24 N.Y.3d 403 (2014)
A party can amend pleadings, even after trial, if the opposing party isn’t prejudiced, especially when the initial pleadings and trial evidence indicate a clear understanding of the issues and potential liabilities.
Summary
Kimso Apartments, LLC v. Gandhi concerns a dispute arising from a real estate partnership dissolution. The corporations (controlled by Filler and Shah) sued Gandhi seeking a declaratory judgment allowing them to offset debt Gandhi owed them (shareholder loans) against payments they owed him under a settlement agreement. Gandhi counterclaimed. The key issue arose when Gandhi sought to amend his pleadings during trial to include a counterclaim for unpaid settlement payments. The New York Court of Appeals reversed the Appellate Division, holding that the amendment should have been allowed because the corporations weren’t prejudiced, as their own pleadings and trial strategy acknowledged their payment obligations to Gandhi.
Facts
Gandhi, Filler, and Shah were equal partners in real estate corporations. After disputes arose, they entered into a settlement agreement where Gandhi sold his shares for installment payments. The corporations later sued Gandhi, seeking to offset the remaining settlement payments against the balance of shareholder loans Gandhi owed the corporations. Gandhi answered and counterclaimed. He sought to amend his pleadings during trial to assert a counterclaim for the unpaid settlement payments.
Procedural History
The corporations sued Gandhi in New York State court. Gandhi filed counterclaims. Supreme Court granted Gandhi’s motion to amend his pleadings to include the counterclaim for unpaid settlement payments and entered judgment in his favor. The Appellate Division reversed, finding Gandhi’s request was barred by laches and prejudiced the corporations. The New York Court of Appeals granted Gandhi leave to appeal.
Issue(s)
Whether the Appellate Division abused its discretion by reversing the trial court’s decision to allow Gandhi to amend his pleadings at trial to include a counterclaim for unpaid settlement payments.
Holding
Yes, because the corporations weren’t prejudiced by the amendment as they acknowledged the debt, and introduced evidence regarding the settlement agreement terms themselves.
Court’s Reasoning
The Court of Appeals stated that CPLR 3025 allows parties to amend pleadings with leave of the court, and such leave should be “freely given.” Prejudice requires more than just greater liability; it requires hindering the opposing party’s case preparation. The Court found no prejudice to the corporations because (1) their amended complaint admitted liability for payments to Gandhi under the settlement agreement, constituting a judicial admission, and (2) they introduced evidence at trial establishing the settlement agreement terms. The court cited Murray v. City of New York, 43 N.Y.2d 400 (1977), stating, “When a variance develops between a pleading and proof admitted at the instance or with the acquiescence of a party, such party cannot later claim . . . surprise [ ] or prejudice [ ] and the motion to conform should be granted.” Delay alone doesn’t bar amendment if there’s no prejudice. Allowing the amendment was proper since the corporations built their case on the fact of their admitted payment obligations. As such, the Court of Appeals reversed the Appellate Division order and remitted the case, concluding that “where the corporations admitted that they owed Gandhi the unpaid installments under the settlement agreement and the trial evidence established as much, there was no operative prejudice to the corporations in allowing Gandhi’s amendment to assert the counterclaim for all outstanding payments.”