New York Law Review

Tag: 1985

  • Alco Gravure, Inc. v. Knapp Foundation, 64 N.Y.2d 458 (1985): Restrictions on Amending Corporate Charters for Non-Profits

    64 N.Y.2d 458 (1985)

    A non-profit corporation’s ability to amend its charter is limited by quasi-cy pres principles, requiring court review to ensure consistency with the original purpose of donated funds, particularly when transferring assets to another entity.

    Summary

    Alco Gravure, Inc., brought suit against The Knapp Foundation to prevent the transfer of assets to another charitable organization founded by Joseph P. Knapp. The New York Court of Appeals held that while a non-profit corporation can amend its charter, this power is limited by the need to adhere to the original intent of the donor and quasi-cy pres principles. The court emphasized that amending a charter to change the use of donated funds requires judicial review to ensure alignment with the donor’s original purpose. The Court found the amendment process insufficient, requiring consideration of the specific limitations in articles 5 and 10 of the N-PCL. The simple process of amending the corporate charter as provided in N-PCL article 8 is legally insufficient to authorize either the transfer of assets or the distribution on dissolution that has here been attempted.

    Facts

    The Knapp Foundation was established in 1923 to aid employees of Joseph P. Knapp’s companies. Over time, requests for aid decreased. In 1983, the Foundation amended its charter to allow the transfer of assets to The Knapp Foundation (North Carolina). Alco Gravure, a successor corporation, and two employees, challenged this amendment, arguing it violated the original purpose of the Foundation.

    Procedural History

    The Supreme Court dismissed the complaint. The Appellate Division affirmed. The New York Court of Appeals modified the Appellate Division’s order, denying the defendant’s motions to dismiss and for summary judgment, holding that the amendment was improper without quasi-cy pres review. The court remanded for further proceedings.

    Issue(s)

    1. Whether a non-profit corporation can amend its charter to change the use of donated funds without judicial review under quasi-cy pres principles.

    Holding

    1. No, because the power to amend a Type B non-profit corporation’s charter is not unlimited. Such amendments must be reviewed by a Justice of the Supreme Court under the quasi-cy pres provisions of the N-PCL, particularly when the amendment changes the purpose for which funds were originally donated.

    Court’s Reasoning

    The court reasoned that the N-PCL must be interpreted harmoniously, and directors do not have unlimited power to amend a charter, especially concerning the use of donated funds. Sections 513 and 522 of the N-PCL impose limitations, requiring that assets be applied to the purposes specified in the gift instrument, subject to quasi-cy pres review by the Supreme Court when the original purpose becomes impracticable or impossible.

    The court stated, “To permit the corporation by a charter amendment such as here adopted to change the purpose for which funds given to it are required to be held would shortcircuit completely the limitations imposed by sections 513 and 522 and permit the Foundation trustees to exercise a power given specifically and only to a Supreme Court Justice as concerns property received by the corporation by inter vivos gift.”

    The court further noted that dissolving a Type B corporation requires compliance with N-PCL sections 1005(a)(3)(A) and 1008(a)(15), ensuring assets are distributed to organizations with substantially similar activities and devoted to the original purpose intended by the donor.

    The dissenting judge argued that the N-PCL grants charitable organizations broad latitude in corporate self-governance, and the amendment was lawful because the Attorney General did not object, and a Supreme Court Justice approved it. However, the majority rejected this argument, emphasizing the importance of adhering to the donor’s original intent and the need for judicial oversight under quasi-cy pres principles.

  • Heller v. U.S. Suzuki Motor Corp., 64 N.Y.2d 407 (1985): Accrual of Implied Warranty Claims Against Remote Manufacturers

    Heller v. U.S. Suzuki Motor Corp., 64 N.Y.2d 407 (1985)

    For breach of implied warranty claims under UCC § 2-725 against a remote manufacturer or distributor, the cause of action accrues on the date the remote party tenders delivery of the product, not on the date of the retail sale to the plaintiff.

    Summary

    Heller sued U.S. Suzuki for injuries from a motorcycle accident, alleging breach of implied warranty. The suit was filed more than four years after Suzuki (the distributor) sold the motorcycle to a retailer but less than four years after the retailer sold it to Heller. The New York Court of Appeals addressed whether the statute of limitations began running from the date Suzuki sold the motorcycle to the retailer or from the date the retailer sold it to Heller. The Court held that the cause of action against the distributor accrued when the distributor tendered delivery to its immediate purchaser, making the suit time-barred. The decision emphasizes adherence to the UCC’s tender of delivery rule and the policy of repose underlying statutes of limitations.

