New York Law Review

Tag: 1981

  • Svendsen v. Smith’s Moving & Trucking Co., 52 N.Y.2d 864 (1981): Constitutionality of UCC § 7-210 and Due Process

    Svendsen v. Smith’s Moving & Trucking Co., 52 N.Y.2d 864 (1981)

    A warehouseman’s lien and the enforcement provisions under UCC § 7-210, permitting a summary non-judicial sale, are unconstitutional as they violate the due process clause of the New York State Constitution.

    Summary

    This case addresses the constitutionality of UCC § 7-210, which allows warehousemen to enforce liens through non-judicial sales. The New York Court of Appeals affirmed the Appellate Division’s decision, holding that the statute violates the due process clause of the New York State Constitution. The court reasoned that the state’s delegation of power to private parties to resolve disputes through non-judicial sales, without adequate safeguards, constitutes state action that must comply with due process requirements.

    Facts

    The specific facts of the case are not detailed in the Court of Appeals memorandum decision but are referenced as aligning with the Appellate Division’s decision, which is cited. The case likely involved a dispute over storage fees and the warehouseman’s attempt to sell the stored goods to satisfy the lien.

    Procedural History

    The case originated in a lower court. The Appellate Division ruled in favor of the party challenging the constitutionality of UCC § 7-210. Smith’s Moving & Trucking Co. appealed to the New York Court of Appeals. The Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    Whether the enforcement provisions of UCC § 7-210, permitting a warehouseman to conduct a non-judicial sale of stored goods to satisfy a lien, violate the due process clause of the New York State Constitution.

    Holding

    Yes, because the statute allows for the deprivation of property without adequate due process safeguards, thereby violating Article I, Section 6 of the New York State Constitution.

    Court’s Reasoning

    The Court of Appeals, in its memorandum decision, explicitly adopted the reasoning of the Appellate Division. The court emphasized that the due process clause of the New York Constitution takes precedence over the Uniform Commercial Code’s uniformity provision. It distinguished the case from situations covered by Article 9 of the Lien Law, noting that Article 9 specifically excludes warehouseman’s liens under the UCC. The court cited Sharrock v. Dell Buick-Cadillac, Inc., which found similar lien enforcement provisions unconstitutional. The court indicated that the Truth-In-Storage Act doesn’t override the unconstitutional nature of the UCC provision. As stated in the opinion, the court found that under the reasoning of Sharrock, UCC § 7-210 “is clearly unconstitutional.” This case highlights the tension between the state’s interest in providing a mechanism for resolving disputes and protecting individual property rights. The decision effectively requires that warehousemen seeking to enforce liens provide greater due process protections to owners of stored goods, likely necessitating judicial intervention before a sale can occur.

  • Passantino v. Consolidated Edison Co., 54 N.Y.2d 840 (1981): Punitive Damages for Utility’s Knowing Interference with Customer Rights

    54 N.Y.2d 840 (1981)

    A utility company may be liable for punitive damages if it knowingly interferes with a customer’s right to advance notice before discontinuing service for nonpayment, even if the initial service interruption was justified due to meter tampering.

    Summary

    In this case, the New York Court of Appeals addressed whether a utility company, Consolidated Edison, could be liable for punitive damages for continuing to withhold electrical service after initially cutting it off due to meter tampering. The court held that because Con Edison employees indicated service would only be restored upon payment for past electricity usage *after* the tampering issue was resolved, the jury could find that Con Edison knowingly violated the customer’s right to five days’ notice before discontinuing service for nonpayment, thus potentially warranting punitive damages. The case was remitted to the Appellate Division for factual findings.

    Facts

    Consolidated Edison (Con Ed) discovered a tampered meter (a “jumper”) at P & F Machine Corp.’s premises, which predated P & F’s ownership. Con Ed employees cut off electrical service to remove the jumper, initially stating the outage would last 15-20 minutes. After fixing the meter, Con Ed informed the plaintiff, Passantino, that power would only be restored upon payment for the electricity previously received. A supervisor reiterated that power would be restored upon payment of the outstanding balance. The next day, Passantino signed an agreement promising to pay $6,400 and paid half immediately, after which electrical service was restored, approximately 20 hours after the initial shutoff.

