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Parent Corporation Not Entitled to Qualified Empire Zone Enterprise (QEZE) Property Tax Credits Because a Related But Separate Entity Did Not Make Payments Required by Its “Payment In Lieu of Taxes” (PILOT) Agreement

With regard to a building in the City of Rochester, the Third Department determined a parent corporation was not entitled to Qualified Empire Zone Enterprise (QEZE) tax credits because a related but separate limited partnership, Rochwil, did not make payments required by its “payment in lieu of taxes” (PILOT) agreement.

The primary issue presented in this proceeding is whether petitioner could claim a refund for unused QEZE real property tax credits that were reported by its subsidiary based on its partnership interest in Rochwil for PILOT payments that were not made. As the taxpayer seeking a tax credit, petitioner “bears the burden of establishing that such credit is unambiguously set forth in the statute” … . To meet this burden, petitioner must show that its “interpretation of the statute is not only plausible, but also that it is the only reasonable construction” … .

We cannot conclude that petitioner met its burden here. As a QEZE, Rochwil was entitled to a credit for eligible real property taxes (see Tax Law former § 15 [a]), and it is not disputed that petitioner was entitled to seek such credit against its corporate franchise taxes during the years at issue (see Tax Law former § 210 [27]). As relevant to this dispute, the term “eligible real property taxes” includes both “taxes imposed on real property which is owned by the QEZE . . . provided such taxes become a lien on the real property” and “[PILOT payments] made by the QEZE to . . . a public benefit corporation” (Tax Law former § 15 [e]). Contrary to petitioner’s claim, the plain and unambiguous language of the statute provides that real property taxes imposed are distinct from PILOT payments made, and where, as here, a QEZE does not own the property but is instead subject to a PILOT agreement with the property owner, the PILOT payments must be made in order to qualify for the credit provided by Tax Law former § 15 … . Matter of Wilmorite, Inc. v Tax Appeals Trib. of the State of N.Y., 2015 NY Slip Op 06386, 3rd Dept 7-30-15

 

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Judge’s Failure to Recuse Himself Was an Abuse of Discretion/Plaintiffs’ Failure to Comply with a Condition Precedent Mandated Summary Judgment to Defendants

The Third Department determined the judge hearing a case concerning the construction of a casino and resort should have recused himself. The judge’s wife was in the county legislature and had voiced support of defendants’ position. In his decision granting summary judgment to the defendants, the judge stated to do otherwise would “violate public policy,” an issue which was not properly part of the case before him. However, the Third Department went on to consider the merits of the case. Plaintiffs’ failure to meet a condition precedent (concerning the financing of the project) by the specified date was an unambiguous breach of the contract, mandating summary judgment in favor of the defendants:

Considering the irrelevancy of [the judge’s] comments to the issues before the court and the parallels between them and the public comments of [his wife] in support of [defendants’] casino proposal, [the judge’s] inclusion of such inherently legislative and policy considerations as a basis for his order displays a striking lack of “sensitivity to the aroma of favoritism [that] such a favorable disposition could engender” … . Under the circumstances, it seems to us that [the judge] should have recognized that this was a situation in which his “impartiality might reasonably be questioned” (22 NYCRR 100.3 [E] [1]), and, therefore, we must conclude that his failure to recuse himself constituted a clear abuse of discretion … . Concord Assoc., L.P. v EPT Concord, LLC, 2015 NY Slip Op 06393, 3rd Dept 7-30-15

 

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Purchase Contract Properly Converted to a “Time Is of the Essence” Contract

In affirming the judgment awarded plaintiff in this breach of contract action, the Third Department noted that a “non time of the essence” real estate purchase contract can be converted to a “time of the essence” contract by giving the buyer clear, unequivocal notice and a reasonable time to perform, as was done by the seller here. 12 Baker Hill Rd., Inc. v Miranti, 2015 NY Slip Op 06400, 3rd Dept 7-30-15

 