    Facts

    Plaintiff Heller was injured in a motorcycle accident on July 7, 1979.
    The motorcycle was manufactured by a Japanese company and distributed in the U.S. by U.S. Suzuki Motor Corp.
    Jim Moroney’s Harley-Davidson Sales, Inc. was the retailer who sold the motorcycle to Heller.
    U.S. Suzuki sold the motorcycle to Bakers Recreational Equipment, Inc., who then sold it to Jim Moroney’s Harley-Davidson Sales, Inc. on March 30, 1978.
    Heller purchased the motorcycle from Jim Moroney’s Harley-Davidson Sales, Inc. on April 21, 1979.
    Heller filed suit against U.S. Suzuki on February 15, 1983, alleging breach of implied warranty.

    Procedural History

    Heller sued U.S. Suzuki in New York State court.
    Special Term denied Suzuki’s motion for summary judgment, holding that the cause of action accrued when the retailer sold the motorcycle to Heller.
    The Appellate Division reversed, dismissing the complaint, holding that the cause of action accrued when Suzuki tendered delivery to its immediate purchaser.
    The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether, for an implied warranty claim under UCC § 2-725 against a remote distributor, the cause of action accrues on the date the distributor tenders delivery to its immediate purchaser or on the date of the retail sale to the plaintiff.

    Holding

    No, because UCC § 2-725 states that a cause of action accrues when the breach occurs, and a breach occurs when tender of delivery is made by the party being sued. The elimination of privity requirements in New York does not alter the accrual date.

    Court’s Reasoning

    The Court applied UCC § 2-725, which provides a four-year statute of limitations for breach of contract for sale, accruing upon tender of delivery, unless a warranty explicitly extends to future performance.
    The Court acknowledged that implied warranty actions were initially rooted in contract law, requiring privity between the plaintiff and defendant. However, New York eliminated the privity requirement for personal injury actions based on implied warranty with the adoption of a new section 2-318 of the Uniform Commercial Code (L 1975, ch 774).
    Despite the elimination of privity, the Court emphasized that the Legislature did not amend the limitations period in UCC § 2-725. The Court reasoned that the cause of action against a manufacturer or distributor still accrues on the date the party charged tenders delivery of the product, not when a third party sells it to the plaintiff.
    The Court rejected the argument that eliminating privity implicitly changed the accrual date, stating that the Legislature would have explicitly amended § 2-725 if that were the intent. “[I]nasmuch as it did not amend section 2-725 to alter the existing rules on the subject we assume it intended no change”.
    The Court highlighted the purpose of uniform acts and statutes of limitations: to eliminate jurisdictional variations and provide repose. Allowing the cause of action to accrue at the date of retail sale would create unpredictability in the period of exposure to liability.
    The Court stated, “A major purpose of the uniform acts, and for the Statutes of Limitation they contain, is to eliminate jurisdictional variations so that concerns doing business nationwide will not be governed by different periods of limitation.”
    The Court also addressed the concern that this interpretation could foreclose a plaintiff’s remedy before the cause of action accrues, noting that the plaintiff in this case waited almost four years after the injury before filing suit. The Court emphasized that a consumer who acts within three years of the accident or four years from the date of sale can still maintain actions based on warranty, negligence, or strict products liability. “[T]here is no need or occasion for us to reinterpret section 2-725 in a manner contrary to its language and past usage.”

  • O’Toole v. Greenberg, 64 N.Y.2d 427 (1985): Recovery of Child-Rearing Costs in Wrongful Conception

    O’Toole v. Greenberg, 64 N.Y.2d 427 (1985)

    In New York, the birth of a healthy child following an unsuccessful sterilization procedure does not constitute a legally cognizable injury entitling the parents to recover the ordinary costs of raising that child.

