Author: DMG

Contract terms

MHR Capital Partners LP v Presstek, Inc., 2009 NY Slip Op 05200 (Ct. App., 2009)

It is well settled that a contract is to be construed in accordance
with the parties' intent, which is generally discerned from the four
corners of the document itself. Consequently, "a written agreement that
is complete, clear and unambiguous on its face must be enforced [*4]according to the plain meaning of its terms" (Greenfield v Philles Records,
98 NY2d 562, 569 [2002]). Furthermore, a condition precedent is "an act
or event, other than a lapse of time, which, unless the condition is
excused, must occur before a duty to perform a promise in the agreement
arises" (Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co.,
86 NY2d 685, 690 [1995] [internal quotation marks and citations
omitted]). We have recognized that the use of terms such as "if,"
"unless" and "until" constitute "unmistakable language of condition" (id. at 691). Express conditions must be literally performed; substantial performance will not suffice.

Rahman v Park, 2009 NY Slip Op 04882 (App. Div., 2nd, 2009)

The operating agreement and the side agreement clearly conflict as
to the manner in which disputes under the respective agreements are to
be determined. The operating agreement requires arbitration of
disputes, while the side agreement contemplates judicial resolution of
disputes by the court, with certain provisions of confidentiality.

"The construction and interpretation of an unambiguous written contract is an issue of law within the province of the court" (Franklin Apt. Assoc., Inc. v Westbrook Tenants Corp., 43 AD3d 860, 861; see Jackson & Wheeler, Inc. v Village of Pleasantville, 56 AD3d 723, 724; Yu Han Young v Chiu, 49
AD3d 535, 535-536). "[A] written agreement that is . . . clear and
unambiguous [as a matter of law] must be enforced according to the
plain meaning of its terms" (Greenfield v Philles Records, 98 NY2d 562, 569; Maroney v Hawkins, 50 AD3d 862, 863; see Ross v Sherman, 57 AD3d 758).

The parties clearly agreed that in case of conflict the
provision of the side agreement controlled. Rahman did not agree to
arbitrate issues arising under the side agreement as opposed to the
operating agreement. A party cannot be required to submit to
arbitration issues it did not agree to arbitrate (see Credit Suisse First Boston Corp. v Cooke, 284 AD2d 365; Matter of American Centennial Ins. Co. v Williams, 233 AD2d 320; see also Brach v Fried, 16 AD3d 533; Matter of Miriam Osborn Mem. Home Assn. v Kreisler Borg Florman Gen. Constr. Co., 306
AD2d 533). To the extent the present action seeks to enforce Rahman's
rights under the side agreement, it is not subject to the mandatory
arbitration provision of the operating agreement.

P.J.P. Mech. Corp. v Commerce & Indus. Ins. Co., 2009 NY Slip Op 04984 (App. Div., 1st, 2009)

Well established principles governing the interpretation of insurance
contracts provide that the unambiguous provisions of the policy must be
given their plain and ordinary meaning (Greater N.Y. Mut. Ins. Co. v United States Underwriters Ins. Co., 36 AD3d 441, 442 [2007]). This is a question of law for the court to determine (Titlebaum Holdings v Gold, 48 NY2d 51, 56 [1979]; Seaport Park Condominium v Greater N.Y. Mut. Ins. Co., 39 AD3d 51,
54 [2007]). However, a court is not at liberty to "make or vary the
contract of insurance to accomplish its notions of abstract justice or
moral obligation" (Breed v Insurance Co. of N. Am., 46 NY2d 351, 355 [1978]).

…

Significantly, if plaintiff believed that Cauldwell's defense was
truly a counterclaim, the prudent action was to immediately move to
strike the defense and force Cauldwell to
replead the claim as a counterclaim. This would have triggered the
insurer's duty to defend. Had these steps been taken in the instant
action, defendant would have been forced to defend plaintiff at the
beginning of the case, rather than when the counterclaim was
voluntarily asserted by Cauldwell several months later.

