My Brother's Keeper; Court Grants Motion for Temporary Receiver for Properties Co-Owned by Deceased's Brother and Widow: Clark v Clark
In a December 20, 2011 decision by Justice Warshawsky, the court granted in part the plaintiff’s motion, pursuant to CPLR 6401 for the appointment of a temporary receiver. The plaintiff, Winifred Clark, the widow of William Clark, brought the action against William’s brother, James Clark. In the instant motion, Winifred moved for the appointment of a temporary receiver for 32 properties, 28 of which she, through William, and James owned as tenants in common; as to the others, the ownership was disputed. Winifred’s brought the motion in an attempt to protect her rights to 50% of the net rental income from the properties, which James managed. The appointment of a temporary receiver is an extreme remedy; the statute requires the movant to prove, by clear and convincing evidence that “there is a danger that the property will be removed from the state, or lost, materially injured or destroyed.” The court explained that while it is “loathe to appoint a receiver in most cases,” and notwithstanding the significant cost required to do so, it found that all of James’ actions taken together, including: defaulting on tax payments; under reporting income; maintaining double books; failing to pay Winifred her fair share of income; and misuse of joint income for personal needs, provided clear and convincing evidence that the CPLR 6401 standard was met. Therefore, the court granted the motion with respect to the 28 properties for which Winifred and James’ co-ownership was undisputed.
Clark v Clark, Sup Ct, Nassau County, December 20, 2011, Warshawsky, J., Index No. 5514/2008
Affirmative Defenses are Barred by Guaranty's Express Waiver Provision: J. Remora Maintenance LLC v Efromovich
In a January 4, 2012 decision by Justice Fried, the court granted the plaintiff’s motion for summary judgment to enforce a guaranty executed by the defendant in connection with the plaintiff’s sale of its interest in a company to a third party. The court found that because the two express conditions set forth in the guaranty for its enforcement were met, the plaintiff established entitlement to summary judgment as a matter of law. The court then determined that the defendant failed to raise an issue of fact through its affirmative defenses of fraudulent inducement and lack of consideration. Based on the Court of Appeal’s decision in Citibank v Plapinger, the court concluded that an express waiver contained in the guaranty barred the defendant from asserting the substantive defenses. The court rejected the defendant’s argument that the waiver did not apply to the two affirmative defenses at issue because it did not contain the words “absolutely and unconditional”, finding that such language was unnecessary under New York law for a waiver to effectively waive substantive defenses. The court also granted the plaintiff’s motion to dismiss the defendant’s fraudulent inducement counterclaim under CPLR § 3016(b) on the grounds that the circumstances surrounding the alleged fraudulent inducement were not alleged in sufficient detail.
J. Remora Maintenance LLC v Efromovich, Sup Ct New York County, January 4, 2012, Fried, J, Index No. 650943/11
Forum Selection Clause Applies to a Non-party to Agreement When Found to be "Closely Related" to the Party: Montoya v Cousins Chanos Casino, LLC
In a January 12, 2012 decision by Justice Kornreich, the court granted in part defendants’ motion to dismiss a declaratory judgment action that sought a declaration that plaintiffs complied in all respects with a Subscription Agreement.
The case arose out of an investment in a Law Vegas casino. In response to defendants’ threats of suing plaintiffs for misleading them in an investment, plaintiffs brought this action seeking, among other things, a declaration that they fully performed their obligations to defendants under the terms of the Subscription Agreement and that any common-law claims based on defendants’ investment are preempted by New York's Martin Act, (NY General Business Law §§ 352. After plaintiffs commenced this action, defendants filed suit in Nevada. The Nevada action alleges that plaintiffs engaged in fraud, fraudulent concealment and securities fraud in connection with the solicitation of investments; deceptive trade practices; unjust enrichment; conspiracy; breach of fiduciary duties; aiding and abetting breach of fiduciary duties and gross mismanagement.
On this motion to dismiss, defendants argue that plaintiffs were not signatories to the Subscription Agreement and, as a result, lack standing to bring this declaratory judgment action. Moreover, they claim that the forum selection clause in the Subscription Agreement is inapplicable because the causes of action in the Nevada complaint, common-law and statutory claims, do not arise from the Subscription Agreement. In addition, defendants contend that this action should be dismissed because there is another action pending between the parties in Nevada and this action was commenced solely in an effort to circumvent Nevada's adjudication of defendants' claims.
The Court held that a non-party may enforce a forum selection clause if the non-party is "closely related" to one of the signatories. Here, the Subscription Agreement contains both New York choice of law and forum selection clauses. By signing the Subscription Agreement containing the forum selection clause, defendants agreed to submit to the jurisdiction of the New York courts. Plaintiffs do have standing to bring this action because they are intended beneficiaries of the agreement and/or are closely related to the entity, one of the signatories of the agreement. Dismissal of this action, which was the first filed, is not warranted, since plaintiffs are merely asking the court to declare the parties' respective rights and remedies under the Subscription Agreement. The court observed that New York courts routinely enforce contractual forum selection clauses and pursuant to New York's General Obligations Law (GOL) § 5-1402.