    Summary

    The plaintiffs, a husband and wife, sued physicians for medical malpractice after the wife became pregnant and gave birth to a healthy child despite undergoing a tubal ligation. They sought damages for the costs associated with the pregnancy and childbirth, as well as the future costs of raising the child. The New York Court of Appeals held that, as a matter of public policy, the birth of a healthy child does not constitute a legally recognizable harm that would allow the parents to recover the costs of raising the child. This ruling establishes a clear precedent against awarding damages for child-rearing expenses in wrongful conception cases involving healthy children in New York.

    Facts

    Susanne O’Toole underwent a tubal ligation procedure performed by Drs. Greenberg and Leber at Jamaica Hospital and Family Practice Clinic on January 11, 1980. Despite the procedure, O’Toole became pregnant and gave birth to a healthy baby girl, Kelly, on November 27, 1981. The O’Tooles filed a lawsuit alleging medical malpractice, seeking damages for the costs of pregnancy, delivery, and postpartum care, and the anticipated expenses of raising Kelly.

    Procedural History

    The defendants moved to dismiss the complaint for failure to state a cause of action. The Supreme Court, Queens County, granted the motion in part, dismissing the claim for the anticipated expenses of raising the child. The plaintiffs’ motion for reargument was granted, but the court adhered to its original determination. The Appellate Division, Second Department, affirmed the Supreme Court’s orders. The Appellate Division then certified the question of whether its order was properly made to the New York Court of Appeals.

    Issue(s)

    Whether the parents in a wrongful conception action can recover the ordinary costs of raising a healthy, normal child born after an unsuccessful surgical birth control procedure.

    Holding

    No, because the birth of a healthy child does not constitute a legally cognizable harm for which an action in tort will lie.

    Court’s Reasoning

    The court reasoned that while the plaintiffs may have suffered an “injuria” (a breach of the defendant’s obligation), they did not suffer “damnum” (damage recognized by law) as a result of the birth of a healthy child. The court emphasized that the law and society place a very high value on human life. Allowing recovery for the costs of raising a healthy child would require the court to improperly assess the value of human life in terms of financial burden. The court cited the principle that an act contrary to law, which does not result in legal harm – injuria absque damnum – is not actionable. The court acknowledged prior cases which generally rejected claims seeking recovery of the costs of raising a healthy child born as the result of wrongful conception, noting, “It is not within the province of the judiciary to decide that the existence of life, and in this case a normal healthy life, is a wrong for which damages can be recovered”. The court explicitly declined to address the issue of mitigation of damages through abortion or adoption, as it had determined that the birth of a healthy child was not a cognizable harm in the first instance. Therefore, no damages existed to be mitigated.

  • Slatt v. Slatt, 64 N.Y.2d 966 (1985): Interpreting Contractual Intent in Separation Agreements

    Slatt v. Slatt, 64 N.Y.2d 966 (1985)

    When the language of a contract is clear and unambiguous, a court must give effect to the intent of the parties as indicated by the language used, without resort to extrinsic evidence.

    Summary

    This case concerns the interpretation of a separation agreement. The wife sought enforcement of a clause providing for cost-of-living adjustments to annual payments. The husband argued the adjustments only applied to monthly payments and that his failure to pay the adjustments for 11 years constituted a waiver. The Court of Appeals held that the agreement’s language unambiguously subjected all enumerated payments to cost-of-living increases, and there was no evidence that conduct of the parties should be considered to ascertain their intent because no waiver was present in this case.

    Facts

    A separation agreement, drafted by the husband’s counsel, was executed on July 1, 1969, outlining support and maintenance payments from the husband to the wife until she either died or remarried. Paragraph fifth of the agreement specified periodic payments, including monthly installments and annual payments of $500 on December 31, 1969, and $1,000 on December 31st of each year thereafter. Subparagraph (g) stated that the wife would receive a cost-of-living increase based on the U.S. Department of Labor’s Consumer Price Index above the 1969 base figure. For 11 years, the husband did not pay cost-of-living increases on the $1,000 annual payments.

    Procedural History

    The trial court determined that the separation agreement obligated the husband to pay a cost-of-living increase on the annual payments. The Appellate Division affirmed, finding the language unambiguous and resolving any ambiguity against the husband, who drafted the agreement. The Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    Whether the separation agreement unambiguously required the husband to pay a cost-of-living increase on the annual $1,000 payments, in addition to the monthly installments.