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Verified Statement Demonstrated Site Contractor’s Improper Use of Funds Held in Trust for the Payment of Subcontractors—Plaintiff Subcontractor Entitled to Summary Judgment on Liability Re: Subcontractor’s Mechanic’s Lien

The Third Department affirmed Supreme Court’s grant of summary judgment to plaintiff subcontractor in plaintiff’s action against the site contractor seeking payment for completed work. Plaintiff alleged it was underpaid for its work and filed a mechanic’s lien. The general contractor withheld 1 1/2 times the amount of the lien from its payment to the site contractor.  The plaintiff demanded a verified statement from the site contractor (showing the receipt and disbursement of funds held by the site contractor in trust for subcontractors) pursuant to Lien Law 76. The verified statement submitted by the site contractor indicated a multi-million dollar discrepancy between the amount it received and the amounts paid out. Because of the discrepancy, the site contractor was found to have used the funds it held in trust for subcontractors for purposes other than the trust. Plaintiff was therefore entitled to summary judgment on liability:

Pursuant to Lien Law article 3-A, owners, contractors and subcontractors are required to maintain funds in trust in order to “provide[] protection to certain parties involved in the improvement of real property, ensuring that they will be properly compensated for their services” … . Specifically, and insofar as is relevant here, “[t]he funds received by a contractor or subcontractor. . . shall be a separate trust and the contractor or subcontractor shall be the trustee thereof” (Lien Law § 70 [2]). A trustee, in turn, is required to, among other things, maintain books or records with respect to each trust, detailing the trust assets receivable, trust accounts payable, trust funds received, trust payments made with trust assets and transfers in repayment of or to secure advances made pursuant to a notice of lending … . A beneficiary of such a trust is entitled to, among other things, “receive a verified statement setting forth the entries with respect to the trust contained in such books or records” … . “Any use of the trust funds other than the payment of claims under the contract . . . is an improper diversion of trust assets” …, and the trustee’s failure to keep the statutorily required books and records “shall be presumptive evidence that the trustee has applied or consented to the application of trust funds . . . for purposes other than a purpose of the trust” (Lien Law § 75 [4]). Anthony DeMarco & Sons Nursery, LLC v Maxim Constr. Serv. Corp., 2015 NY Slip Op 06394, 3rd Dept 7-30-15

 

Plaintiff Did Not Affirmatively Demonstrate Fire Was Not Intentionally Set by Merely Challenging the Insurer’s Arson Investigation—Plaintiff’s Summary Judgment Motion Properly Denied—Proof Burdens at Summary Judgment Stage Explained

The Third Department determined plaintiff was not entitled to summary judgment in its breach of contract action against the insurer. Plaintiff’s restaurant was destroyed by fire. The insurer disclaimed coverage on the ground that the fire had been intentionally set. Plaintiff brought a summary judgment motion seeking the dismissal of the insurer’s affirmative defense (arson) and judgment in its favor on liability. The court explained the relevant proof burdens re: the affirmative defense of arson at the summary judgment stage:

As the movant, plaintiff was required to initially demonstrate “the absence of genuine issues of material fact on every relevant issue raised by the pleadings, including any affirmative defenses” … . Upon the affirmative defense of arson, if plaintiff, as the insured, met its initial burden, the burden would then shift to defendant, as the insurer. Although defendant’s ultimate burden of proving the affirmative defense at trial would be by the standard of clear and convincing evidence …, this strict standard is not applied at this juncture. Assuming that plaintiff met its initial burden to demonstrate that the fire was not intentionally set and that plaintiff had no motive to commit arson, to defeat the summary judgment motion defendant was merely required to demonstrate “that plaintiff’s premises may have been damaged by arson and that plaintiff may have had a motive to see the property destroyed by fire” … . Importantly, “[e]vidence of motive and incendiary origin without more is sufficient to defeat an insured’s motion for summary judgment in an action on its fire insurance policy” … .

