, namely, that physical contact occurred, that the identity of the owner and operator of the offending vehicle could not be ascertained, and that the insured’s efforts to ascertain such identity were reasonable” … . Matter of Progressive Northwestern Ins Co v Scott, 2014 NY Slip Op 08847, 2nd Dept 12-17-14

 

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Bank Properly Sanctioned for Not Negotiating in Good Faith in Mandatory Foreclosure Settlement Conferences

The Second Department determined plaintiff bank had not negotiated in good faith in the mandatory foreclosure settlement conferences (required by CPLR 3408(f)).  The bank was sanctioned by precluding it from collecting interest on the mortgage for a period of several months:

Pursuant to CPLR 3408(f), the parties at a mandatory foreclosure settlement conference are required to negotiate in good faith to reach a mutually agreeable resolution (see CPLR 3408[f]; Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9, 11). ” The purpose of the good faith requirement in [CPLR 3408] is to ensure that both plaintiff and defendant are prepared to participate in a meaningful effort at the settlement conference to reach resolution'” (US Bank N.A. v Sarmiento, 121 AD3d 187, 200, quoting 2009 Mem of Governor’s Program Bill, Bill Jacket, L 2009, ch 507, at 11). To conclude that a party failed to negotiate in good faith pursuant to CPLR 3408(f), a court must determine that “the totality of the circumstances demonstrates that the party’s conduct did not constitute a meaningful effort at reaching a resolution” … .

Here, the totality of the circumstances supports the referee’s finding that the plaintiff failed to negotiate in good faith. The referee’s finding was based, in part, upon the plaintiff’s failure to follow guidelines pursuant to the federal Home Affordable Mortgage Program (hereinafter HAMP). The applicable guidelines required the plaintiff, as a lender participating in HAMP, to attempt to obtain a waiver of an investor prohibition or restriction in lowering the interest rate and to keep such evidence in the loan file (see Making Home Affordable Program, Handbook for Servicers of Non-GSE Mortgages, version 4.0, ch 2, § 6.5 at 99 [August 17, 2012]). However, despite repeated requests by the referee to produce evidence that the plaintiff attempted to obtain a waiver of the investor’s restrictions in the PSA, the plaintiff failed to do so for more than one year. Therefore, the plaintiff failed to demonstrate that it followed HAMP regulations and guidelines, which, as several trial courts have concluded, constitutes a failure to negotiate in good faith pursuant to CPLR 3408(f)… . US Bank NA v Smith, 2014 NY Slip Op 08832, 2nd Dept 12-17-14

 

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Contract Giving Plaintiff Option to Sell the Property Back to the Defendants If Rezoning Not Obtained Was Ambiguous About When the Option Must Be Exercised Raising a Question of Fact About the Timeliness of Plaintiff’s Exercise of the Option

The Second Department determined the contract rider which allowed plaintiff-purchaser to sell the property back to the defendants-sellers if rezoning and subdivision approvals were not obtained within 15 months was an option contract.  The defendants argued that the option must be exercised within a reasonable time and the plaintiff’s failure to do so entitled defendants to summary judgment.  Supreme Court disagreed and granted plaintiff summary judgment (specific performance). The Second Department found that the contract was ambiguous concerning the time within which the option must be exercised, raising a triable question of fact:

An option contract is an agreement to hold an offer open; it confers upon the optionee, for consideration paid, the right to purchase–—or, less commonly, to sell –at a later date … . Whether an agreement is an option contract or a bilateral contract is determined by reference to its various terms … .

Here, as the defendants correctly contend, section 8(a) of the rider to the subject contract giving the plaintiff the right to sell the property back to [the defendants if plaintiff] failed to obtain certain rezoning and subdivision approvals was an option contract, as it conferred upon the plaintiff the right to sell the property back to Fairview at a later date.

However, in order for there to be an enforceable contract for the sale of land upon which an action for specific performance can be based, an optionee must exercise an option in accordance with its terms, within the time and the manner specified in the option … .

Here, the plaintiff interprets the option contained in section 8(a) of the rider as providing it with an open-ended right to exercise same, and the Supreme Court agreed. The defendants, however, interpret the same provision as limiting the plaintiff’s time to exercise the option to “a reasonable time” after the expiration of the aforementioned 15-month period in which to obtain the specified rezoning and subdivision approvals, and contend that the plaintiff failed to timely exercise its rights.