There do not appear to be any New York cases addressing the
issue of whether the assertion of a claim such as Cauldwell's offset
claim, when pleaded as an affirmative defense, triggered the insurer's
duty to defend. Plaintiff relies on Construction Protective Servs. v TIG Specialty Ins. Co. (29
Cal 4th 189, 57 P3d 372 [2002]) and argues that we should adopt the
rationale therein. In that case, a security firm sued the insurance
company that provided its comprehensive general liability policy,
claiming the insurer breached its duty to defend and indemnify against
a setoff claim. The setoff was asserted as an affirmative defense in a
lawsuit for unpaid services. The customer alleged that the security
firm was legally responsible for fire damage at its construction site
and thus was entitled to set those damages off against the amounts owed
for security services. The trial court sustained the insurance
company's demurrer without leave to amend, based on its conclusion that
a liability insurer's duty to defend does not extend to affirmative
defenses raised in response to a lawsuit initiated by the insured.
Based solely on its Code of Civil Procedure, the California Supreme
Court held that the trial court had erroneously sustained the demurrer,
but it declined to address the question on the facts where the precise
terms of the insurance policy were not before the court. In an action
on a written contract, a [*6]plaintiff
could, under California procedure, plead "the legal effect of the
contract rather than its precise language," thus enabling the court to
determine whether "a prima facie right to relief" had adequately been
stated, notwithstanding the specific language of the contract (29 Cal
4th at 198-199, 57 P3d at 377).

Despite the omission of a copy of the insurance policy as an
exhibit to the complaint, the court concluded that the allegations in
the complaint were sufficient to allege that the setoff claim fell
within the scope of the contractual obligation to defend against suits
seeking damages, and left open the question whether the duty would
extend to the setoff claim once the precise language of the policy was
known.

We decline to follow this holding. Were we to adopt the reasoning of Construction,
it would represent a dramatic change in long-established New York law,
which mandates that unambiguous contract language controls. It would
essentially eliminate our pleading distinctions between affirmative
defenses and counterclaims by holding that how the setoff is pleaded
does not control. While Construction recognized that a setoff
is limited to defeating a plaintiff's claim in the same manner that an
affirmative defense is so limited, it then went on to hold the effect
of pleading a setoff defense is the same as if it were pleaded as a
counterclaim, and thus, at least for the purposes of whether utilized
defensively (as in an affirmative defense) or offensively (as in a
counterclaim), there is no distinction between the two. In either case,
an insurer would be mandated to assign counsel to defend the insured.
This would impact the long-established business practices of insurers,
and lead to uncertainty in the drafting of insurance contracts.

To ignore the clear language of an insurance policy and order a
carrier to litigate an affirmative action chosen by the policyholder
based on a mere claim in a defendant's answer that the affirmative
action somehow relates, however tenuously, to an occurrence or
allegation of negligence on the part of the insured would run afoul of
the rule enunciated in Breed (46 NY2d at 355). We see no reason to set aside long-standing precedent on this issue.

The bold is mine.

Under Oath

McKay v Vita, 2009 NY Slip Op 51135(U) (App. Term, 2nd, 2009)

Plaintiff, an attorney, brought the instant small claims action to
recover amounts allegedly due and owing for services rendered to
defendant, a former client, in connection with plaintiff's legal
representation of defendant in a Supreme Court action.

At the commencement of the nonjury trial, an oath was
administered only to defendant, and the trial proceeded, with both
plaintiff and defendant testifying in their own behalf. A judgment was
rendered in plaintiff's favor.

Regardless of profession or affiliation to the court system,
all persons testifying in a civil action, even in a small claims
action, must be sworn (see Diederich v Del Prior, 18 Misc 3d 132[A], 2008 NY Slip Op 50084 [App Term, 2d & 11th Jud Dists 2008]; Trensky v Johnson, 1 Misc 3d 50 [App Term, 1st Dept 2003]; Uniform Civil Rules for the District Courts [22 NYCRR] § 212.41 [j]); see also
Siegel, NY Prac § 388, at 655 [4th ed]). Plaintiff's status as an
"officer of the court" does not dispense with this requirement (see Trensky, 1 Misc 3d at 52).