Plaintiff failed to offer evidence to establish that the fire had not been intentionally set and, instead, merely challenged the validity of defendant’s investigation, arguing that the evidence failed to affirmatively establish that the fire had been deliberately set. Morley Maples, Inc. v Dryden Mut. Ins. Co., 2015 NY Slip Op 06395, 3rd Dept 7-30-15

 

“No Damages for Delay” and “Mandatory Notice” Clauses Precluded Suit

The Third Department affirmed the dismissal of plaintiff’s breach of contract complaint, finding that the exceptions to the enforceability of a “no damages for delay” clause did not apply, and the “mandatory notice” clause precluded suit for “extra work.” Plaintiff was engaged by defendant to install heating, ventilation and air conditioning equipment:

As a general rule, “contract clauses exculpating the contractee from liability to the contractor for damages resulting from delays in performance of the contract work” are valid and enforceable … . However, even where the contract contains such a clause, there are several recognized exceptions. As relevant here, a contractor may still recover for “delays caused by the contractee’s bad faith or its willful, malicious, or grossly negligent conduct” … . A defendant seeking summary judgment dismissing a claim for delay damages “bears the initial burden of demonstrating prima facie that none of the exceptions to the ‘damages for delay’ clause are present” … .  * * *

… [P]laintiff attempts to claim compensation for tasks that allegedly constituted “extra work” beyond the scope of the parties’ contract. However, a provision in the contract required plaintiff to notify defendant that it considered a task to constitute extra work within 15 working days after being ordered to undertake the task or beginning to perform it. Here, plaintiff concedes that it did not notify defendant of this claim until five months after it began performance of the disputed task. Thus, “[d]efendant established its entitlement to summary judgment by submitting proof that [plaintiff] did not comply with the condition precedent” by providing timely notice … . Tougher Indus., Inc. v Dormitory Auth. of the State of N.Y., 2015 NY Slip Op 06388, 3rd Dept 7-30-15

 

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agreement to maintain a driveway on a right-of-way ran with the land.

The Third Department held small claims court had properly determined an agreement to maintain a driveway on a right-of-way passing through the grantor’s front parcel to the grantee’s rear parcel ran with the land. The Third Department noted its review of small claims court rulings is confined to whether “substantial justice” was done according to the rules and principals of substantive law. Small claims court correctly held that the original parties to the property transfer intended the maintenance agreement to run with the land and that the agreement “touches and concerns” the land.  Therefore the defendant, the subsequent purchaser of the rear parcel, was bound by the maintenance agreement:

“Appellate review of small claims is limited to determining whether ‘substantial justice has not been done between the parties according to the rules and principles of substantive law'” … . Accordingly, this Court will overturn such a decision only if it is clearly erroneous … . As relevant here, to establish that the 1982 agreement ran with the land and was binding on defendants, plaintiff was required to establish that “(1) the grantor and grantee intended the [agreement] to run with the land, (2) there is privity of estate between the parties to the current dispute, and (3) the [agreement] touches and concerns the land” … . * * *

…[A]n agreement touches and concerns the land “if it affects the legal relations — the advantages and the burdens — of the parties to the [agreement], as owners of particular parcels of land and not merely as members of the community in general”… . Pugliatti v Riccio, 2015 NY Slip Op 06398, 3rd Dept 7-30-15

 

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correspondence which was intended to lead to a settlement agreement (re: real property taxes) did not create a binding agreement

The Third Department determined correspondence which was intended to lead to a settlement agreement (re: real property taxes) did not create a binding agreement. Subsequent to the correspondence, proposed stipulations had been circulated but were not executed. The Court explained the relevant analytical criteria:

… [A]n out-of-court settlement agreement “is not binding upon a party unless it is in a writing subscribed by [that party] or [that party’s] attorney” (CPLR 2104). Writings between parties to an action or proceeding that discuss the possibility of settlement will be considered to constitute a binding agreement if “the settlement agreement was adequately described in [such] writings, namely, the agreement was clear, the product of mutual accord and contained all material terms” … . Settlement-related writings may be deemed to have contained sufficiently detailed terms to give rise to a binding agreement when, for example, these writings explicitly incorporate the terms of other documents prepared in anticipation of settlement … . In contrast, settlement-related writings will not be found to have created a binding agreement if they expressly anticipate a subsequent writing that is to officially memorialize the existence of a settlement agreement and set forth all of its material terms … . Matter of George W. & Dacie Clements Agric. Research Inst., Inc. v Green, 2015 NY Slip Op 06399, 3rd Dept 7-30-15

