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ATTORNEY WHO HAD PREVIOUSLY PROSECUTED MOTHER FOR ENDANGERING THE WELFARE OF A CHILD SHOULD NOT HAVE BEEN APPOINTED TO REPRESENT MOTHER’S CHILDREN IN A CUSTODY MATTER; IN THE ABSENCE OF EVIDENCE MOTHER WAS PREJUDICED BY CONFIDENTIAL INFORMATION MOTION TO VACATE CUSTODY STIPULATION ON CONFLICT OF INTEREST GROUNDS PROPERLY DENIED.

The Third Department determined Family Court should not have allowed an attorney who, as an assistant District Attorney, prosecuted mother for endangering the welfare of a child, to serve as the children's attorney in a custody matter. Mother moved to vacate the custody stipulation, in part based upon the attorney's (Bielicki's) conflict of interest. The fact that Bielicki should not have been appointed, in the absence of evidence of actual prejudice to mother from the use of confidential information, did not warrant vacation of the stipulation:

The mother … argues that Bielicki's representation of the children violated Rules of Professional Conduct (22 NYCRR 1200.0) rule 1.11 (c), which provides that “a lawyer having information that the lawyer knows is confidential government information about a person, acquired when the lawyer was a public officer or employee, may not represent a private client whose interests are adverse to that person in a matter in which the information could be used to the material disadvantage of that person.” The rule defines confidential governmental information as “information that has been obtained under governmental authority and that, at the time this Rule is applied, the government is prohibited by law from disclosing to the public or has a legal privilege not to disclose, and that is not otherwise available to the public” … . * * *

Bielicki's assignment as attorney for the children in this matter was contrary to the standards set forth in Rules of Professional Conduct (22 NYCRR 1200.0) rule 1.11 (c) — and, for that reason, Family Court … should not have permitted Bielicki to serve in that capacity — such error, without more, does not warrant vacatur of the stipulation and order. Matter of Tina X. v John X., 2016 NY Slip Op 02874, 3rd Dept 4-14-16


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MOTION TO AMEND PLEADINGS BASED ON TRIAL EVIDENCE OF MUTUAL MISTAKE PROPERLY GRANTED, CRITERIA EXPLAINED.

The Third Department determined Supreme Court properly allowed the pleadings to be amended to conform to the evidence at trial. The trial evidence indicated the contract at issue was based upon mutual mistake rather than deliberate misrepresentation. The motion to amend the pleadings to allege mutual mistake was properly granted and the contract was properly rescinded on that ground:

 

The burden was upon defendant, as the party opposing plaintiff's motion, to establish that it was “hindered in the preparation of [its] case or . . . prevented from taking some measure in support of [its] position” … . That burden cannot be met when the difference between the original pleading and the evidence results from “proof admitted at the instance or with the acquiescence of [the opposing] party” .. . Here, the proof upon which plaintiff's motion was based was the testimony of defendant's president that she acted mistakenly in providing the wrong sales figures … . Given this testimony, defendant cannot have been surprised or unduly prejudiced by plaintiff's assertion of the theory of mutual mistake; thus, leave to conform the pleadings to the proof was properly granted … . Lakshmi Grocery & Gas, Inc. v GRJH, Inc., 2016 NY Slip Op 02891, 3rd Dept 4-14-16


APPELLANT COULD NOT PURSUE COUNTERCLAIMS AND CROSS-CLAIMS WHICH WERE NOT LISTED AS ASSETS IN APPELLANT’S BANKRUPTCY PETITION; THE CAUSES OF ACTION REMAIN VESTED IN THE BANKRUPTCY ESTATE.

The Third Department determined appellant was precluded from raising counterclaims and cross-claims in a matter which was stayed when appellant filed for bankruptcy. The causes of action were not listed as assets and therefore became the property of the bankruptcy estate:

 

It is fundamental that, “[u]pon the filing of a voluntary bankruptcy petition, all property which a debtor owns . . ., including a cause of action, vests in the bankruptcy estate” … . Such a cause of action “can only revert to the debtor to be pursued in his or her individual capacity if the claim is 'dealt with' in the bankruptcy, which necessitates it being listed as an asset [in the schedule of assets] and either abandoned by the bankruptcy trustee or administered by the bankruptcy court for the benefit of the creditors” … . Accordingly, “a debtor's failure to list a legal claim as an asset in his or her bankruptcy proceeding causes the claim to remain the property of the bankruptcy estate and precludes the debtor from pursuing the claim on his or her own behalf” … . Central Natl. Bank, Canajoharie v Scotty's Auto Sales, Inc., 2016 NY Slip Op 02876, 3rd Dept 4-14-16


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CONSTRUCTION CONTRACT PROVISION MAKING LITIGATION THE SOLE METHOD FOR RESOLVING A DISPUTE RENDERED VOID BY GENERAL BUSINESS LAW. 