    Holding

    Yes, because the language of the agreement clearly evinced an intent to subject all enumerated payments to the cost-of-living increase, and the contract explicitly required modifications to be in writing while stating that failure to assert a right would not constitute a waiver.

    Court’s Reasoning

    The Court of Appeals emphasized that courts must discern the parties’ intent as evidenced by the written contract. Citing Laba v. Carey, 29 NY2d 302, 308, the court stated that it must give effect to the intent as indicated by the language used when it is clearly and unambiguously set forth. The court found the phrase “[i]n addition to the foregoing payments” unambiguously applied the cost-of-living increase to all payments listed, including the annual payments. The court distinguished cases where ambiguity or doubtful meaning existed, stating “[s]uch an inquiry might be appropriate in the instance of an ambiguity or where the contract is of ‘doubtful meaning’ (City of New York v New York City Ry. Co., 193 NY 543) or where there is claimed ‘waiver’, none of which is present in this case.” The court also noted the contract required modifications to be in writing and that failure to assert a right would not constitute a waiver, further supporting the wife’s claim. Therefore, there was no need to consider the parties’ conduct over the 11 years to ascertain their intent. The court refused to fashion a new contract under the guise of contract construction, citing Marlee Sales Corp. v Manufacturers Trust Co., 9 NY2d 16.

  • People v. Alviti, 64 N.Y.2d 956 (1985): Harmless Error in Right to Counsel at Lineup

    People v. Alviti, 64 N.Y.2d 956 (1985)

    An error in admitting lineup identification evidence, even if it violates the right to counsel, may be deemed harmless if there is overwhelming independent evidence of guilt, such as multiple untainted in-court identifications by eyewitnesses and a confession used for impeachment.

    Summary

    The defendant was convicted of robbery. He challenged the introduction of a lineup identification by one of the victims, arguing it violated his right to counsel because his attorney did not attend the lineup. The New York Court of Appeals affirmed the conviction, holding that even if the lineup identification was admitted in error, the error was harmless. The court reasoned that there were three in-court identifications by eyewitnesses, and the defendant’s confession, though inadmissible in the prosecution’s direct case, was used to discredit his testimony. This constituted overwhelming evidence of guilt, making any error in admitting the lineup evidence harmless.

    Facts

    On October 21, 1980, a man robbed a gas station attendant, John Taylor, and his cousin, James Alviti. The next day, Taylor and Alviti identified the defendant from photographs at police headquarters. A week later, the same man robbed Taylor and Vincent Rizzuto at the same station. Taylor informed police he recognized the defendant and both he and Rizzuto identified the defendant from a photographic array. The defendant was arrested on November 7, 1980, and confessed to both robberies. On May 19, 1981, the defendant was placed in a lineup after being indicted, and Rizzuto identified him. The other victims did not view the lineup. The defendant’s attorney was notified but did not attend.

    Procedural History

    The trial court denied the motion to suppress the identifications, finding the photo arrays and lineup were not unduly suggestive and each victim had an independent source for in-court identification. The court also found the defendant was not denied his right to counsel at the lineup because his counsel refused to attend. The defendant was convicted after trial. The Appellate Division affirmed the conviction without opinion. The case then went to the New York Court of Appeals.

    Issue(s)

    Whether the introduction of Rizzuto’s lineup identification violated the defendant’s right to counsel and, if so, whether that violation requires reversal of the conviction.

    Holding

    No, because even if the introduction of Rizzuto’s lineup identification was an error, it was harmless given the overwhelming independent evidence of the defendant’s guilt, including multiple untainted in-court identifications and the defendant’s confession used for impeachment.

    Court’s Reasoning

    The Court of Appeals did not definitively rule on whether the lineup identification violated the defendant’s right to counsel. Instead, it assumed, arguendo, that there was an error. The court emphasized that the lower courts found that Taylor and Alviti’s identifications were untainted by any improper procedure. As for Rizzuto, his in-court identification was based on his observation of the defendant during the robbery itself, not the lineup. The court highlighted the significance of the three in-court identifications by eyewitnesses. The court reasoned that Rizzuto’s lineup identification added little to the already substantial evidence against the defendant. The court also noted the defendant’s confession, even though inadmissible in the prosecution’s direct case, was properly used to impeach his testimony. Citing People v. Maerling, 64 NY2d 134 and People v. Ricco, 56 NY2d 320, the court underscored the legitimacy of using the confession for impeachment purposes, even if it couldn’t be used in the prosecution’s case-in-chief. Given this evidence, the court concluded that any error in admitting the lineup evidence was harmless, citing People v. Adams, 53 NY2d 241, 252. This case illustrates the harmless error doctrine: an appellate court can affirm a conviction, even when an error occurred at trial, if that error did not affect the outcome. Here, the court found that the weight of evidence against Alviti was so overwhelming, that any error stemming from Rizzuto’s lineup identification, was not prejudicial. This case serves as a practical example of how appellate courts consider the totality of evidence when evaluating claims of reversible error.