    Procedural History

    The trial court charged the jury that punitive damages could be awarded if Con Ed’s conduct was wanton, reckless, or malicious. The jury found in favor of the plaintiff. The Appellate Division reversed on the law. The Court of Appeals reversed the Appellate Division’s order and remitted the case to that court for determination of factual questions.

    Issue(s)

    Whether a utility company can be held liable for punitive damages for knowingly interfering with a customer’s right to advance notice before discontinuing service for nonpayment, even if the initial interruption was due to meter tampering.

    Holding

    Yes, because the jury could have found that the utility company, knowing of the customer’s right to five days’ notice before discontinuance for nonpayment, deliberately interfered with those rights by withholding service until the customer paid for past usage after the meter tampering issue had been addressed.

    Court’s Reasoning

    The Court of Appeals focused on the jury instructions, to which the defendant had not objected, which became the “law of the case.” The trial court instructed the jury that Con Ed had the right to discontinue service without notice for meter tampering but was required to provide five days’ notice before discontinuing service for nonpayment under Section 15 of the Transportation Corporation Law and pertinent tariff rules. The court emphasized Con Ed’s statements that service would be restored upon payment *after* the tampering issue was resolved. The court reasoned that this evidence allowed the jury to conclude that while the initial shutoff was justified, the *continued* withholding of service was for nonpayment and without the required notice. Because Con Ed knew of the plaintiff’s rights but deliberately interfered with them, the corporate plaintiff was entitled to an award of punitive damages. The court stated that the jury could have found the utility company “knew that plaintiffs had the right to five days’ advance notice prior to any discontinuance of service for nonpayment, that while the initial interruption of service without notice for tampering may have been warranted, the continued withholding of service after the jumper had been removed was for nonpayment and without notice, and accordingly that defendant, knowing of plaintiffs’ rights, had deliberately interfered with them.” The court also noted that the jury could have interpreted the charge to mean that Con Ed only had the right to discontinue service for tampering if the *current* customer was the one who tampered with the meter, which was not the case here. Therefore, the initial shutoff might also have been wrongful. The reversal at the Appellate Division was on the law, requiring the Court of Appeals to remit the case for factual determinations.

  • Mancini v. McLaughlin, 417 N.E.2d 862 (N.Y. 1981): Limits on Agency Authority Absent Statutory Mandate

    Mancini v. McLaughlin, 417 N.E.2d 862 (N.Y. 1981)

    An administrative agency cannot compel actions (such as mandating the inclusion of taxes and markups in cost calculations) without explicit statutory authority.

    Summary

    Mancini, a liquor wholesaler, challenged a State Liquor Authority (SLA) directive requiring the inclusion of New York City excise tax and a 20% markup in the calculation of “cost” for pricing purposes. The New York Court of Appeals reversed the Appellate Division’s order, holding that the SLA exceeded its statutory authority. The court reasoned that neither Section 101-b nor any other section of the Alcoholic Beverage Control Law explicitly grants the SLA the power to mandate the inclusion of these items in cost calculations. The court emphasized that an agency’s actions must be rooted in statutory authority, even if intended as a temporary measure. The ruling was later clarified to enjoin the SLA from enforcing the specific bulletin and to emphasize that the decision only addressed the SLA’s authority to adopt mandatory regulations.

    Facts

    The State Liquor Authority issued Bulletin 529 which directed liquor wholesalers to include the New York City excise tax and a 20% markup when calculating the “cost” of liquor for pricing purposes.

    Mancini, a liquor wholesaler, challenged the directive, arguing that the SLA lacked the statutory authority to impose such a requirement.

    Procedural History

    The case was initially heard in a lower court, which likely ruled in favor of the State Liquor Authority.

    Mancini appealed to the Appellate Division, which affirmed the lower court’s decision (as noted by the dissenting judges).

    Mancini then appealed to the New York Court of Appeals.

    The New York Court of Appeals reversed the Appellate Division’s order and granted the relief sought by Mancini, enjoining the enforcement of Bulletin 529.

    Issue(s)

    Whether the State Liquor Authority exceeded its statutory authority by directing that the New York City excise tax and a 20% markup be included in the calculation of “cost” under the Alcoholic Beverage Control Law.