The Third Department determined the General Business Law rendered void a provision in a construction subcontract mandating litigation as the sole method for resolving a dispute:

… General Business Law § 757 (3) … unambiguously voids and renders unenforceable any contractual provision that makes expedited arbitration unavailable to one or both parties. … [T]he obvious function of section 6.2 of the subcontract is to establish litigation as the sole legal option for the resolution of disputes under the subcontract, which, in turn, denies both parties the opportunity to arbitrate such claims. Inasmuch as General Business Law § 757 (3) clearly operates to void and render unenforceable the subcontract's dispute resolution provision, we find that Supreme Court properly denied petitioner's application to stay arbitration. Matter of Capital Siding & Constr., LLC (Alltek Energy Sys., Inc.), 2016 NY Slip Op 02878, 3rd Dept 4-14-16


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MORTGAGE HAD PRIORITY OVER COUNTY’S CLAIM FOR REIMBURSEMENT OF MEDICAID BENEFITS.

The Third Department determined a mortgage held by Wells Fargo had priority to a claim by the county seeking reimbursement of Medicaid benefits received by the decedent:

 

Petitioner [Saratoga County Department of Social Services] asserts priority pursuant to Social Services Law § 104 (1), which provides, in relevant part, that “[i]n all claims of the public welfare official made under [such] section[,] the public welfare official shall be deemed a preferred creditor” (emphasis added). “Preferred creditor” has been construed to give a social services department priority over a “general creditor, that is, a creditor that, upon giving credit, takes no rights against specific property of a debtor” … . Here, Wells Fargo holds a mortgage lien against the Rotterdam property that was recorded prior to the May 2014 decree of Surrogate's Court validating petitioner's claim. Although Medicaid assistance was provided to decedent before the mortgage was given, petitioner did not have a prior lien against the property (see Social Services Law § 369 [2] [a]). As such, we conclude that Wells Fargo's prior specific lien gives it priority over petitioner's claim with respect to the … property … . Matter of Shambo, 2016 NY Slip Op 02699, 3rd Dept 4-7-16


EXCLUSIONARY LANGUAGE IN HARASSMENT STATUTE NEED NOT BE PLED AND NEGATED IN THE CHARGING DOCUMENT; THE EXCLUSIONS ARE PROVISOS WHICH CAN BE RAISED AS DEFENSES.

The Third Department, in the context of a family offense, determined the portions of the second degree harassment statute which state the subdivision does not apply “to activities regulated by the national labor relations act, as amended, the railway labor act, as amended, or the federal employment labor management act, as amended” (Penal Law § 240.26…)” were “provisos.” The respondent argued that the labor and railroad provisions in the statute were “exceptions” which must be affirmatively pled and negated in the charging document. The Third Department found the provisions were “provisos” which can be asserted as defenses, but which do not have to be pled:

 

“The general rule regarding statutory crimes is that 'exceptions must be negatived by the prosecution and provisos utilized as a matter of defense'” … . In attempting to distinguish between exceptions and provisos, courts will look to whether the defining statute “contains as part of its enacting clause an exception to the effect that under certain circumstances the offense is not to be considered as having been committed” … , in which case a true exception generally will be found, or whether the exception arises either by way of a statutory amendment or reference to a statute outside of the Penal Law, in which case the exception generally will be regarded as a proviso … .

As originally enacted, Penal Law § 240.26 did not contain the exclusionary language at issue; such language was added when the statute was amended in 1994 (see L 1994, ch 109, § 1) to “clarif[y] that activities protected by certain federal labor statutes are not included within the definition of harassment” (Governor's Approval Mem, Bill Jacket, L 1994, ch 109, at 7). Further, as a review of the statute itself makes clear, application of the exclusionary language requires reference to numerous federal statutes outside of the Penal Law. Under these circumstances, the language excluding certain labor activities or disputes from the definition of harassment in the second degree “is more accurately construed as a proviso, which may be raised as a defense [by the charged party], rather than an exception, which must be [affirmatively] pleaded” and negated by the charging party … . Matter of Rogers v Phillips, 2016 NY Slip Op 02687, 3rd Dept 4-7-16


DISQUALIFICATION OF ATTORNEY APPROPRIATE TO AVOID THE APPEARANCE OF IMPROPRIETY.