  • Matter of Town of Mount Kisco v. State Bd. of Equalization and Assessment, 64 N.Y.2d 950 (1985): Procedure for Challenging County Equalization Rates

    Matter of Town of Mount Kisco v. State Bd. of Equalization and Assessment, 64 N.Y.2d 950 (1985)

    A municipality that fails to challenge tentative or final state equalization rates under Article 12 of the Real Property Tax Law is precluded from collaterally attacking those rates in a subsequent proceeding under Section 816 of the Real Property Tax Law.

    Summary

    Several municipalities challenged the 1980 county equalization rates adopted by the Westchester County Tax Commission, arguing errors in the calculation of the 1979 state equalization rate. The State Board of Equalization and Assessment (SBEA) rejected these challenges, citing the municipalities’ failure to challenge the 1979 state rates directly. The New York Court of Appeals affirmed, holding that the municipalities were precluded from collaterally attacking the state rates in this manner. The court emphasized the importance of using the direct statutory procedures for challenging state equalization rates provided in Article 12 of the Real Property Tax Law.

    Facts

    Westchester County adopted equalization rates for apportioning 1981 county taxes, mirroring the state’s 1980 advisory schedule. This schedule incorporated the state’s final 1979 equalization rates, which were based on a 1976 market survey. The petitioner municipalities challenged the 1980 county equalization rates before the SBEA, alleging errors in the calculation of the 1979 state equalization rate, specifically citing overvaluation of properties in the 1976 survey and incorrect appraisal methods for condominiums. The municipalities did not previously challenge the 1979 state rates.

    Procedural History

    The SBEA confirmed the hearing officer’s conclusion that the municipalities waived their right to question the valuations and methodology used in determining the 1979 rates due to their failure to challenge those rates directly. The Appellate Division confirmed the SBEA’s decision. The Court of Appeals affirmed the Appellate Division’s judgment.

    Issue(s)

    Whether municipalities, having failed to challenge state equalization rates under Article 12 of the Real Property Tax Law, can challenge the validity of those rates in a collateral attack under Section 816 of the Real Property Tax Law.

    Holding

    No, because the failure to pursue direct statutory procedures for challenging state equalization rates under Article 12 of the Real Property Tax Law precludes a collateral attack on those rates under Section 816.

    Court’s Reasoning

    The court emphasized the importance of the statutory procedures outlined in Article 12 of the Real Property Tax Law for challenging state equalization rates. These procedures provide municipalities with a mechanism to challenge tentative rates, participate in hearings, and seek judicial review. The court cited previous cases, including Central Buffalo Project Corp. v. City of Buffalo, which emphasized the need to invoke these direct statutory procedures. The court reasoned that allowing collateral attacks on state rates after failing to use the Article 12 procedures would undermine the statutory scheme. The court acknowledged that Section 816 allows localities to challenge the fairness of the county rate, particularly for counties that set rates independently of the state. However, this right does not extend to challenging the underlying state rates when the municipalities failed to utilize Article 12. As the court stated, “This failure precludes them from questioning the validity of those same rates in this collateral attack under section 816 of the Real Property Tax Law”. The court reasoned that this preclusion doesn’t negate Section 816 because it still allows challenges to other aspects of county rates not subject to Article 12 review. This distinction is crucial for understanding the scope and limitations of both Article 12 and Section 816. The court did not address the underlying fairness of the rates themselves.

  • Owners Committee, Century Apts., Inc. v. Village of Tuckahoe, 66 N.Y.2d 940 (1985): Mootness Doctrine and Exceptions

    Owners Committee, Century Apts., Inc. v. Village of Tuckahoe, 66 N.Y.2d 940 (1985)

    A case is moot when a determination will not affect the rights of the parties, and the court will generally dismiss the appeal unless an exception to the mootness doctrine applies.