    Holding

    Yes, because neither Section 101-b nor any other section of the Alcoholic Beverage Control Law explicitly requires or permits the State Liquor Authority to mandate the inclusion of the New York City excise tax or a 20% markup in cost calculations.

    Court’s Reasoning

    The court based its decision on the fundamental principle that an administrative agency’s power is limited to the authority delegated to it by the legislature. The Court stated, “Before a court can determine whether an agency acted reasonably in taking a particular action it must find that the agency had authority to act in the first instance.”

    The Court scrutinized the Alcoholic Beverage Control Law, specifically Section 101-b, but found no provision that explicitly authorized the SLA to dictate how “cost” should be calculated for pricing purposes. Without such explicit statutory authority, the SLA’s directive was deemed an overreach of its power.

    The Court acknowledged the SLA’s argument that the directive was a temporary measure. However, it emphasized that an agency cannot exceed its statutory authority, even temporarily. The Court focused solely on the SLA’s right to adopt mandatory regulations, leaving open other potential arguments about the SLA’s powers.

    The dissenting judges, referencing the Appellate Division’s memorandum, likely argued that the SLA’s directive was a reasonable interpretation of its existing powers under the Alcoholic Beverage Control Law, aimed at preventing price manipulation or promoting fair competition within the liquor industry.

  • Matter of Petrie, 54 N.Y.2d 807 (1981): Upholding Judicial Removal for Mismanagement of Funds

    Matter of Petrie, 54 N.Y.2d 807 (1981)

    A judge’s disregard for record-keeping requirements and carelessness in handling public funds constitutes a serious breach of public trust, warranting removal from office.

    Summary

    This case concerns the removal of a town court justice, David W. Petrie, for mishandling court funds and failing to adhere to statutory record-keeping requirements. The New York State Commission on Judicial Conduct investigated Petrie after receiving a letter from the Department of Audit and Control regarding his inability to account for certain court funds. When Petrie failed to respond to the formal complaint issued by the Commission, they availed themselves of summary proceedings and determined that his conduct warranted removal. The New York Court of Appeals upheld the Commission’s determination, emphasizing the importance of maintaining public trust and the seriousness of Petrie’s violations.

    Facts

    The Department of Audit and Control notified the State Commission on Judicial Conduct that Justice Petrie of the Town Court of Danube, Herkimer County, was unable to properly account for court funds.
    The Commission investigated Petrie’s handling of court funds and record-keeping practices.
    The Commission served Petrie with a formal written complaint detailing the charges against him.
    Petrie failed to answer the complaint or raise any questions of fact regarding the allegations.

    Procedural History

    The State Commission on Judicial Conduct investigated and determined that Justice Petrie’s conduct warranted removal from office.
    Petrie challenged the Commission’s procedures and the imposed sanction in the New York Court of Appeals.
    The Court of Appeals accepted the Commission’s determination and removed Petrie from his position as Justice of the Town Court of Danube.

    Issue(s)

    Whether the procedures followed by the State Commission on Judicial Conduct in investigating and determining Justice Petrie’s removal were beyond its powers or denied him due process.
    Whether the sanction of removal from office was excessive given Justice Petrie’s conduct.

    Holding

    No, because the Commission is empowered with broad authority to investigate charges of improprieties by members of the judiciary, and the course of the investigation and proceedings are governed by detailed provisions of section 44 of the Judiciary Law. The statutory requirement authorizing the commission to make a determination after a hearing does not require the commission to go through a meaningless formal hearing where no issue of fact is raised.
    No, because Justice Petrie’s disregard for statutory record-keeping requirements and his carelessness in handling public moneys constituted a serious violation of his official responsibilities and a breach of the public’s trust, warranting removal.

    Court’s Reasoning

    The Court of Appeals found that the Commission acted within its broad authority to investigate judicial improprieties, as outlined in Section 44 of the Judiciary Law and as interpreted in Matter of Nicholson v State Comm., 50 NY2d 597. Since Petrie failed to answer the complaint or raise any factual disputes, the Commission was not required to hold a formal hearing. The Court emphasized the importance of the judiciary maintaining public trust, stating that “Petitioner’s disregard for statutory record-keeping requirements and his carelessness in handling public moneys is a serious violation of his official responsibilities. Such a breach of the public’s trust warrants removal.” The Court cited Matter of Cooley, 53 NY2d 64 and Bartlett v Flynn, 50 AD2d 401, in support of its decision to uphold the removal sanction. The court determined the penalty was not excessive. The court found that Petrie’s actions went to the heart of his duties as a member of the bench and as such, the removal was a justified remedy.