 

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Only Documents Relevant to the Order/Judgment Appealed from Should Be in the Record on Appeal—Motion to Settle the Record Denied

The Third Department affirmed Supreme Court’s denial of plaintiff’s motion to settle the record (on appeal) by adding documents (which were deemed not relevant to the appeal). The court described the required contents of the record:

Consistent with the provisions of CPLR 5526, “the record on appeal from a final judgment shall consist of a notice of appeal, the judgment roll, the transcript or a statement in lieu of a transcript if there was a trial or hearing, any exhibits in the court of original instance, any other reviewable order and any opinion in the case” … . The judgment roll, in turn, shall contain, among other things, “the summons, pleadings, admissions, each judgment and each order involving the merits or necessarily affecting the final judgment” (CPLR 5017 [b]…). As a result, “[d]ocuments or information that were not before [the trial court] cannot be considered by this Court on appeal” .. . Here, Supreme Court expressly found that the five documents at issue were neither considered in conjunction with nor relevant to the issues that gave rise to its … order and judgment… . Xiaoling Shirley He v Xiaokang Xu, 2015 NY Slip Op 06385, 3rd Dept 7-30-15

 

Failure to Directly Address a Juror’s Stated Bias Required Reversal—“Bright Line” Rule Explained

The Third Department, over a dissent, determined that, once the prospective juror (No. 383) expressed a bias based upon the age difference between the adult defendant and child complainant, the failure to gain the assurance from the juror that her prior state of mind will not influence her verdict and she will render an impartial verdict based solely on the evidence constituted reversible error. The fact that the juror assured the judge she would not vote to convict if she had a reasonable doubt and that she would follow the law as instructed was not enough to address the expressed age-related bias.  A juror who has expressed a bias must unambiguously assure the court she will put her bias aside:

Once a prospective juror has identified his or her own biased perspective, he or she “must expressly state that his [or her] prior state of mind concerning either the case or either of the parties will not influence his [or her] verdict, and he [or she] must also state that he [or she] will render an impartial verdict based solely on the evidence” … . “[N]othing less than a personal, unequivocal assurance of impartiality can cure a juror’s prior indication that [he or] she is predisposed against a particular defendant or particular type of case” …, and, accordingly, the “bright-line standard . . . followed throughout the state” is “that a prospective juror who expresses partiality towards [one party] and cannot unequivocally promise to set aside this bias should be removed for cause” … . * * *

Considering the entirety of the questions posed to juror No. 383 and her responses, juror No. 383 unambiguously acknowledged a form of bias — based on the respective ages of the victim and defendant — that she identified as preventing her from being a fair and impartial juror. After juror No. 383 identified her own bias, she was never asked a question that referenced whether she could set aside any biases she held, generally, or whether she could set aside her specific bias regarding the respective ages of defendant and the victim. Further, in her responses to questions posed to her, juror No. 383 never specifically made reference to the age issue after she identified it as preventing her from being fair and impartial, and she never agreed, more generally, that she could set aside any bias that she held and decide the case in a fair and impartial manner based on the evidence presented. Therefore, juror No. 383 did not “unambiguously state that, despite preexisting opinions that might indicate bias, [she would] decide the case impartially and based on the evidence,” because she never made any statement regarding her preexisting opinion, let alone an unambiguous statement that she could set such opinion aside (People v Arnold, 96 NY2d at 363)[FN3]. Accordingly, County Court committed reversible error in denying defendant’s for-cause challenge to a juror who never contradicted or retracted her statement that her bias related to the respective ages of defendant and the victim prevented her from being a fair and impartial juror … . People v Warrington, 2015 NY Slip Op 06380, 3rd Dept 7-30-15

 

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