    Summary

    The Village of Tuckahoe initially adopted the Emergency Tenant Protection Act (ETPA) based on a housing emergency declaration but was challenged for failing to adequately establish the vacancy rate. The Appellate Division invalidated the initial adoption. However, the Village readopted the ETPA while the appeal was pending, superseding the challenged resolution with a determination based on a recent survey, thus continuing the rent freeze. The New York Court of Appeals dismissed the appeal as moot because the rent controls remained in effect regardless of the outcome of the appeal and no exception to the mootness doctrine applied.

    Facts

    On November 19, 1979, the Village of Tuckahoe declared a housing emergency for buildings with 16 or more units, applying the ETPA which froze rentals. Owners Committee, Century Apts., Inc. challenged this resolution, arguing the Village failed to properly establish the vacancy rate as required by the statute. While the appeal of the challenge was pending, the Village readopted the ETPA on December 18, 1984, based on a recent survey, continuing the rent freeze.

    Procedural History

    The plaintiff, Owners Committee, Century Apts., Inc., initiated an action to declare the Village’s resolution void. The Appellate Division accepted the plaintiff’s argument and invalidated the initial adoption of the ETPA. The Village appealed to the New York Court of Appeals, and the Appellate Division’s order was automatically stayed. While the appeal was pending before the Court of Appeals, the Village readopted the ETPA based on a new survey. The Court of Appeals then reviewed the case.

    Issue(s)

    Whether the appeal of the initial ETPA adoption is moot, given that the Village readopted the ETPA during the pendency of the appeal, thereby superseding the challenged resolution and continuing the rent freeze regardless of the appeal’s outcome.

    Holding

    Yes, because the rentals remained the same whether or not the plaintiff prevailed on the appeal, and none of the exceptions to the mootness doctrine applied.

    Court’s Reasoning

    The Court of Appeals reasoned that the core issue of the appeal – the validity of the initial ETPA adoption – was superseded by the Village’s subsequent readoption of the ETPA based on a new survey. The court determined that a decision on the initial adoption would have no practical effect on the parties because the rent freeze would remain in effect regardless. The court applied the mootness doctrine, which dictates that courts should not decide cases where the outcome will not affect the rights of the parties. The Court explicitly noted that none of the three exceptions to the mootness doctrine, which would allow the court to retain jurisdiction, were applicable. These exceptions, generally, involve situations where: (1) there is a likelihood of repetition, either between the parties or other members of the public; (2) the issue is one of public importance; and (3) the issue is likely to evade review. The court cited Matter of Westchester Rockland Newspapers v Leggett, 48 NY2d 430, 437 to support its analysis of the mootness doctrine. Because the readoption effectively neutralized the initial challenge, the court dismissed the appeal without costs. The practical impact is that municipalities can correct procedural deficiencies in adopting legislation while an appeal is pending, potentially rendering the appeal moot and avoiding judicial scrutiny of the initial, flawed process.

  • Weissman v. Blue Cross, 486 N.E.2d 912 (N.Y. 1985): Discretion to Consider Late Affidavits in Summary Judgment

    Weissman v. Blue Cross, 486 N.E.2d 912 (N.Y. 1985)

    A trial court does not abuse its discretion when it refuses to consider a late affidavit submitted in opposition to a motion for summary judgment, especially when the delay is due to a failure to recognize the necessity of the affidavit and the opposing party objects.

    Summary

    Weissman sued Blue Cross. Blue Cross moved for summary judgment. On the day the motion was to be submitted, but after the motion was marked submitted, Weissman’s attorney delivered Weissman’s affidavit to the judge’s law secretary, claiming it was inadvertently omitted. Blue Cross objected and requested an opportunity to reply if the affidavit was considered. The New York Court of Appeals held that the Special Term’s refusal to consider Weissman’s affidavit was not an abuse of discretion, given the circumstances of the delay and the lack of prior notice of the affidavit.

