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Numerous Core Issues Discussed in Complicated Case Stemming from Mold in a Complex of Apartments Which Necessitated Termination of All the Leases

In perhaps the most complicated decision this writer has ever read, the Second Department reversed many of Supreme Court’s rulings and sorted out the defense and indemnification responsibilities for an astounding array of insurance companies.  The lawsuits arose from the intrusion of water and mold into a complex of rental apartments causing the termination of all the leases. The general contractor and a large number of subcontractors all had insurance policies issued by many different companies. Among the issues addressed: (1) “[C]ontract language that merely requires the purchase of insurance will not be read as also requiring that a contracting party be named as an additional insured”…; (2) Whether damage from water intrusion and mold is an “occurrence” within the meaning of the policy-language; (3) Whether the law of the insured’s domicile should apply; (4) The use of extrinsic evidence to determine an insurer’s duty to defend; and (5) Disclaimer based upon late notice.  QBE Ins Corp v Adjo Contr Corp, 2013 NY Slip Op 08238, 2nd Dept 12-11-13

 

Petitioners’ Properties Not Close Enough to Proposed Development to Confer Standing to Allege Violations of the State Environmental Quality Review Act (SEQRA)

The Second Department determined petitioners did not have standing to bring an action alleging violations of the State Environmental Quality Review Act (SEQRA) because petitioners’ properties were not sufficiently close to the location of the development project:

To establish standing under SEQRA, a petitioner must show (1) an environmental injury that is in some way different from that of the public at large, and (2) that the alleged injury falls within the zone of interests sought to be protected or promoted by SEQRA … . An injury in fact may be inferred from a showing of close proximity of the petitioner’s property to the proposed development … . Generally, the relevant distance is the distance between the petitioner’s property and the actual structure or development itself, not the distance between the petitioner’s property and the property line of the site … . Here, the individual petitioners’ properties were not located in sufficient proximity to the proposed development to give rise to standing … . Matter of Tuxedo Land Trust Inc v Town Bd of Town of Tuxedo, 2013 NY Slip Op 08255, 2nd Dept 12-11-13

 

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Defendant Understood the Reference to the “Appellate Division” Was a Reference to a Higher Court—Waiver of Appeal Was Therefore Valid

The Second Department, over a dissent, determined that the defendant’s waiver of appeal was knowingly, voluntarily and intelligently made.  The defendant was asked by the prosecutor if he understood he was waiving the right to appeal his conviction and sentence to “the Appellate Division, Second Department.”  Because the defendant was 27 years old, had prior contact with the criminal justice system, had filed a notice of appeal pro se, and had requested appellate counsel, the court concluded the defendant understood the reference to the “appellate division” was a reference to a higher court. People v Sanders, 2013 NY Slip Op 08276, 2nd Dept 12-11-13

 

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Purported Lack of Standing Is Not a Jurisdictional Defect/Sua Sponte Dismissal of Complaint Reversed

In reversing Supreme Court, the Second Department noted that a court’s power to dismiss a complaint sua sponte should rarely be used and further noted that a purported lack of standing is not a jurisdictional defect warranting sua sponte dismissal:

The Supreme Court improvidently exercised its discretion in, sua sponte, directing the dismissal of the complaint. ” A court’s power to dismiss a complaint, sua sponte, is to be used sparingly and only when extraordinary circumstances exist to warrant dismissal'” … . Here, there were no extraordinary circumstances warranting sua sponte dismissal of the complaint. Moreover, the defendants, having failed to answer the complaint or make pre-answer motions to dismiss the complaint, waived the defense of lack of standing … . “Furthermore, a party’s lack of standing does not constitute a jurisdictional defect and does not warrant sua sponte dismissal of a complaint by the court”… .  Onewest Bank FSB v Fernandez, 2013 NY Slip Op 08233, 2nd Dept 12-11-13

 

 

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Question of Fact About Whether the Three-Year Statute of Limitations for Professional Malpractice Was Tolled by the “Continuous Representation” Doctrine

The Second Department determined plaintiff had raised a question of fact about whether the “continuous representation” doctrine tolled the statute of limitations.  The complaint alleged that the defendant engineering and architectural firms failed to provide design and construction services which complied with the disability-accessibility design requirements.  The causes of action sounded in professional malpractice and breach of contract. Here the work was completed more than three years prior to the action (three-year statute of limitations applies even to the contract cause of action).  But the firms were later used to remedy the deficiencies uncovered by the Attorney General:

“[A]n action to recover damages for malpractice, other than medical, dental or podiatric malpractice, regardless of whether the underlying theory is based in contract or tort” is subject to a three-year statute of limitations (CPLR 214[6]…). “A cause of action to recover damages for professional malpractice . . . for defective design or construction accrues upon the actual completion of the work to be performed and the consequent termination of the professional relationship”… . However, a professional malpractice cause of action asserted against an architect or engineer may be tolled under the “continuous representation” doctrine if the plaintiff shows its reliance upon a continued course of services related to the original professional services provided … .