  • Bernstein v. Bodean, 53 N.Y.2d 520 (1981): Scope of Questioning Medical Malpractice Panel Members

    Bernstein v. Bodean, 53 N.Y.2d 520 (1981)

    When a medical malpractice panel’s recommendation is admitted into evidence, panel members called as witnesses may be examined on any matter that reasonably assists the jury in assessing the recommendation’s probative value, focusing on their participation in the panel.

    Summary

    In a medical malpractice case, after a medical malpractice panel recommended no liability, the plaintiff called the panel’s physician members as witnesses but was restricted in questioning them about the basis of their opinions. The New York Court of Appeals held that the trial court’s limitations were too restrictive. The statute allowing panel recommendations into evidence aims to aid the jury in reaching a verdict. Therefore, panel members can be questioned on any matter that helps the jury assess the recommendation’s probative worth, but this examination is limited to their panel participation and cannot turn them into general expert witnesses.

    Facts

    Deborah Bernstein suffered from a rare malignancy. She underwent extensive treatment from several physicians, including the defendants. A medical malpractice panel was convened before trial. The panel unanimously recommended “there is no liability on the part of said defendants.” This recommendation was read to the jury at trial.

    Procedural History

    The plaintiff commenced a medical malpractice action. After the medical malpractice panel issued its recommendation, the case proceeded to trial. The trial court limited the scope of questioning of the physician panel members. The jury returned a verdict for the defendants. The Appellate Division affirmed. The New York Court of Appeals reversed and remitted for a new trial, finding the restrictions on questioning the panel physicians were too restrictive.

    Issue(s)

    Whether, under Section 148-a of the Judiciary Law, specifically subdivision 8, the examination of a medical malpractice panel member called as a witness is limited, and if so, what is the scope of examination contemplated and permitted by the statutory phrase “with reference to the recommendation of the panel only”?

    Holding

    Yes, the examination is limited, because the examination of panel members can only be comprehended as in furtherance of the legislative objective and thus a means to assist the triers of fact to assess the probative worth of the panel’s recommendation.

    Court’s Reasoning

    The Court reasoned that the purpose of allowing the panel’s recommendation into evidence was to assist the jury in reaching a verdict, not to supplant its role. The statute explicitly states that the recommendation is not binding on the jury. The examination of panel members is intended to help the jury assess the probative worth of the panel’s recommendation. The statute authorizes examination as to any matter which may reasonably assist the triers of fact in judging the significance and probative worth properly to be accorded the panel’s recommendation. This includes the procedures followed by the panel, materials considered, deliberation processes, and the education, training, and experience of panel members concerning the issues involved. However, the statute contains the restrictive adverb “only.” This means that examination shall not be permitted as to the qualifications of the panel member generally but shall be exclusively focused on his qualifications related to and his participation in the panel recommendation. Nor may he be asked to express opinions on hypotheses other than those before the panel. “In short he is not to be made an expert witness on behalf of any litigant, but may be examined only with respect to the panel recommendation.” The Court also emphasized the Trial Judge’s role in supervising the trial, including the scope and manner of questioning witnesses. The Court noted the constitutional arguments regarding Section 148-a but declined to address them since the case was being remitted for a new trial and the issue might not arise again. Because the trial court impermissibly restricted the scope of the plaintiff’s examination of the physician panel members, the verdicts in favor of the physician defendants were set aside.

  • Matter of Kogan v. D’Angelo, 54 N.Y.2d 781 (1981): Impact of Fraudulent Signatures on Entire Petition

    54 N.Y.2d 781 (1981)

    When a significant number of signatures collected by a subscribing witness on a petition are proven fraudulent, the court must consider whether these irregularities permeate the entire petition, potentially invalidating even seemingly valid signatures collected by that witness.