    Facts

    Weissman sued Blue Cross. Blue Cross filed a motion for summary judgment against Weissman. Weissman’s attorney submitted an affirmation opposing the motion weeks before the return date, attaching several documents but omitting an affidavit from Weissman himself. Weissman’s cross-motion for summary judgment, filed six days before the return date, also did not mention an affidavit from Weissman. After the motion was marked as submitted, Weissman’s attorney delivered Weissman’s affidavit to the judge’s law secretary. Blue Cross did not receive a copy until the next day and promptly objected, requesting an opportunity to reply if the court considered it.

    Procedural History

    Blue Cross moved for summary judgment in Special Term. Weissman attempted to submit a late affidavit. Special Term refused to consider the late affidavit and granted summary judgment for Blue Cross. The Appellate Division affirmed. Weissman appealed to the New York Court of Appeals.

    Issue(s)

    Whether Special Term abused its discretion as a matter of law by refusing to consider an affidavit of the plaintiff which was delivered to the Judge’s law secretary on the same day as, but several hours after, the motion was marked “submitted” on call of the calendar, because it had been inadvertently omitted from plaintiff’s papers.

    Holding

    No, because the inadvertence involved failing to realize the necessity for an affidavit from the party and because the defendant objected to its consideration and requested an opportunity to reply.

    Court’s Reasoning

    The Court of Appeals reasoned that the critical error was not a mere oversight in enclosing a prepared affidavit, but a failure to recognize the need for Weissman’s personal affidavit in the first place. The court emphasized that Weissman’s attorney’s affirmation, prepared well in advance, did not refer to any intention to submit Weissman’s affidavit. Similarly, the cross-motion for summary judgment made no mention of it. Furthermore, Blue Cross’s motion included a CPLR 2214 (b) notice, requiring answering papers to be served at least five days before the return date, which was not met. Considering these factors, the court concluded that Special Term acted within its discretion in refusing to consider the late affidavit. The court cited Zuckerman v City of New York, 49 NY2d 557 which likely stands for the proposition that an attorney’s affidavit without personal knowledge is insufficient to oppose summary judgment. The court implicitly held that the trial court is not required to allow supplemental submissions after the motion has been marked submitted, especially when the opposing party would be prejudiced. The decision underscores the importance of timely and complete submissions in motion practice and the discretion afforded to trial courts in managing the motion calendar.

  • Albert Saggese, Inc. v. Town of Hempstead, 64 N.Y.2d 908 (1985): Surety’s Right to Funds Over Contractor

    Albert Saggese, Inc. v. Town of Hempstead, 64 N.Y.2d 908 (1985)

    A surety who pays mechanic’s lienors on behalf of a contractor is entitled to funds due from the town to the contractor, taking precedence over the contractor’s claim.

    Summary

    This case concerns a dispute over funds owed by the Town of Hempstead for a construction project undertaken by a joint venture, Albert Saggese, Inc. and Anthony Rivara Construction Co., Inc. The joint venture sued the Town for extra costs, while the Town counterclaimed. Royal Indemnity Company, the surety, was brought in due to its role in paying mechanic’s liens on behalf of the joint venture. The Court of Appeals modified the Appellate Division’s order, holding that Royal, as the surety who paid the lienors, was entitled to $54,060 owed by the Town, which would then extinguish the Town’s obligation to the joint venture in that reduced amount.

    Facts

    Albert Saggese, Inc. and Anthony Rivara Construction Co., Inc., formed a joint venture to perform construction work for the Town of Hempstead.
    The joint venture claimed additional costs (extras) beyond the original contract price.
    Royal Indemnity Company served as the surety for the joint venture, guaranteeing performance.
    Royal Indemnity Company paid mechanic’s lienors who had claims against the joint venture for unpaid work and materials.
    The joint venture sued the Town for the claimed extras.

    Procedural History

    The joint venture sued the Town of Hempstead.
    The Town brought a third-party claim against Royal Indemnity Company.
    Royal Indemnity Company, in turn, brought a fourth-party claim against the joint venture.
    The Appellate Division made a ruling on the various claims.
    The Court of Appeals reviewed the Appellate Division’s order.

    Issue(s)

    Whether the surety, Royal Indemnity Company, as assignee of mechanic’s lienors paid on the joint venture’s behalf, is entitled to funds owed by the Town of Hempstead for work performed, taking priority over the joint venture’s direct claim for those same funds.