In view of the foregoing, the judgment is reversed and the matter is remitted to the District Court for a new trial.

The bold is mine.

CPLR § 3101(d) Experts and Weight

CPLR § 3101(d)

Board of Mgrs. of the 195 Hudson St. Condominium v 195 Hudson St. Assoc., LLC, 2009 NY Slip Op 04950 (App. Div., 1st, 2009)

While the "qualification of an expert witness is within the court's
sound discretion, and its determination will not be disturbed in the
absence of serious mistake, an error of law or abuse of discretion" (People v Jones, 171 AD2d 609, 610 [1991], lv denied 77 NY2d 996 [1991]), this expert should not have been precluded from testifying as to future cost estimates (see generally Issacs v Incentive Sys.,
52 AD2d 550 [1976]). Licensed professionals acting as experts have been
found qualified to give their opinions regarding future or estimated
costs (see Matter of City of Troy v Town of Pittstown, 306 AD2d 718, 719 [2003], lv denied 1 NY3d 505 [2003]), and this witness's education, training and experience qualified him to testify as an expert in connection [*2]with
estimating costs. The computer database utilized by plaintiff's expert
to prepare pre-bid cost estimates was based on the same methodology
employed in connection with the completed remediation work —
specifications and bids of hundreds of prior projects on which the
expert had worked. Furthermore, "any alleged lack of knowledge in a
particular area of expertise goes to the weight and not the
admissibility of the testimony," and could have been cured with a
limiting instruction to the jury (see Moon Ok Kwon v Martin, 19 AD3d 664 [2005]).

K & J/Gonzalez's argument that it is entitled to set off
against the $2,059,692.09 jury verdict the $1,960,000 received from the
settling codefendants is unsupported by the record (see e.g. Promenade v Schindler El. Corp., 39 AD3d 221, 222-223 [2007], lv dismissed
9 NY3d 839 [2007]). Based on the explicit language of the second
amended complaint, the verdict sheet and the settling agreements, there
is no basis for concluding that the jury allocated damages to these
defendants based on the same claims or injuries by which plaintiff had
entered into its agreements with the settling codefendants. Plaintiff's
Amended CPLR 3101(d) Expert Disclosure clearly indicated that this
expert's testimony would address construction defects caused by K &
J and the "costs to remedy" those defects.

The bold is mine.

CPLR § 203(d)

CPLR § 203 Method of computing periods of limitation generally

(d) Defense or counterclaim

Carlson v Zimmerman, 2009 NY Slip Op 04849 (App. Div., 2nd, 2009)

The Supreme Court erred, however, in granting that branch of the
plaintiffs' motion which was to dismiss the defendants' counterclaims
as time-barred insofar as the counterclaims pertained to erosion of the
defendants' properties caused by the plaintiffs' activities. Under CPLR
203(d), "claims and defenses that arise out of the same transaction as
a claim asserted in the complaint are not barred by the Statute of
Limitations, even though an independent action by defendant might have
been time-barred at the time the action was commenced" (Bloomfield v Bloomfield, 97
NY2d 188, 193). "The provisions of CPLR 203(d) allow a defendant to
assert an otherwise untimely claim which arose out of the same
transactions alleged in the complaint, but only as a shield for
recoupment purposes, and does not permit the defendant to obtain
affirmative relief" (DeMille v DeMille, 5 AD3d 428, 429; see Delta Funding Corp. v Murdaugh, 6 AD3d 571, 571-572; Rothschild v Industrial Test Equip. Co., 203
AD2d 271, 272). Here, there is evidence that some of the defendants'
trespassing activities were undertaken in an attempt to correct damage
that the plaintiffs admitted to having caused by excavating too deeply
into their land abutting properties belonging to the defendants, and
failing to leave a sufficient buffer area along the border. It is
undisputed that these activities caused erosion on the affected
properties, allegations concerning which form the basis of portions of
the defendants' counterclaims. Accordingly, the Supreme Court should
have denied that branch of the plaintiffs' motion which was to dismiss
the counterclaims as time-barred to the extent that the damages sought
in the counterclaims are for the erosion caused by the plaintiffs'
excavating activities, and/or to reimburse the defendants' costs in
attempting to correct the resulting damage. These damages should be
applied to offset any damages award in favor of the plaintiffs and
against the defendants (cf. Delta Funding Corp. v Murdaugh, 6 AD3d at 571-572; DeMille v DeMille, 5 AD3d at 429).