    Summary

    This case concerns a challenge to a petition designating a candidate for a Republican primary election. The central issue is whether the established fraudulent signatures gathered by a single subscribing witness invalidate all signatures collected by that witness, even those not directly proven fraudulent. The Court of Appeals reversed the Appellate Division’s decision, holding that the stipulation regarding the 45 mismatched signatures, without a finding of fraud, did not automatically invalidate the remaining 13 signatures collected by the same witness. The court remitted the case for factual consideration of whether the irregularities permeated the entire set of signatures.

    Facts

    Ronald D’Angelo was a candidate in a Republican primary election. Alfonso Kitt served as the subscribing witness for 58 signatures on D’Angelo’s designating petition. The Board of Elections initially invalidated 1,065 signatures, leaving D’Angelo 355 signatures short of the required amount. At a hearing, D’Angelo conceded that 45 of the 58 signatures collected by Kitt were apparent forgeries because they did not match the signatures on file with the Board of Elections.

    Procedural History

    The hearing court struck the 45 conceded forged signatures but declined to strike the remaining 13 signatures collected by Kitt. The Appellate Division reversed, holding that the irregularities concerning 45 of the 58 signatures permeated the entire collection, invalidating all signatures obtained by Kitt. The Court of Appeals reversed the Appellate Division’s order and remitted the case back to the Appellate Division for consideration of the facts.

    Issue(s)

    Whether the high incidence of admitted irregularities and apparent forgeries among signatures collected by a subscribing witness on an election petition requires, as a matter of law, that all signatures collected by that witness be invalidated, even absent direct proof of fraud for each signature.

    Holding

    No, because a stipulation regarding mismatched signatures, absent a specific finding of fraud, does not automatically invalidate all signatures collected by the subscribing witness; the court must factually determine whether the irregularities permeate the entire set of signatures.

    Court’s Reasoning

    The Court of Appeals reasoned that the Appellate Division erred in applying the “permeation principle” as a matter of law based solely on the stipulation regarding the 45 signatures. The court distinguished this situation from cases where actual fraudulent practices were proven. The court emphasized that the stipulation alone, without a finding of fraudulent intent or practice, was insufficient to invalidate the remaining 13 signatures. The court stated, “The stipulation made did not by itself establish such gross irregularity or fraudulent practice with respect to the 45 signatures as to bring into play the permeation principle announced in the cases on which the Appellate Division relied. It was, therefore, error to invalidate the remaining 13 signatures as a matter of law.” The dissent argued that the high number of conceded forgeries created a presumption of permeation that should invalidate all signatures collected by Kitt, absent some explanation to the contrary. The majority, however, required a factual determination by the Appellate Division.

  • Church of God of Prophecy v. Fourth Church of Christ, Scientist, of Brooklyn, 54 N.Y.2d 742 (1981): Religious Corporation’s Authority to Sell Property

    Church of God of Prophecy v. Fourth Church of Christ, Scientist, of Brooklyn, 54 N.Y.2d 742 (1981)

    A religious corporation must obtain both leave of the court and appropriate denominational authorization as required by section 12 of the Religious Corporations Law before selling any of its real property; a contract to sell is valid only if conditioned upon obtaining such court approval, and a court of equity can inquire into the fairness of the contract and its advantage or disadvantage to the religious corporation.

    Summary

    The New York Court of Appeals affirmed the Appellate Division’s order, holding that a religious corporation cannot sell its real property without court approval and denominational authorization, as stipulated by Religious Corporations Law § 12. While the corporation can enter a contract contingent on obtaining court approval, the court has the power to evaluate the contract’s fairness and its benefits to the corporation. The court found that the sale would not benefit the religious corporation, and therefore, judicial consent was appropriately withheld, invalidating the purported agreement and precluding specific performance or monetary damages.

    Facts

    The Church of God of Prophecy sought to purchase real property from the Fourth Church of Christ, Scientist, of Brooklyn. The Fourth Church of Christ entered into a contract to sell the property. The lower court determined the sale was not in the best interest of the Fourth Church and denied the sale. The Church of God of Prophecy then sued for specific performance.

    Procedural History

    The Supreme Court initially ruled against specific performance. The Appellate Division affirmed, finding that the sale would not benefit the religious corporation or its members. The Church of God of Prophecy appealed to the New York Court of Appeals.