    Holding

    Yes, because the surety, having paid the mechanic’s lienors, has a superior claim to the funds due from the Town, stepping into the shoes of those lienors.

    Court’s Reasoning

    The Court of Appeals determined that the weight of evidence supported the conclusion that most of the claimed extras were not the Town’s responsibility, arising instead from the joint venture’s inadequate cost assessment or changes made at their request. However, the critical point was the surety’s right to funds due from the Town due to its payment of the mechanic’s lienors. The Court emphasized that Royal, “as assignee of mechanic’s lienors paid by it on plaintiff’s behalf, rather than the plaintiff, is entitled to such moneys as may be due from the town.” This reflects the established principle that a surety who fulfills the obligations of a contractor by paying debts like mechanic’s liens acquires the rights of those creditors. This is rooted in equitable subrogation, preventing unjust enrichment of the contractor who would otherwise receive funds without satisfying their underlying obligations to subcontractors and suppliers. The decision underscores the practical importance of surety bonds in construction projects, ensuring that subcontractors and suppliers are paid, and providing the surety with recourse against the project owner for amounts owed to the contractor, but rightfully belonging to those who provided labor and materials.

  • Chartair, Inc. v. State Tax Commission, 65 N.Y.2d 831 (1985): Burden of Proof for Challenging Tax Audits

    Chartair, Inc. v. State Tax Commission, 65 N.Y.2d 831 (1985)

    A taxpayer challenging a tax assessment based on a test period and markup audit bears the burden of proving the inaccuracy of the audit.

    Summary

    Chartair, Inc. challenged a sales tax assessment by the State Tax Commission. The Commission’s auditor, finding the taxpayer’s records inadequate, used a test period and markup audit to estimate the tax due. Chartair argued that the audit was inaccurate because it didn’t account for employee purchases, theft, waste, and loss leaders. The Court of Appeals held that the auditor’s method was reasonable given the inadequate records and that Chartair failed to meet its burden of proving the audit’s inaccuracy by presenting sufficient evidence of these losses.

    Facts

    Chartair’s sales tax records consisted of cash register tapes showing total sales and sales tax collected by category, but not itemizing each transaction. The State Tax Commission’s auditor determined that, based on the available tapes, it was not possible to ascertain whether tax had been charged on all taxable items or the correct amount of tax charged. Consequently, the auditor employed a test period and markup audit to estimate the tax due from Chartair. Chartair disputed the audit’s accuracy, arguing that it failed to account for factors such as employee purchases, theft, waste, and “loss leaders.”

    Procedural History

    The State Tax Commission determined that Chartair owed additional sales tax based on the audit. Chartair challenged the determination. The Appellate Division’s judgment was reversed in favor of the State Tax Commission and the Tax Commission’s original determination was reinstated by the Court of Appeals.

    Issue(s)

    Whether the State Tax Commission’s use of a test period and markup audit to estimate sales tax due was arbitrary or without rational basis given the inadequacy of the taxpayer’s records.

    Whether Chartair met its burden of proving the inaccuracy of the tax assessment by providing sufficient evidence of losses due to employee purchases, theft, waste, and loss leaders.

    Holding

    1. No, because the taxpayer’s records were inadequate to determine the correct sales tax owed.

    2. No, because Chartair failed to present sufficient direct proof or expert testimony to establish the extent of such losses.

    Court’s Reasoning

    The Court of Appeals reasoned that the auditor’s use of a test period and markup audit was justified under Tax Law § 1138(a)(1) because Chartair’s records were insufficient to determine whether the correct sales tax had been collected. The Court cited Matter of Markowitz v State Tax Commn., 54 AD2d 1023, affd 44 NY2d 684 in support of this point.

    Regarding Chartair’s challenge to the audit’s accuracy, the court emphasized that the burden of proof rested on the taxpayer to demonstrate the audit’s inaccuracy. The Court cited Matter of Petroleum Sales & Serv. v Bouchard, 64 NY2d 671, affg 98 AD2d 882. The court found that Chartair failed to meet this burden because it presented neither direct proof of the alleged losses nor expert testimony establishing the extent of such losses regularly occurring in the industry. The absence of such evidence left the court with no basis to conclude that the audit was inaccurate. The court noted that, to successfully challenge a tax assessment, the taxpayer must provide concrete evidence, not just unsubstantiated claims.