Source: https://www.schlamstone.com/commercial/page/204/
Timestamp: 2019-04-26 00:36:50+00:00

Document:
On December 17, 2013, the Court of Appeals issued a decision in William J. Jenack Estate Appraisers and Auctioneers, Inc., v. Albert Rabizadeh, Docket No. 229, addressing the Statute of Frauds’ requirements for sales at auction.
Notwithstanding section 2-201 of the uniform commercial code, if the goods be sold at public auction, and the auctioneer at the time of the sale, enters in the sale book, a memorandum specifying the nature and price of the property sold, the terms of the sale, the name of the purchaser, and the name of the person on whose account the sale was made, such memorandum is equivalent in effect to a note of the contract or sale, subscribed by the party therewith to be charged.
The Court of Appeals went on to reject the buyer’s second argument, holding that Section 5-701(a)(6) did not require disclosure of the seller’s name but could be satisfied if the writing named the seller’s agent, such as the auctioneer in this case.
In this case, despite statutory language apparently focusing specifically on the auctioneer’s sale book, the Court of Appeals looked outside the sale book and considered other writings on order to rule that the Statute of Frauds was satisfied, seeming to show their unwillingness to allow parties to avoid commercial transaction based upon purely technical violations of the Statute of Frauds.
On November 11, 2013, Justice Whelan of the Suffolk County Commercial Division issued a decision in OneWest Bank, FSB v. Navarro, 2013 NY Slip Op. 52053(U), denying a motion for leave to serve a late answer despite the defendant’s claim that she did not read or write English.
The excuses proffered by defendant Navarro for her delay in answering the summons and complaint are premised in part upon her inability to read or write English, her lack of knowledge and understanding of legal processes and procedures and her participation in the court scheduled settlement conferences detailed above. However, recent appellate case authorities have instructed that confusion or ignorance of the law, legal processes and/or court procedures do not constitute reasonable excuses for the failure to answer or otherwise appear. Defendant Navarro’s inability to read or write English may not serve as a reasonable excuse for her failure to answer. Persons under disabilities such as blindness or illiteracy are not per se excused from the terms of their contracts as they are obliged to employ reasonable efforts to understand the contents thereof prior to signing. A party whose mastery of English is imperfect must make reasonable efforts to have the document made clear to him or her.
OneWest Bank stands as a reminder that courts can construe a reasonable excuse for failure to answer very narrowly.
On December 11, 2013, Justice Kornreich of the New York County Commercial Division issued a decision in Adler v. Ogden Cap Props., LLC, 2013 NY Slip Op. 23428, denying class certification to a plaintiff class purporting to represent all renters in the State of New York against a proposed defendant class of all landlords in the State of New York, with the goal of obtaining rent rebates for violations of the warranty of habitability, RPL § 253-b, caused by Superstorm Sandy.
Individual actions in the Housing Court were likely the most effective route to compensating tenants for warranty of habitability damages.
Based upon these holdings, all claims were dismissed. Those tenants who remained in their apartments during the storm were given leave to replead, but were cautioned that the court had serious misgivings about certifying any plaintiff or defendant class.
On December 18, 2013, the Second Department issued a decision in Mr. San, LLC v. Zucker & Kwestel, LLP, 2013 NY Slip Op. 08416, holding that, in exceptional circumstances, a legal malpractice claim can survive a motion to dismiss despite the lack of an attorney-client relationship.
While the complaint does not allege an attorney-client relationship between the plaintiffs and the defendants, it sets forth a claim which falls within “the narrow exception of fraud, collusion, malicious acts or other special circumstances” under which a cause of action alleging attorney malpractice may be asserted absent a showing of privity.
This is an action for aiding and abetting fraud. Plaintiffs invested substantial amounts of money with Gershon Barkany who held himself out as a financial advisor and real estate investor. Plaintiffs allege that Barkany represented that the money was to be used to fund real estate loans and other investments but Barkany was actually running a Ponzi scheme. Plaintiffs further allege that Barkany presented defendants Zucker & Kwestel LLP and Steven Kwestel as his attorneys in connection with the sham real estate transactions, and the firm accepted wire transfers of plaintiffs’ funds into its escrow account.
Plaintiffs allege that Barkany presented defendants as his attorneys, rather than the attorneys for the plaintiffs. An attorney for an organization is not the attorney for its members. However, it appears that no company had been formed at the time that plaintiffs made their investment. At the time that plaintiffs invested their funds, their interests seemed aligned with Barkany, at least as to the expected profitabilty of the venture. Moreover, the fact that Kwestel borrowed money from Barkany suggests that there may have been collusion between client and attorney and perhaps even knowledge on Kwestel’s part as to Barkany’s fraud upon the plaintiff. In these circumstances, the court must give plaintiffs the benefit of the possible favorable inference that an attorney-client relationship arose when defendants accepted plaintiffs’ money into their escrow account.
Lawyers should be aware of the rule that makes them potentially liable to parties who are not their clients in exceptional circumstances; it might be better to avoid such situations because of the potential conflict between the fiduciary obligation to a client and the concern for malpractice liability to a non-client.
On December 17, 2013, the Court of Appeals issued a decision in Herzl Ragins, et al. v. Hospitals Insurance Company, Inc., Docket No. 234, holding that an excess liability carrier was required to pay post-judgment interest that exceeded the limit on the insured’s primary liability insurance.
In Ragins, the excess policy covered “all sums” that the insured was “legally obligated to pay as damages” in excess of the primary policy cap. The Court of Appeals held that interest on the underlying judgment was within the scope of coverage because the policy did not “limit the definition of ‘sums’ to any particular category of damages or liability, or otherwise exclude interest from its reach.” In reaching this conclusion, the Court of Appeals reiterated the well-established principle that insurance contracts are construed broadly in favor of coverage. Therefore, “even if there were any ambiguity as to whether the covered sums under the insurance policy include interest, that ambiguity must be construed against [the insurance company] and in favor of” the insured.
On December 6, 2013, Justice Friedman of the New York County Commercial Division issued a decision in 412 W. 12th St. 1N LLC v. C and A Capital LLC, 2013 NY Slip Op. 33099(U), ruling that whether a liquidated damages clause was an unenforcable penalty was a fact question that could not be resolved on a motion to dismiss.
[A] contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation. If, however, the amount fixed is plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced. . . . As the Court of Appeals has noted, today the trend favors freedom of contract through the enforcement of stipulated damage provisions as long as they do not clearly disregard the principle of compensation.
On this motion, [defendant] fails to meet its burden of demonstrating both that the damages that would result from a default under the Mortgage Agreement were not readily ascertainable at the time the contract was entered into, and that the default interest rate provision, the late charge provision, or both in combination, are not grossly disproportionate to the probable damages. The issue of what the default interest rate and the late charge were intended to compensate [defendant] for, and what its probable losses were at the time of contracting, cannot be resolved on the record of this motion to dismiss.
A lesson here for both transactional counsel and litigators is it is unwise to assume–even in a commercial transaction–that the courts will hold contracting parties to liquidated damages provisions that cannot be justified by the circumstances.

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