The “continuous representation” doctrine, as applied to professionals including architects and engineers, “recognizes that a person seeking professional assistance has a right to repose confidence in the professional’s ability and good faith, and realistically cannot be expected to question and assess the techniques employed of the manner in which the services are rendered” … . The doctrine applies when a plaintiff shows that he or she relied upon a continuous course of services related to the particular professional duty allegedly breached… . * * *

The law recognizes that the supposed completion of the contemplated work does not preclude application of the continuous representation toll if inadequacies or other problems with the contemplated work timely manifest themselves after that date and the parties continue the professional relationship to remedy those problems … . In this regard, a motion to dismiss pursuant to CPLR 3211(a)(5) will be denied unless the facts establish that a gap between the provision of professional services on the particular matter is so great that the representation cannot be deemed continuous as a matter of law … . Regency Club at Wallkill LLC v Appel Design Group PA, 2013 NY Slip Op 08067, 2nd Dept 12-4-13

 

Presumption in Favor of Resentencing (re: the New Scheme for Drug Offenses) Not Rebutted—Supreme Court Should Not Have Denied Motion for Resentencing

The Second Department determined the factors relied upon by the resentencing court were not sufficient to overcome the presumption in favor of resentencing under Criminal Procedure Law 440.46:

The Supreme Court improvidently exercised its discretion in denying the defendant’s motion to be resentenced pursuant to CPL 440.46. Although resentencing is not mandatory, there is a statutory presumption in favor of resentencing (see L 2004, ch 738, § 23; CPL 440.46[3]…). Under the circumstances of this case, the factors relied upon by the Supreme Court in denying the motion–the defendant’s criminal history, disciplinary infractions, and parole violations–are insufficient to overcome the statutory presumption. The defendant served more than 14 years in prison for a low-level drug crime committed when he was 19 years old. The defendant’s criminal history included only larcenous and low-level drug crimes, all committed before he was 20 years old. While the defendant violated his parole by failing to abide by certain parole rules, including, inter alia, by breaking curfew and by traveling to Georgia to be reunited with his family, he has never committed another crime or had a positive drug test. Under all of the circumstances presented here, “the presumption that the defendant is entitled to benefit from the reforms enacted by the Legislature based upon its judgment that the prior sentencing scheme for drug offenses like that committed by the defendant was excessively harsh, has not been rebutted”… . People v Simmons, 2013 NY Slip Op 08103, 2nd Dept 12-4-13

 

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Failure to Provide Pre-Restraint Notice to a Judgment Debtor as Required by the Exempt Income Protection Act Violates Due Process

In a full-fledged opinion by Justice Hall, the Second Department determined that the failure of the judgment debtor’s bank to provide the notice required by the Exempt Income Protection Act (CPLR 5222-a) before restraining the debtor’s account violated due process:

…[T]he statutory mechanism requires the attorney for the judgment creditor to serve a judgment debtor’s banking institution with a copy of the restraining notice, an exemption notice, and two exemption claim forms (see CPLR 5222-a[b][1]). The statute then requires the banking institution, within two business days after receipt of such documents, to serve upon the judgment debtor a copy of the restraining notice, the exemption notice, and the two exemption claim forms (see CPLR 5222-a[b][3]). In this action, the attorney for the judgment creditor properly sent the required documents to the judgment debtor’s bank, but the bank did not timely send the documents to the judgment debtor. As a result, the judgment debtor’s bank account was restrained without any notice to her or any opportunity to claim that certain funds in the account were exempt from debt collection. We conclude that this constituted a violation of the judgment debtor’s due process rights, and, as a remedy, afford the judgment debtor the opportunity to claim exemptions before any funds in her account are turned over. Distressed Holdings LLC v Ehrler, 2013 NY Slip Op 08044, 2nd Dept 12-4-13

