Chapter Twenty-Three
Rochester, New York
Summaries of Recently Released Decisions to Be Included In the Next Issue of the Digest (uncorrected)
Click on the Case Name to View Full Decision
ARBITRATION/CIVIL PROCEDURE
Arbitrator Not Precluded from Considering Punitive Damages by Provision that the Agreement Is To Be "Construed and Enforced" in Accordance with New York Law
In a full-fledged opinion by Justice Manzanet-Daniels, over an extensive dissent, the First Department determined that the provision in an agreement covering arbitration of disputes stating that the agreement is to be "construed and enforced" in accordance with New York law did not necessarily preclude the arbitrator from considering punitive damages. The court found the language in the agreement insufficiently specific to invoke the "Garrity rule. " Under "Garrity," arbitrators in New York are prohibited from considering punitive damages. But the Federal Arbitration Act, which may apply here because of the involvement of interstate commerce, does not. The court also noted that participation in arbitration precludes a party from seeking a stay of arbitration pursuant to CPLR 7503. The choice of law issue is framed by the following passages:
Merely stating, without further elaboration, that an agreement is to be construed and enforced in accordance with the law of New York does not suffice to invoke the Garrity rule. The Supreme Court has made clear that in order to remove the issue of punitive damages from the arbitrators, the agreement must "unequivocal[ly] exclu[de]" the claim ... . The agreement in this case, which provided only that it was to be "construed and enforced" in accordance with the law of New York, did not unequivocally exclude claims for punitive damages from the consideration of the arbitrators
From the dissent:
The core issue in this case - an appeal from an order denying petitioners' motion to stay arbitration of claims for punitive damages - relates to the tension between New York State policy against the privatization of punitive damages and the federal policy that there is no such prohibition. Specifically, under New York State law, as expressed by Garrity v Lyle Stuart, Inc. (40 NY2d 354 [1976]), the power to award punitive damages is limited to judicial tribunals, and is not within an arbitrator's authority... . Conversely, the federal view, as reflected in the Federal Arbitration Act (FAA),... which applies to arbitration disputes concerning interstate commerce, generally empowers arbitrators to award punitive damages, absent a contractual intent to the contrary. Unlike the majority, I find that, while the agreement here evidences a transaction involving interstate commerce, the provision stating that the agreement is to be "construed and enforced" in accordance with the laws of New York suffices to invoke the Garrity rule. Therefore, I dissent and would grant petitioners' motion to stay arbitration of the claims for punitive damages. Matter of Flintlock Constr Servs LLC v Weiss, 2014 NY Slip Op 05818, 8-14-14
CRIMINAL LAW
Pointing Finger and Saying "I'm Going to Shoot You" Did Not Support Harassment and Menacing Charges
The First Department determined that the allegations supporting harassment and menacing charges were insufficient:
...[T]he accusatory instrument was insufficient as a matter of law with regard to the harassment and menacing charges. The allegation that defendant pointed his finger in a shooting motion and stated, "I'm going to shoot you," without any indication that defendant was armed at the time, did not set forth an imminent threat of harm to the complainant. Nor were any facts alleged showing the statement should have been taken seriously ... . People v Harris, 2014 NY Slip Op 05814, 1st Dept 8-14-14
CRIMINAL LAW/ATTORNEYS
Failure to Move to Sever Unrelated Counts of Indictment Constituted Ineffective Assistance of Counsel
The Second Department determined defense counsel's failure to move to sever unrelated counts of the indictment constituted ineffective assistance of counsel:
In this case, based solely on the complainant's identification, the defendant and his codefendant were charged with robbery in the first degree and robbery in the second degree in connection with a robbery that occurred on November 6, 2005. The same indictment also separately charged the defendant with four drug offenses and resisting arrest, stemming from his arrest at his mother's home on January 16, 2006, despite the fact that the drug and resisting arrest charges had no connection to the November 6, 2005, robbery. Defense counsel failed to make an on-the-record pretrial motion to sever the robbery charges from the other charges and did not raise the issue at trial, and the defendant was tried on all counts in the indictment. * * *