In a dispute about easements used by property owners to gain access to their properties, the Third Department determined disqualification of an attorney based upon avoiding the appearance of impropriety was appropriate, even though the mandatory conflict-of-interest disqualification criteria may not have been met:

… [E]ven in instances where … disqualification is not mandatory, disqualification nonetheless may be warranted depending upon the particular facts and circumstances of a given case … . In this regard, “[i]t is well settled that an attorney must avoid not only the fact, but even the appearance, of representing conflicting interests” … . To that end, “[a]n attorney may not place himself [or herself] in a position where a conflicting interest may, even inadvertently, affect, or give the appearance of affecting, the obligations of the professional relationship” … . “The disqualification of an attorney is a matter that rests within the sound discretion of the court” … , and the case law makes clear that “[a]ny doubts as to the existence of a conflict of interest must be resolved in favor of disqualification so as to avoid even the appearance of impropriety”… . McCutchen v 3 Princesses & AP Trust Dated Feb. 3, 2004, 2016 NY Slip Op 02703, 3rd Dept 4-7-16


1899 DEED COVENANT TO PROVIDE FREE ELECTRIC POWER TO DEFENDANT’S PREMISES RAN WITH THE LAND; HOWEVER THE IMPLIED DURATIONAL LIMITS ON THE COVENANT HAVE BEEN SURPASSED RENDERING IT UNENFORCEABLE.

The Third Department, reversing Supreme Court, determined that a covenant in an 1899 deed to provide free power to the property now occupied by defendant Allied Healthcare Product (AHP) was no longer enforceable. The covenant was precipitated by the building of a hydroelectric dam which cut off the water supply upon which the mills on the property now owned by AHP relied. The Third Department determined the covenant met all the requirements for running with the land. But the court went on to find that implied durational limits on the covenant have been surpassed:

While the general requisites of an affirmative covenant running with the land have been met, that does not end the matter. “The affirmative covenant is disfavored in the law because of the fear that this type of obligation imposes an 'undue restriction on alienation or an onerous burden in perpetuity'” … . The power covenant has no express limitation on its duration, and “it may 'fall[] prey to the criticism that it creates a burden in perpetuity, and purports to bind all future owners, regardless of the use to which the land is put'” … . AHP rightly points out that the power covenant may be implicitly “conditioned upon the continued existence of” a hydroelectric facility capable of supplying the required power to ongoing manufacturing at the mills … . Suffice it to say, those conditions have only been intermittently met as historical matter and are not met now. The hydroelectric power facility was not in operation from 1994 to 2012 and, while AHP attempts to minimize the fact, there was not constant manufacturing activity at the mills over the course of the last century. The record further shows that the hydroelectric facility, for both technical and legal reasons, cannot supply consistent or usable electricity directly to the mills. To find that the power covenant remains enforceable under these circumstances would render it an “onerous burden in perpetuity” disfavored by the law, as it would reach beyond any implied durational requirements and overlook the very real changes in the hydroelectric facility and the manner for distributing electricity that defeat the original purpose of the power covenant … . This result cannot be countenanced and, as such, the power covenant is unenforceable. Niagara Mohawk Power Corp. v Allied Healthcare Prods., Inc., 2016 NY Slip Op 02504, 3rd Dept 3-31-16

REAL PROPERTY (1899 DEED COVENANT TO PROVIDE FREE ELECTRIC POWER TO DEFENDANT'S PREMISES RAN WITH THE LAND; HOWEVER THE IMPLIED DURATIONAL LIMITS ON THE COVENANT HAVE BEEN SURPASSED RENDERING IT UNENFORCEABLE)/DEEDS (1899 DEED COVENANT TO PROVIDE FREE ELECTRIC POWER TO DEFENDANT'S PREMISES RAN WITH THE LAND; HOWEVER THE IMPLIED DURATIONAL LIMITS ON THE COVENANT HAVE BEEN SURPASSED RENDERING IT UNENFORCEABLE)/COVENANT RUNNING WITH THE LAND (1899 DEED COVENANT TO PROVIDE FREE ELECTRIC POWER TO DEFENDANT'S PREMISES RAN WITH THE LAND; HOWEVER THE IMPLIED DURATIONAL LIMITS ON THE COVENANT HAVE BEEN SURPASSED RENDERING IT UNENFORCEABLE)

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QUESTION OF FACT WHETHER SNOW-REMOVAL CONTRACTOR CREATED THE ICE CONDITION WHERE PLAINTIFF FELL.