The bold is mine.

CPLR § 3215 Default judgment

(f) Proof

CPLR R 306 Proof of service

(a) Generally

Jian Zheng v Evans, 2009 NY Slip Op 04863 (App. Div., 2nd, 2009)

In opposition, the plaintiffs failed to raise a triable issue of
fact. The plaintiffs produced only an attorney's affirmation offering
speculation, unsupported by any evidence, that the defendants acted in
bad faith and failed to abide by the terms of the contract of sale (see Cordova v Vinueza,
20 AD3d 445). Moreover, the plaintiffs' contention that the granting of
summary judgment was premature is without merit. The plaintiffs failed
to "show more than a mere hope that [they] might be able to uncover
some evidence during the discovery process," nor did they show that
their "ignorance was unavoidable and that reasonable attempts were made
to discover the facts which would give rise to a triable issue of fact"
(Companion Life Ins. Co. of N.Y. v All State Abstract Corp., 35 AD3d 519, 521).
[*2]

The Supreme Court also properly
granted that branch of the defendants' motion which was for leave to
enter a default judgment on their counterclaim for the return of their
down payment upon the plaintiffs' failure to serve a reply to the
counterclaim. The defendants submitted proof of service of their
verified answer and counterclaim, proof of the facts constituting the
counterclaim, and an affirmation from their attorney regarding the
plaintiffs' default in serving a reply (see CPLR 3215[f]). In
opposition, the plaintiffs failed to demonstrate that they served a
reply on the defendants. Although they annexed a reply to their
attorney's affirmation, it was not signed and they did not provide
sufficient evidence of service (see CPLR 306[a], [d]; Celleri v Pabon, 299 AD2d 385, 385-86; cf. Dixon v Motor Veh Acc. Indem. Corp.,
224 AD2d 382, 383-384). Moreover, the plaintiffs did not provide a
reasonable excuse for their failure to timely serve a reply, and a
potentially meritorious defense (see ACME ANC Corp. v Read, 55 AD3d 854, 855; Twersky v Kasaks, 24 AD3d 657, 658; cf. MMG Design, Inc. v Melnick, 35 AD3d 823).

The bold is mine.

CPLR § 5205(c)(2)&(5)

CPLR § 5205 Personal property exempt from application to the satisfaction of money judgments

(c)
Trust exemption

Memmo v Perez, 2009 NY Slip Op 04710 (App. Div., 1st, 2009)

Order, Supreme Court, New York County (Saralee Evans, J.), entered
February 20, 2009, which, in an action for divorce, inter alia,
directed plaintiff to satisfy the charging lien of his former attorneys
(MSAR) "from the retirement accounts retained by or transferred to
Plaintiff" pursuant to the settlement in the divorce action,
unanimously modified, on the law, to delete the words "retained by or,"
and otherwise affirmed, without costs. Appeal from paper, denominated
decision and order, which granted MSAR's motion seeking, inter alia,
the above relief and directed settlement of an order, unanimously
dismissed, without costs.