“Contract language which is clear and unambiguous must be enforced according to its terms” … . However, ambiguity in a written agreement exists if there is more than one reasonable interpretation of the language at issue … . The test for determining whether contract language is ambiguous is “whether the agreement on its face is reasonably susceptible of more than one interpretation” … . Whether an agreement is ambiguous is a question of law to be resolved by the court … . Here, we conclude that section 8(a) of the rider is ambiguous and subject to more than one interpretation regarding the time within which the plaintiff had to exercise the option. Since a triable issue of fact exists as to the intention of the parties, the Supreme Court erred in granting the plaintiff’s motion for summary judgment on the cause of action for specific performance … . IPE Asset Mgt LLC v Fairview Block & Supply Corp, 2014 NY Slip Op 08811, 2nd Dept 12-17-14

 

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Criteria for Accelerated Relief Re: a Promissory Note Explained–Conclusory Allegations of Fraud in the Inducement Insufficient to Defeat Summary Judgment

Reversing Supreme Court, the Second Department determined plaintiff was entitled to accelerated summary judgment on a promissory note because the defendant’s conclusory allegations of fraud in the inducement were not sufficient to defeat the motion.  The court explained the availability of accelerated relief:

“Pursuant to CPLR 3213, a party may obtain accelerated relief by moving for summary judgment in lieu of complaint, provided that the action is based upon an instrument for the payment of money only or upon any judgment'” … . ” A promissory note is an instrument for the payment of money only, provided that it contains an unconditional promise by the borrower to pay the lender over a stated period of time'” … . “An instrument does not qualify for accelerated relief under CPLR 3213 if outside proof is needed, other than simple proof of nonpayment or a similar de minimis deviation from the face of the document'” … . “Therefore, a plaintiff makes a prima facie showing of entitlement to judgment as a matter of law pursuant to CPLR 3213 by showing that the defendant executed the subject instrument, the instrument contains an unconditional promise to repay the plaintiff upon demand or at a definite time, and the defendant failed to pay in accordance with the instrument’s terms” … . Once the plaintiff establishes its prima facie entitlement to judgment as a matter of law, the burden shifts to the defendant to submit admissible evidence to establish the existence of a triable issue of fact with respect to a bona fide defense … .

Here, the plaintiff established its prima facie entitlement to judgment as a matter of law by showing that the defendant executed the subject instruments, which contained unconditional promises to repay the plaintiff upon demand or at a definite time, and the defendant failed to pay in accordance with the terms of the instruments … . Contrary to the Supreme Court’s determination, in opposition, the defendant failed to establish the existence of a triable issue of fact with respect to a bona fide defense. The defendant claimed that the plaintiff fraudulently induced it to execute the promissory notes. However, the evidence submitted by the defendant failed to raise a triable issue of fact in this regard. Moreover, the defendant’s conclusory allegations of fraud were insufficient to defeat the plaintiff’s entitlement to summary judgment … . Sun Convenient Inc v Sarasamir Corp, 2014 NY Slip Op 08827, 2nd Dept 12-17-14

 

Motion for a Change of Venue Made in the Wrong County–Statutory Procedure Explained

The Second Department determined that, given plaintiff’s response to the demand to change venue, defendants’ motion for a change of venue should have been made in the county where action was pending.  The court explained the applicable law:

“CPLR 511(b) provides a mechanism pursuant to which a defendant may serve a demand to change the place of a trial upon the ground of improper venue to a county the defendant specifies as being proper” … . If the plaintiff does not consent to the change, “the defendant may move to change the place of trial within fifteen days after service of the demand” (CPLR 511[b]). The defendant may notice such motion to be heard as if the action were pending in the county he or she specified, unless the plaintiff, within five days after service of the demand, serves an affidavit showing either that the county specified by the defendant is not proper or that the county designated by the plaintiff is proper (see id.).

Here, in response to the defendants’ demand to change venue, the plaintiff timely served an affidavit of her attorney containing factual averments that were prima facie sufficient to show that the county designated by her was proper (see CPLR 503[a]; 511[b]…). Accordingly, the defendants’ motion pursuant to CPLR 510(1) should have been made in the Supreme Court, Kings County, where the action was pending, and the Supreme Court, Nassau County, erred in granting the motion … .  King v CSC Holdings LLC, 2014 NY Slip OP 08813, 2nd Dept 12-17-14

 

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