    Issue(s)

    Whether a religious corporation can be compelled to specifically perform a contract to sell its real property when it has not obtained the required court approval and denominational authorization, and when the court determines the sale is not in the best interest of the corporation.

    Holding

    No, because the religious corporation did not obtain the necessary court approval and denominational authorization, and the court determined that the sale was not in the best interest of the corporation.

    Court’s Reasoning

    The court emphasized the requirement of Religious Corporations Law § 12, which mandates both court leave and denominational authorization for a religious corporation to sell real property. While a religious corporation may enter into a contract to sell conditioned upon obtaining court approval, the court retains the power to evaluate the fairness and advantage of the contract to the religious corporation. Citing Muck v. Hitchcock, 149 App. Div. 323, 328-329, the court noted that it has ample power to inquire into the fairness of the contract. The court found that the Appellate Division’s determination that the sale would not promote the purposes of the respondent religious corporation or the interests of its members was supported by the evidence. Because judicial consent was properly withheld, the agreement was invalid, and the plaintiff was not entitled to specific performance or monetary damages. The court stated, “in an action for specific performance, a court of equity “has ample power to inquire into the fairness of the contract and as to its advantage or disadvantage to the religious corporation, and to approve the proposed conveyance and direct it to be made where, upon all the facts, no valid reason appears for refusing such relief.” The court distinguished cases where the requirements of section 511 of the Not-For-Profit Corporation Law were met, but declined to rule on the propriety of granting permission in a proceeding like the present one where all the requirements of section 511 would have been met because approval was not granted.

  • Gager v. White, 53 N.Y.2d 475 (1981): Retroactivity of Rush v. Savchuk and Waiver of Jurisdictional Objections

    Gager v. White, 53 N.Y.2d 475 (1981)

    The Supreme Court’s decision in Rush v. Savchuk, which invalidated quasi in rem jurisdiction based solely on the attachment of an out-of-state defendant’s liability insurance policy, applies retroactively only when a specific jurisdictional objection was properly preserved; otherwise, the objection is waived.

    Summary

    This case addresses whether the Supreme Court’s decision in Rush v. Savchuk, which eliminated quasi in rem jurisdiction based solely on attaching an out-of-state insurance policy, applies retroactively. The New York Court of Appeals held that Rush applies retroactively to cases still in litigation *only* if the defendant preserved a specific objection to quasi in rem jurisdiction. Failure to raise this objection constitutes a waiver, and the court retains jurisdiction. The court reasoned that while constitutional due process limitations on jurisdiction are fundamental, the right to object to basis jurisdiction can be waived, similar to other procedural defenses.

    Facts

    These cases involve New York domiciliaries seeking damages for injuries sustained in out-of-state automobile accidents caused by non-resident defendants. The primary connection to New York was the ability to attach the defendant’s liability insurance policy in New York, based on the Seider v. Roth doctrine. After the Supreme Court decided Rush v. Savchuk, which invalidated this type of quasi in rem jurisdiction, defendants moved to dismiss the pending cases for lack of jurisdiction.

    Procedural History

    The trial courts initially denied the motions to dismiss, relying on prior New York case law supporting Seider jurisdiction. The intermediate appellate courts reversed in four out of five cases, dismissing the complaints because of Rush v. Savchuk. The New York Court of Appeals then reviewed these decisions.

    Issue(s)

    Whether the Supreme Court’s decision in Rush v. Savchuk, which invalidated quasi in rem jurisdiction based solely on attachment of a liability insurance policy, should be applied retroactively to pending cases.

    Holding

    Yes, Rush v. Savchuk applies retroactively, but *only* if the defendant preserved a specific objection to the assertion of quasi in rem jurisdiction by appropriate motion or affirmative defense. No, if the defendant failed to properly object to quasi in rem jurisdiction, the objection is waived because basis jurisdiction is waivable under CPLR 3211(e).