The Third Department, in this slip and fall case, determined Inland, the owner of the shopping mall where plaintiff fell on ice, raised a question of fact whether the snow removal contractor, Hayes Paving, created the dangerous condition (i.e., launched an instrument of harm) by piling ice near a building which subsequently melted and refroze:

… [W]e conclude that a question of fact exists as to whether Hayes Paving negligently created a dangerous condition by piling chunks of ice against the Staples store building which, thereafter, melted and refroze into the patch of ice upon which plaintiff allegedly slipped … . Thus, Hayes Paving was not entitled to dismissal of Inland's third-party claim for contribution. Hannigan v Staples, Inc., 2016 NY Slip Op 02506, 3rd Dept 3-31-16

NEGLIGENCE (QUESTION OF FACT WHETHER SNOW-REMOVAL CONTRACTOR CREATED THE ICE CONDITION WHERE PLAINTIFF FELL)/SLIP AND FALL (QUESTION OF FACT WHETHER SNOW-REMOVAL CONTRACTOR CREATED THE ICE CONDITION WHERE PLAINTIFF FELL)/CONTRACT LAW (QUESTION OF FACT WHETHER SNOW-REMOVAL CONTRACTOR CREATED THE ICE CONDITION WHERE PLAINTIFF FELL)

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QUESTION OF FACT WHETHER GOVERNMENTAL OR PROPRIETARY ACTS WERE INVOLVED IN CONNECTION WITH A BURST WATER MAIN; QUESTION OF FACT WHETHER ROAD-WORK CONTRACTOR LIABLE IN TORT FOR LAUNCHING AN INSTRUMENT OF HARM.

The Third Depatment, in a full-fledged opinion by Justice Garry, determined questions of fact had been raised about governmental immunity and tort liability arising from contract in a property-damage case arising from road renovation work. Village officials and the contractor hired to do the road work (Merritt) decided to allow what was thought to be a small water leak to remain unaddressed temporarily. The leak was apparently created when a fire hydrant was removed to accommodate the road work. At some point the water main burst, causing flooding and a mudslide which damaged plaintiffs' property. The questions before the court were whether the village should be allowed to amend its answer with a governmental-immunity affirmative defense, and whether an indemnification cross-claim against the contractor (Merritt) by the village should have been allowed. The Third Department answered both questions in the affirmative. Although maintenance of a water system for fire protection is a governmental function to which immunity applies, maintenance of the water system generally is a proprietary function, to which immunity would not apply. With respect to Merritt, although tort liability does not usually arise from a contract, here there was a question of fact whether Merritt “launched an instrument of harm” which would trigger liability in tort. With respect to whether governmental immunity applied, the court explained:

A threshold inquiry in determining if a municipality is entitled to immunity in a negligence action is “whether the municipal entity was engaged in a proprietary function or acted in a governmental capacity at the time the claim arose” … . Where the alleged negligence arose out of proprietary, rather than governmental acts, no immunity will attach and a municipality will generally be liable to the same extent as a private actor … . The maintenance of a municipal water system to provide water for the private use of residents has been deemed to be a proprietary function … . However, where the alleged negligence stems from municipal efforts to protect the safety of the public by “aggregating and supplying water for the extinguishment of fires,” it is engaged in a government function entitled to immunity … . These established rules can present challenges as applied to modern municipal water systems that are used to provide water to both homes and hydrants … . In such cases, where a municipality can be seen to be serving dual governmental and proprietary roles, we must look to “the specific act or omission out of which the injury is claimed to have arisen and the capacity in which that act or failure to act occurred” … . Billera v Merritt Constr., Inc., 2016 NY Slip Op 02503, 3rd Dept 3-31-16

MUNCIPAL LAW (QUESTION OF FACT WHETHER GOVERNMENTAL OR PROPRIETARY ACTS WERE INVOLVED IN CONNECTION WITH A BURST WATER MAIN)/GOVERNMENTAL IMMUNITY (QUESTION OF FACT WHETHER GOVERNMENTAL OR PROPRIETARY ACTS WERE INVOLVED IN CONNECTION WITH A BURST WATER MAIN)/PROPRIETARY FUNCTION (QUESTION OF FACT WHETHER GOVERNMENTAL OR PROPRIETARY ACTS WERE INVOLVED IN CONNECTION WITH A BURST WATER MAIN)/NEGLIGENCE (MUNICIPAL LAW, QUESTION OF FACT WHETHER GOVERNMENTAL OR PROPRIETARY ACTS WERE INVOLVED IN CONNECTION WITH A BURST WATER MAIN)/TORT LIABILITY ARISING FROM CONTRACT (QUESTION OF FACT WHETHER ROAD-WORK CONTRACTOR LIABLE IN TORT FOR LAUNCHING AN INSTRUMENT OF HARM)/CONTRACT LAW (QUESTION OF FACT WHETHER ROAD-WORK CONTRACTOR LIABLE IN TORT FOR LAUNCHING AN INSTRUMENT OF HARM)/NEGLIGENCE  (QUESTION OF FACT WHETHER ROAD-WORK CONTRACTOR LIABLE IN TORT FOR LAUNCHING AN INSTRUMENT OF HARM)

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