MSAR's charging lien came about not by virtue of Judiciary Law § 475, but rather a stipulation, so ordered by the court, in which plaintiff agreed that MSAR "shall have a charging lien
against plaintiff and plaintiff's share of equitable distribution, if
any, in the amount of $70,000." Accordingly, plaintiff will not be
heard to argue that because MSAR's efforts did not create a "new fund"
greater than the value of interests already held by plaintiff, MSAR
does not have a valid charging lien (see Miller v Kassatly, 216 AS2d 260 [1995]; Resnick v Resnick, 24 AD3d 238
[2005]). Nor is the stipulation rendered unenforceable by CPLR
5205(c)(2), exempting personal retirement accounts from application to
the satisfaction of money judgments. First, the transfer of assets from
defendant's IRA account to plaintiff's IRA account pursuant to the
settlement in the divorce action admittedly took place within 90 days
of plaintiff's stipulation to MSAR's lien (CPLR 5205[c][5][i]). Second,
because the matrimonial settlement agreement left plaintiff with no
immediate liquid assets to which MSAR's lien could attach, the court
providently exercised its discretion to look behind that settlement to
determine if plaintiff had used all liquid assets to which he had a
claim to defray obligations other than the lien (see Haser v Haser,
271 AD2d 253 [2000]). However, the directive that payment be made of
out of funds "retained by" plaintiff in retirement accounts is
incorrect, since any funds originally held by plaintiff in his name
would be [*2]exempt from judgment under CPLR 5205(c)(2). In accordance with CPLR 5205(c)(5)(i), only the funds
transferred into plaintiff's IRA account from defendant's IRA account
may be used to satisfy MSAR's lien.

The bold is mine

CPLR § 311(a)(1); CPLR R. 5015(a)(1)(4)

CPLR § 311 Personal service upon a corporation or governmental subdivision

(a)(1)

CPLR R. 5015 Relief from judgment or order

(a) On motion

CPLR R. 5015(a)(4) lack of jurisdiction to render the judgment or order

CPLR R. 5015(a)(1) excusable default

Aguilera v Pistilli Constr. & Dev. Corp., 2009 NY Slip Op 04844 (App. Div., 2nd, 2009)

The affidavit of the plaintiff's process server showed that on July
25, 2005, Pistilli was served with a summons and complaint by delivery
to its general agent at its office located in Astoria. Since no answer
was served by Pistilli, the plaintiff sought and obtained leave to
enter a default judgment against it.

Pistilli sought to vacate the default pursuant to, inter alia,
CPLR 5015(a)(4), claiming that service of process was improper under
CPLR 311(a)(1), and/or pursuant to CPLR 5015(a)(1) on the ground that
its default was excusable. By order dated October 2, 2007, the Supreme
Court, inter alia, directed a hearing to determine whether service of
process was effected. Contrary to Pistilli's position, the Supreme
Court properly ordered the hearing (see CLE Assoc., Inc. v Greene, 43 AD3d 382, 384; Skyline Agency v Ambrose Coppotelli, Inc., 117 AD2d 135, 139).

Pursuant to CPLR 311(a)(1), service upon a corporation shall be
made by delivering the summons to an officer, director, managing agent,
general agent, cashier, or assistant cashier, or to any other agent
authorized by appointment or by law to receive service. In addition,
service may be made upon someone whom the corporation cloaks with
authority (see Fashion Page v Zurich Ins. Co., 50 NY2d 265; Rokicki v 24 Hour Courier Serv., 282 AD2d 664, 665; Eastman Kodak Co. v Miller & Miller Consulting Actuaries, 195 AD2d 591; Seda v Armory Estates, 138 AD2d 362, 363-364).

The Supreme Court correctly determined that it acquired
jurisdiction over Pistilli through proper service of process. The
evidence adduced at the hearing established that Angela Rodriguez, to
whom the summons and complaint was delivered, was seated behind the
cashier/reception desk when the process server entered Pistilli's
office, that the process server, who had served Pistilli in the same
office and the same manner on at least three prior occasions, read the
summons and complaint out loud to Rodriguez, and that Rodriguez
informed the process server that she could accept service on behalf of
Pistilli. While Rodriguez claimed that she was not employed by
Pistilli, the record demonstrates that the company by which she was
employed shared offices with Pistilli and was owned by the same
principals. She also testified that service of process was regularly
made by delivering documents to the reception desk for the various
entities that operated out of the same office. Under these
circumstances, "the plaintiff's process server acted reasonably and
with due diligence" and it was reasonable for the process server to
believe that Rodriguez was authorized to accept service on behalf of
Pistilli (Rokicki v 24 Hour Courier Serv., 282 AD2d at 664; see Fashion Page v Zurich Ins. Co., 50 NY2d 265; Eastman Kodak Co. v Miller & Miller Consulting Actuaries, 195 AD2d at 591; Seda v Armory Estates, 138
AD2d at 363-364). Furthermore, we decline to disturb any credibility
determination made by the hearing court, as its determination is amply
supported by the record (see Lattingtown Harbor Prop. Owners Assn., Inc. v Agostino, 34 AD3d 536, 538).