 

 

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“Special Relationship” Required Before Municipality Can Be Liable for Failure to Enforce Statute or Regulation

The Second Department determined Supreme Court should have dismissed a complaint against the village alleging plaintiffs were exposed to “noise, smoke and odor” emanating from a Verizon facility and the exposure constituted a health hazard.  The complaint against the village alleged the negligent failure to enforce rules, regulations and building codes.  The Second Department explained that absent a “special relationship” creating a duty of care for the benefit of particular people, liability may not be imposed on a municipality for failure to enforce a statute or regulation.  The criteria for a special relationship are:

A special relationship can be formed in three ways: (1) when the municipality violates a statutory duty enacted for the benefit of a particular class of persons; (2) when the municipality voluntarily assumes a duty that generates justifiable reliance by the person who benefits from the duty; or (3) when the municipality assumes positive direction and control in the face of a known blatant and dangerous safety violation… .

“To form a special relationship through breach of a statutory duty, the governing statute must authorize a private right of action”… .

With respect to the creation of a special relationship by the municipality’s voluntary assumption of a duty and the plaintiffs’ justifiable reliance on the municipality’s undertaking, four criteria must be shown: “ (1) an assumption by the municipality, through promises or actions, of an affirmative duty to act on behalf of the party who was injured; (2) knowledge on the part of the municipality’s agents that inaction could lead to harm; (3) some form of direct contact between the municipality’s agents and the injured party; and (4) that party’s justifiable reliance on the municipality’s affirmative undertaking’”… .

“[R]eliance must be examined in the specific context of the nature of the affirmative duty undertaken[,]” and “[i]t is the plaintiffs’ burden to show that the defendants’ conduct actually lulled them into a false sense of security, induced them to . . . forego other avenues of protection, and thereby placed themselves in a worse position than they would have been had the defendants never assumed the duty”… . Ferriera v Cellco Partnership…, 2013 NY Slip Op 07706, 2nd Dept 11-20-13

 

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Surrogate’s Court Has Jurisdiction to Determine the Legal Fees Owed to Out-Of-State Counsel for Services to the Estate

In a full-fledged opinion by Justice Austin, the Second Department determined Surrogate’s Court erred when it held that Surrogate’s Court did not have jurisdiction to determine the legal fees due out-of-state counsel and Surrogate’s Court further erred when it ordered that the fees already paid to out-of-state counsel be returned.  The out-of-state firm (Choate Hall) represented the executor who, at the time the firm was hired, lived in Massachusetts (where the firm is located).  The opinion includes a detailed discussion of the jurisdiction of Surrogate’s Court, as well as the relevant statutory and case law (not summarized here):

…[W]e find that the Surrogate’s Court erred in concluding that it lacked subject matter jurisdiction to fix and determine the compensation owed to Choate Hall for services rendered to the estate. Further, the court should have made a determination as to the fair value of Choate Hall’s services, rather than direct that the entire fee be returned. Thereafter, the court should have directed only a refund of such fees paid to Choate Hall that it considered to have been paid in excess of what it determined to be the fair value of Choate Hall’s services to the estate pursuant to SCPA 2110.  Matter of Askin, 2013 NY Slip Op 07963, 2nd Dept 11-27-13

 

Tax Exempt Status of Non-Profit Public Parking Lots Should Not Have Been Revoked

The Second Department ruled the tax exempt status of non-profit public parking lots should not have been revoked:

“The crucial issue in determining whether property is tax exempt pursuant to [RPTL 420-a] is whether the primary or principal use of the property is a tax-exempt purpose of its owner” … . The general rule is that the taxpayer bears the burden of proving that a property is tax exempt … . However, where, as here, a municipality seeks ” to withdraw a previously granted tax exemption, the municipality bears the burden of proving that the real property is subject to taxation'” … . * * *

Here, the respondents failed to meet their burden of proof for revocation of the tax exemption on the grounds that the petitioners’ activity did not conform to a charitable purpose within the meaning of RPTL 420-a. Absent a precise statutory definition of “charitable purpose,” courts have interpreted this category to include relief of poverty, advancement of governmental and municipal purposes, and other objectives that are beneficial to the community… . Matter of Greater Jamaica Dev Corp v NYC Tax Comm, 2013 NY Slip Op 07972, 2nd Dept 11-27-13

 

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