The Court also concluded that no private right of action for damages exists under the Martin Act. Rather, the court reasoned that it appeared that plaintiffs were seeking an impermissible advisory opinion from the court to determine whether they have viable defenses to defendants' lawsuit. Plaintiffs' request for a declaration that they complied in all respects with the Subscription Agreement, requires the court to declare findings of fact, rather than to decide issues of law.
Montoya v. Cousins Chanos Casino, LLC, Sup Ct, New York County, Jan. 12, 2012, Kornreich J, Index No. 651353/2011.
Preference to Particular Bidders Did Not Require Acceptance of Bid At Any Cost: Outstanding Transp., Inc. v. Interagency Council of Mental Retardation & Dev. Disabilities, Inc.
In a January 13, 2012 decision by Justice Demarest, the court granted defendant’s motion for summary judgment dismissing the complaint – even though discovery was not complete. The dispute arose from a private bus transportation contract. In a prior contract, the parties agreed that the companies already providing transportation services would be given a “preference” in subsequent contract negotiations. Plaintiff alleged that defendant ignored that preference and awarded the new contract to another bus company. Plaintiff also alleged that it relied on defendant’s false and misleading statements in acquiring new equipment.
The court dismissed plaintiff’s cause of action based on the contract’s preference language because plaintiff’s bid was between 26% and 112% higher than the lowest bidder, negating the preference language because plaintiff’s reading of that language would have required defendant to award plaintiff the contract no matter the amount of plaintiff’s bid. The court also dismissed plaintiff’s implied covenant of good faith and fair dealing cause of action, finding that cause of action could not be used to resurrect a defective breach of contract claim. Also, the court found that there was no basis for plaintiff’s negligent misrepresentation and fraudulent inducement claims because plaintiff failed to, and couldn’t, prove any of the allegations of those claims.
Outstanding Transp., Inc. v. Interagency Council of Mental Retardation & Dev. Disabilities, Inc., Sup Ct, Kings County, January 13, 2012, Demarest, J, Index No. 8338/11.
Insurance Broker Can Be Liable for Not Finding the Most Cost Effective Life Insurance Policy: Finkelstein et al. v. Lincoln Natl. Corp. et al.
In an October 14, 2011 decision by Justice Warshawsky the court granted plaintiffs’ motion to amend to add an additional statutory cause of action and an additional party. Defendants were retained to provide estate planning advice and services, including assisting in the purchase of life insurance policies. Plaintiffs alleged that defendants failed to diligently seek the most cost effective insurance policy. Plaintiffs sought to add a cause of action under Insurance Law §§ 4226 and 2123. Defendants opposed arguing that the claims were palpably insufficient because they were not covered by the statutes and were barred by the applicable statute of limitations. The court granted plaintiffs’ motion regarding Insurance Law § 2123 which holds an insurance broker liable for failing to make a complete comparison when presenting various insurance policies but denied the motion as to Insurance Law § 4226 because there was no allegation that defendants misrepresented the terms and conditions of its own insurance policies. The court also held that the claim was not barred by the statute of limitations because it related back to when plaintiffs filed their original complaint. The court also granted plaintiffs’ motion to add one of the individual brokers as a named party based on his testimony that the entity through which he did business was not a legal entity but a marketing name.
Finkelstein et al. v. Lincoln Natl. Corp. et al., Nassau County, October 14, 2011, Warshawsky, J, Index No. 5372/09.
Defendant Cannot Vacate Default Judgment By Claiming It Never Received Pleadings: C McCormack Inc. v 6 St. Nicholas LLC
In a December 7, 2011 decision by Justice Driscoll, the court denied the defendant’s motion to vacate a default judgment against it. Based on Second Department law, the court found that the plaintiff presumptively established the right to a default judgment by providing a process server’s affidavit of service of the summons and complaint pursuant to NY LLC Law § 303, and the defendant failed to overcome that presumption by merely denying receipt of the pleadings. The motion was also denied because, the court found, the defendant failed to provide any excuse for its failure to answer the complaint or respond to the prior motion for a default judgment, and the defendant alleged only in conclusory fashion that it had a meritorious defense yet failed to present any facts supporting such defense.
C McCormack Inc. v 6 St. Nicholas LLC, Sup Ct Nassau County, December 7, 2011, Driscoll, J, index No. 011841-10
Questions of Fact and Automatic Stay Prohibit Motion for Summary Judgment: Tomlinson v Degannes
In a December 2, 2011 decision by Justice Schmidt, the court denied the defendant/third-party defendant, Chan’s, motion for summary judgment pursuant to CPLR 3212 which sought to dismiss the complaints of both the plaintiff, Tomlinson, and the intervening defendant/third-party plaintiff, BNC Mortgage, Inc. The case stemmed from a sale of real property in which Tomlinson was the seller and Chan was the settlement agent representing BNC, who was the lender. After the closing, Tomlinson commenced the action for recision of the contract of sale and for damages resulting from an alleged “mortgage rescue scheme.”