    Court’s Reasoning

    The court acknowledged the general rule that changes in decisional law are usually applied retrospectively. However, it recognized an exception when a sharp break in the law would cause significant disruption and reliance interests are at stake. While plaintiffs argued that retroactive application would foreclose actions in other jurisdictions due to statute of limitations, the court emphasized the fundamental nature of jurisdictional determinations. The court stated that a constitutional due process limitation on a state’s exercise of jurisdiction is an absolute abnegation of the state’s power to act beyond those boundaries. The court discussed the evolution of jurisdictional principles, highlighting Pennoyer v. Neff, International Shoe Co. v. Washington, and Shaffer v. Heitner, leading up to Rush v. Savchuk. The court quoted World-Wide Volkswagen Corp. v. Woodson, reminding that “[a] judgment rendered in violation of due process is *void* in the rendering State and is not entitled to full faith and credit elsewhere”. However, unlike subject matter jurisdiction, the court emphasized that basis jurisdiction is waivable under CPLR 3211(e). The court held that a defendant’s voluntary participation in litigation without properly objecting to quasi in rem jurisdiction constitutes a submission to the jurisdiction of the state’s courts. Therefore, the court distinguished between cases where a specific objection to quasi in rem jurisdiction was raised in the answer and those where it was not. In cases where the objection was properly raised, dismissal was appropriate. Where no such objection was made, jurisdiction was deemed waived, and the action could proceed.

  • S.E.S. Importers, Inc. v. Pappalardo, 53 N.Y.2d 455 (1981): Specific Performance When Title Defect is Cured by Trial

    S.E.S. Importers, Inc. v. Pappalardo, 53 N.Y.2d 455 (1981)

    A buyer is entitled to specific performance of a real estate contract even if the seller could not convey good title at the originally scheduled closing, provided the title defect is cured by the time of trial, allowing the court to issue an effective judgment for specific performance.

    Summary

    S.E.S. Importers contracted to buy property from Pappalardo, but a tenant’s lease created a title defect at the scheduled closing. S.E.S. sued for specific performance, or, alternatively, for conveyance of the defective title with a price abatement. By the time of trial, the tenant had surrendered the lease. The New York Court of Appeals held that S.E.S. was entitled to specific performance because the title defect was cured before trial. The Court reasoned that the ability to convey good title at the time of the court’s order, not at the originally scheduled closing, is the key factor. A contract clause limiting the buyer’s remedies did not preclude specific performance because it only applied if the seller *could not* convey good title, and at the time of trial, he could.

    Facts

    Pappalardo contracted to sell property to S.E.S. Importers on March 27, 1978. The contract stipulated that S.E.S. was not obligated to close until a pending eviction action against tenants Simonetti and Moscatiello was resolved in Pappalardo’s favor. The contract also contained a clause limiting S.E.S.’s remedies if Pappalardo could not convey good title, allowing S.E.S. to either accept the title as is or rescind the contract. At the originally scheduled closing on September 29, 1978, the Simonetti-Moscatiello tenancy remained unresolved, creating a title defect.

    Procedural History

    S.E.S. sued for specific performance, or, failing that, conveyance of the title with an abatement of the purchase price. The trial court ruled that S.E.S. was only entitled to the return of its deposit because it had sought a remedy (abatement) inconsistent with the contract’s limitations. The Appellate Division affirmed. The Court of Appeals reversed, holding that S.E.S. was entitled to specific performance.

    Issue(s)

    Whether a buyer is entitled to specific performance of a real estate contract when a title defect existing at the originally scheduled closing is cured by the time of trial.

    Holding

    Yes, because the relevant time for determining whether specific performance is available is the time of trial, not the originally scheduled closing, provided the seller is able to convey good title at the time the court makes its order.

    Court’s Reasoning

    The Court of Appeals reasoned that the ability of the seller to convey good title at the time of the court’s order is the determining factor in granting specific performance. The Court cited Haffey v. Lynch, 143 N.Y. 241, stating that a seller can be compelled to perform if they perfect their title while an action for specific performance is pending. The Court emphasized that equity courts decide cases based on the circumstances at the time the case is before them. The Court stated, "A plaintiff in an equity action should not lose his day in court because of any defense interposed to his action, if at the time of the trial, the facts are such that if he then commenced his action, he would be entitled to the equitable relief sought." Because the tenant had surrendered the lease prior to trial, the title defect was cured. The clause limiting the buyer’s remedies to accepting the title as is or rescinding the contract did not preclude specific performance because it only applied if the seller could not convey good title, and at the time of trial, Pappalardo could. The dissent argued that the buyer should have been forced to elect its remedy (accept title or rescind) at or shortly after the failed closing, and that the buyer’s lawsuit, seeking abatement, constituted a rejection of the contract’s terms. The majority rejected this argument, noting that the parties sharply disagreed on whether the title was defective at the closing, and resolution of that disagreement required judicial intervention.