The Supreme Court also properly denied that branch of Pistilli's
renewed motion which was to vacate the default pursuant to CPLR
5015(a)(1). "A party seeking to vacate a default pursuant to CPLR 5015
(a)(1) must demonstrate a reasonable excuse for its delay in appearing
and answering the complaint and a meritorious defense to the action'" (New York & Presbyt. Hosp. v American Home Assur. Co., 28 AD3d 442, quoting Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 NY2d 138, 141; see CPLR 5015[a][1]; Koyenov v Twin-D Transp., Inc., 33 AD3d 967).
"The decision as to the setting aside of a default in answering is
generally left to the sound discretion of the Supreme Court, the
exercise of which will generally not be disturbed if there is support
in the record therefor" (Mjahdi v Maguire, 21 AD3d 1067, 1068, quoting MacMarty, Inc. v Scheller, 201 AD2d 706, 707).

Pistilli failed to offer a reasonable excuse for its failure to answer or appear in this action (see Eastman Kodak Co. v Miller & Miller Consulting Actuaries, 195 AD2d at 592). Contrary [*3]to
Pistilli's position, its default was not attributable to its insurance
carrier's assertion that it would represent it in this matter, as it
was served with the summons and complaint approximately five months
prior to any communication that it received from its insurance carrier
regarding representation (cf. Perez v Linshar Realty Corp., 259
AD2d 532, 533). In view of the lack of a reasonable excuse, it is
unnecessary to consider whether Pistilli sufficiently demonstrated the
existence of a meritorious defense (see Mjahdi v Maguire, 21 AD3d at 1068; Krieger v Cohan, 18 AD3d 823).

The bold is mine.


Triable issue of fact as to service by mail

Liriano v Eveready Ins. Co., 2009 NY Slip Op 04871 (App. Div., 2nd, 2009)

The Supreme Court improperly granted the plaintiff's motion for summary
judgment. The plaintiff submitted a process server's affidavit of
service indicating that the defendant was served by mail with a default
judgment against its insured in the underlying action on August 13,
2007, which constituted prima facie evidence of proper service (see Kihl v Pfeffer, 94 NY2d 118, 122; Matter of de Sanchez,
57 AD3d 452, 454). In response, the defendant came forward with a sworn
denial of receipt and an affidavit of an employee with personal
knowledge regarding the defendant's regular practices and procedures in
retrieving, opening, and indexing its mail and in maintaining its files
on existing claims. That affidavit indicated that the defendant did not
receive the judgment in the mail, and instead first learned of it on
March 13, 2008, promptly issuing a disclaimer only six days later.
Under the circumstances of this [*2]case,
the defendant's submissions sufficed to raise a triable issue of fact
regarding the service of the judgment, and the question of whether the
defendant's disclaimer of coverage was timely must await the resolution
of that issue (see e.g. Matter of TNT Petroleum, Inc. v Sea Petroleum, Inc., 40 AD3d 771; Johnson v Deas, 32 AD3d 253; First Union Mtge. Corp. v Silverman, 242 AD2d 258; Long Is. Sav. Bank v Meliso, 229 AD2d 478; Poet v Kolenda, 142 AD2d 633).

The bold is mine.

UPDATE!

The decision has since been recalled.

[Recalled and vacated by order of the Appellate Division, Second Department entered June 12, 2009, see 2009 NY Slip Op 75125(U).]