As a result of defense counsel's error, the same jury that heard evidence regarding the robbery also heard voluminous evidence concerning the defendant's arrest and the large quantity of drugs found in his mother's home. Consequently, the jury could have inferred that the robbery at issue was committed for a drug-related purpose, and it is probable that the improper joinder tainted the jury's evaluation of the separate, unrelated incidents ... . Under the circumstances presented here, the defendant was deprived of the effective assistance of counsel, based on defense counsel's failure to make a proper pretrial motion to sever the charges of robbery from the drug charges. People v Hall, 2014 NY Slip Op 05802, 2nd Dept 8-13-14
CONTRACT LAW/REAL PROPERTY LAW/DEBTOR-CREDITOR
Insufficient Proof of an Agreement to Assume a Mortgage at the Time Deed Transferred
The Second Department determined that the writings were insufficient to demonstrate the grantee agreed to assume a mortgage at the time the deed was transferred:
General Obligations Law § 5-705 provides, in relevant part, that "[n]o grantee of real property shall be liable upon any indebtedness secured by a mortgage" unless, "simultaneously with the conveyance," the grantee executes a writing before a notary agreeing to assume and pay the mortgage debt. Here, it is clear from the allegations in the complaint and attached exhibits that the defendants did not execute a notarized written agreement to assume the mortgage allegedly held by the plaintiff at the time the properties were conveyed ... . Thus, General Obligations Law § 5-705 bars the plaintiff from recovering on the theory that the defendants agreed to assume his existing mortgage on the properties as alleged in the complaint. Furthermore, [recovery] is also barred by the statute of frauds because an agreement to answer for the debt of another must be in writing (see General Obligations Law § 5-701[a][2]). Contrary to the plaintiff's contention, the various writings attached to the complaint, taken together, were insufficient to memorialize the existence of an agreement ... . Dahan v Weiss, 2014 NY Slip Op 05767, 2nd Dept 8-13-14
EVIDENCE/CIVIL PROCEDURE/REAL PROPERTY LAW
The Requirements of Certificates of Conformity and Authenticity (Re: the Admissibility of Out-of-State Affidavits) Explained
The Second Department, in a full-fledged opinion by Justice Dillon, reversed Supreme Court finding that an out-of-state affidavit re: the assignment of a note and mortgage was in admissible form and could therefore be considered in support of plaintiff's summary judgment motion. The court explained that, because the document was notarized, no "certificate of authentication" was needed, and the "certificate of conformity" which was provided was adequate under New York law:
Here, the affidavit of Josh Mills was necessary for the plaintiff to establish the assignment to it of the subject mortgage and note and the defendants' default in payment. The primary issue on this appeal is whether Mills's out-of-state affidavit was sworn to and conformed in a manner rendering it admissible in this state under CPLR 2309(c). * * *
The "certificate" required by CPLR 2309(c), commonly referred to in case law as a "certificate of conformity," must contain language attesting that the oath administered in the foreign state was taken in accordance with the laws of that jurisdiction or the law of New York (see Real Property Law § 299-a[1]). A "certificate of conformity" is separate and distinct from a "certificate of authentication," which attests to the oathgiver's authority under the foreign jurisdiction to administer oaths ... . * * *
A combined reading of CPLR 2309(c) and Real Property Law §§ 299 and 311(5) leads to the inescapable conclusion that where, as here, a document is acknowledged by a foreign state notary, a separate "certificate of authentication" is not required to attest to the notary's authority to administer oaths ... . * * *
Nevertheless, CPLR 2309(c) requires that even when a notary is the foreign acknowledging officer, there must still be a "certificate of conformity" to assure that the oath was administered in a manner consistent with either the laws of New York or of the foreign state. In other words, a certificate of conformity is required whenever an oath is acknowledged in writing outside of New York by a non-New York notary, and the document is proffered for use in New York litigation. * * *
Here, the Supreme Court erred in concluding that the Mills affidavit was not accompanied by a certificate of conformity, as the "Uniform, All Purpose Certificate of Acknowledgment," appended to the Mills affidavit, substantially conformed with the template requirement of Real Property Law § 309-b and constituted a certificate of conformity. * * * Midfirst Bank v Agho, 2014 NY Slip OP 05778, 2nd Dept 8-13-14
INSURANCE LAW/CONTRACT LAW/LANDLORD-TENANT
Term "Entrustment" in a Policy Exclusion (In the Context of Entrustment of Property to Another) Interpreted to Encompass Entire Leased Premises
The First Department determined that preclusion of coverage for "dishonest or criminal acts" committed by persons to whom the subject property was "entrusted" encompassed the removal of fixtures from premises leased by the insured:
Plaintiffs leased the insured premises to a tenant, which converted the premises into a youth hostel, removed the kitchen cabinets and appliances to turn the kitchens into additional dormitory areas, and, when the hostel closed, did not return the cabinets or appliances ... . Plaintiffs argue that the term "entrustment" in the policy pertains solely to chattels and not to fixtures ... . However, in Abrams v Great Am. Ins. Co. (269 NY 90, 92 [1935]), the Court of Appeals explained that an insurance contract's language "must be given its ordinary meaning," and "common words" in a policy such as entrusted are not "used as words of art with legalistic implications" (id.). Accordingly, Abrams taught, when a contract indicates that the property is entrusted, it can be understood that the parties mean that possession of property is willingly "surrender[ed] or deliver[ed] or transfer[red]," to be "used for the purpose intended by the owner . . . . The controlling element is the design of the owner rather than the motive of the one who obtained possession" (id.). Here, we find that the terms of the policy at issue do not limit what can be entrusted, that property may be entrusted to another under a triple net lease agreement, and that the entrustment refers to the entirety of the premises unless otherwise specified. Lexington Park Realty LLC v National Union Fire Ins Co of Pittsburgh PA, 2014 NY Slip Op 05817, 8-14-14
INSURANCE LAW
Denial of "Defective" No-Fault Claim (on Form UB-40) Was of No Effect---Failure to Respond Within 30 Days to a Subsequent "Correct" Claim (on Form NF-5) Precluded Insurer from Raising Defenses to the Claim
The Second Department determined the insurer's denial of a defective claim was of no effect and the insurer's failure to respond to the valid claim within 30 days precluded raising defenses to the claim:
[The insurer] contends that the 30-day period commenced when it received the Form UB-04 in December 2011, that it timely requested verification of the claim, and that, after it received the medical records, it timely denied the claim in January 2012. [the hospital] could not commence the 30-day clock anew by submitting the same claim several months later ... .
We conclude that the Supreme Court erred in denying [the hospital's] motion for summary judgment on the complaint and in granting [the insurer's] cross motion for summary judgment dismissing the complaint. Under our decision in Sound Shore [106 AD3d 157], the 30-day period for [the insurer] to pay or deny the claim did not begin to run until March 26, 2012, when [the hospital] submitted the Form NF-5, which contained the information needed. Because [the insurer] did not pay or deny the claim within 30 days thereafter, it was precluded from raising defenses. In other words, the defective "claim" submitted in December 2011 did not start the 30-day clock, so [the insurer's] denial in January 2012 was of no effect ... . Mount Sinai Hosp v New York Cent Mut Fire Ins Co, 2014 NY Slip Op 05779, 2nd Dept 8-13-14
REAL PROPERTY TAX LAW
Mistaken Classification of Property Resulting In a Much Too Large Tax Bill Was a "Clerical Error" Which Could Be Corrected by the City Department of Finance---No Need for Property Owner to Commence a Tax Certiorari Proceeding
The Second Department, in a full-fledged opinion by Justice Leventhal, over a dissent, determined that the petitioner could challenge a mistaken classification of his property (which resulted in a property tax more than $40,000 too high) through an Article 78 proceeding finding that a tax certiorari proceeding under the Real Property Tax Law (RPTL) was not the exclusive vehicle for the challenge. The Article 78 proceeding was timely, a tax certiorari proceeding would not have been timely. The mistake was deemed a "clerical error" which could have been corrected by the NYC Department of Finance (DOF) pursuant to City Administrative Code sectionn 11-206:
We agree with the petitioner that the DOF's determination, at the very least, suggests that it misapprehended both the relief sought by the petitioner as well as its authority to grant the relief actually requested. Administrative Code § 11-206 vests the DOF with the discretion to correct tax assessments that are erroneous due to a clerical error or to an error of description; the DOF's authority is not limited to transcription errors or arithmetical errors. Moreover, contrary to the DOF's representation in the letter dated March 24, 2011, the authority to correct such an error pursuant to Administrative Code § 11-206 does not lie with the Tax Commissioner or the judiciary. Therefore, the Supreme Court erred in granting the respondents' motion pursuant to CPLR 3211(a)(5) and (7) to dismiss the petition on the grounds that it fails to state a cause of action and that the proceeding was time-barred. Matter of Better World Real Estate Group v New York City Dept of Fin, 2014 NY Slip Op 05786, 2nd Dept 8-13-14