  • Public Service Mutual Insurance Co. v. Goldfarb, 53 N.Y.2d 392 (1981): Intentional vs. Unintentional Acts and Insurance Coverage

    Public Service Mutual Insurance Co. v. Goldfarb, 53 N.Y.2d 392 (1981)

    An insured is not entitled to indemnification for civil liability arising from intentional acts that cause injury, but may be indemnified for liability arising from intentional acts that cause unintended injury; punitive damages are uninsurable as a matter of public policy.

    Summary

    A dentist, insured under a professional liability policy, was sued by a patient alleging sexual abuse during treatment. The insurer sought a declaratory judgment on whether the policy covered the claim. The court held that the insurer had a duty to defend, as the policy language covered assault and undue familiarity. However, indemnification depended on whether the abuse was intentional and caused injury, and occurred during professional services. The court also determined that punitive damages were uninsurable under public policy. A special verdict was required to determine the nature of the dentist’s conduct.

    Facts

    Dr. Goldfarb, a dentist, was insured under a “Dentist’s Professional Liability Policy” issued to the Dental Society of the State of New York by Public Service Mutual Insurance Company. Jacqueline Schwartz, a patient of Dr. Goldfarb, alleged that she was sexually abused by him during a dental treatment in May 1977. This allegation formed the basis of a civil suit, professional disciplinary proceedings, and a criminal conviction for sexual abuse in the third degree against Dr. Goldfarb.

    Procedural History

    The insurer, Public Service Mutual, initiated a declaratory judgment action seeking a determination that its policy did not cover the civil claim. Special Term held no coverage was provided. The Appellate Division reversed, finding coverage based on the policy’s broad language including “assault” and “undue familiarity.” Two justices dissented, arguing against coverage for punitive damages. The New York Court of Appeals granted review.

    Issue(s)

    1. Whether the insurance policy contractually obligated the insurer to defend and indemnify the dentist for the claim of sexual abuse.
    2. Whether public policy precludes insurance coverage for a claim of sexual abuse in the course of dental treatment.

    Holding

    1. Yes, because the policy language indicated an intent to cover both compensatory and punitive damages arising out of unlawful or inappropriate physical contact during dental treatment.
    2. No, unless the insured intentionally caused injury; punitive damages are uninsurable as a matter of public policy.

    Court’s Reasoning

    The court first addressed the contractual obligation, finding that the dentist provided timely notice. The policy required notice upon an unusual occurrence “or [upon] receiving notice of claim or suit”. The court found that the term “unusual occurrence” is ambiguous, and any ambiguity in the policy must be resolved against the insurer.

    The court then examined the policy language, which stated the insurer would pay all sums, including punitive damages, the insured was obligated to pay due to liability for damages because of injury from professional dental services, including claims based on malpractice, assault, or undue familiarity. This broad language suggested an intent to cover unlawful physical contact during treatment.

    Regarding public policy, the court stated that while an act may have penal consequences, insurance coverage for civil liability is not automatically precluded. The key is whether the insured intended to cause injury. One who intentionally injures another cannot be indemnified, but one whose intentional act causes an unintended injury may be.

    The court quoted Messersmith v American Fid. Co., 232 NY 161, 165: “fundamental principle that no one shall be permitted to take advantage of his own wrong”. Indemnity for punitive damages is barred because it would defeat their purpose. The court emphasized that the insurer must provide independent counsel for the dentist, given the conflict of interest, with the attorney’s fees to be paid by the insurer.

    Ultimately, the court determined that if the fact-finder determined that the dentist intended to injure the patient, he would be precluded from seeking indemnity from his insurer for either compensatory or punitive damages. However, if punitive damages are awarded on grounds other than intentional causation of injury (e.g., gross negligence), indemnity for compensatory damages would be allowable, though indemnity for punitive damages would still be barred.