In the instant motion, Chan asserted that: 1) with respect to Tomlinson’s complaint, he was not a party to the transaction and, notwithstanding, there were no irregularities in the disbursements of the loan proceeds because "simple arithmetic" and the HUD-1 statement verified that the loan proceeds were accounted for; and 2) with respect to BNC’s complaint, the claims were unsupported by the record and BNC failed to properly plead their causes of action. The court found that material questions of fact existed related to Tomlinson’s allegations about irregularities in the disbursements at the closing, precluding summary judgment as to Tomlinson’s complaint. The court then dismissed without prejudice the branch of Chan’s motion seeking summary judgment against BNC because BNC was under Chapter 11 bankruptcy protection and subject to the automatic stay. The court noted that Chan could renew that part of the motion when BNC emerged from bankruptcy or when the automatic stay was lifted.
Tomlinson v. Degannes, et al, Sup Ct, Kings County, December 2, 2011, Schmidt, J., Index No. 41418/2007
Express As-Is Lease Provisions Bars Fraud Claim: Midorimatsu, Inc. v Hui Fat Co.
In an November 22, 2011, decision by Justice Kitzes, the court granted defendant’s motion to dismiss for failure to state a cause of action. Plaintiff-restaurant tenant sued defendant-landlord for allegedly failing to prepare the premises for compliance with certain restaurant regulations, including seating capacity for up to 150 customers. Defendant moved to dismiss based on specific provisions in the lease, which expressly placed the burden of such compliance on plaintiff in several “as is” provisions. Based on the unambiguous lease provisions, the court granted the motion, finding that defendant was under no obligation to make any changes to the premises and that any alleged representations to the contrary were specifically merged into the lease documents.
Midorimatsu, Inc. v Hui Fat Co., Sup Ct, Queens County, November 22, 2011, Kitzes, J., Index No. 16053/2011
General Electric Capital Corp. v. Ocean Marine Inc.
In a November 28, 2011 decision by Justice Driscoll, the court granted plaintiff lender’s motion for judgment of foreclosure and sale and an order of reference. In 2005, the lender, GE Capital Corp., loaned $1 million to defendant, a marina located in Freeport, NY. The loan was secured by a mortgage on three properties. In addition, the individual defendants each signed a commercial guaranty. The Note required defendants to pay all real estate taxes associated with the property, and contained an acceleration clause in the event of default by the borrower.
Defendants failed to pay the 2009 and 2010 real estate taxes, and ultimately the lender accelerated the payments due under the Note which, by the time of acceleration, amounted to $988,736.
On the motion, the defendants did not contest the signing of the Note or that the they intended to mortgage the three lots, but rather that the mortgage recording was defective because of improper indexing by the office of the County Clerk. As such, foreclosure should be denied.
In granting the judgment of foreclosure, the court held that the lender established a prima facie right to entitlement to a judgment of foreclosure. Such right, held the court, is not defeated by an indexing error by the County Clerk. Accordingly, the court directed entry of judgment of foreclosure, and directed the County Clerk to amend the records to re-index the mortgage as it was intended.
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Court Denies Motion for Leave to Amend Where Proposed Allegations Were Reviewed and Dismissed as Part of Cross-Motion for Summary Judgment: Ferghana Partners Inc. v Bioniche Life Sciences Inc.
In an October 5, 2011, decision by Justice Schweitzer, the court granted defendant’s motion for summary judgment dismissing the complaint and denied plaintiff’s motion for leave to amend. Plaintiff-investment firm sued defendant-biotechnology company for breach of contract under a finder’s agreement in connection with defendant’s partnership with a pharmaceutical company to market and sell one of defendant’s drugs. Defendant moved for summary judgment dismissing the complaint, proffering evidence that plaintiff admittedly failed to comply with the specific finding process set forth in the agreement. Plaintiff ultimately contended that it was entitled to its finder’s fee under the agreement because the third-party pharmaceutical company had subsequently acquired another company – a potential candidate – with which plaintiff previously had contact regarding defendant’s drug. The court granted defendant’s motion finding that plaintiff failed to comply with the agreement, particularly with the provisions requiring plaintiff to identify potential candidates for partnership with defendant “in conjunction with defendant” and to “obtain defendant’s approval” with respect to any such candidates. The court also denied plaintiff’s motion for leave to amend the complaint to allege facts related to the third-party pharmaceutical company’s acquisition of the potential candidate because the company “was acquired . . . nearly three years after plaintiff had contact with [it], and after the [finder’s] agreement had been terminated months before.”
Ferghana Partners Inc. v Bioniche Life Sciences Inc., Sup Ct, New York County, October 5, 2011, Schweitzer, J., Index No. 650747/2009
