Source: https://www.schlamstone.com/commercial/page/203/
Timestamp: 2019-04-25 23:56:01+00:00

Document:
On December 24, 2013, Justice Sherwood of the New York County Commercial Division issued a decision in Newmark & Co. Real Estate, Inc. v. Brennan, 2013 NY Slip Op. 33261(U), examining the standard for a motion for summary judgment in lieu of complaint pursuant to CPLR 3213.
CPLR 3213 provides for accelerated judgment where the instrument sued upon is for the payment of money only and where the right to payment can be ascertained from the face of the document without regard to extrinsic evidence, other than simple proof of nonpayment or a similar de minimis deviation from the face of the document. An action on a promissory note is an action for payment of money only. The usual standards for summary judgment apply to CPLR 3213 motions. The instrument and evidence of failure to make payments in accordance with its terms constitute a prima facie case for summary judgment.
The case of Tradition North America, Inc. v Sweeney (133 AD2d 53 [1st Dept 1987]) is controlling. In that case, an employee signed six promissory notes that held out the possibility of being repaid by bonuses. In order to determine the amount payable, the court was required to look beyond the notes to determine the employee’s entitlement to payments to offset the obligations evidenced by the notes. Even though the notes could have been satisfied by monetary payments, the employee did not make an unconditional promise to pay a sum certain at a given time or over stated period. Rather, he had the option of performing work for his employer to satisfy the debt. The court considered the notes alternatively as evidencing a loan obligation or an advance on bonus and indeed, nonbonus, compensation. The First Department concluded that when what purport to be notes have such a hybrid dimension they ought not to be considered instruments for the payment of money only.
(Internal quotation and citations omitted).
Newmark illustrates a (small) limitation to the use of promissory notes to secure obligations from employees of which counsel should be aware.
On December 24, 2013, Justice Kornreich of the New York County Commercial Division issued a decision in Loreley Fin. (Jersey) No. 4 Ltd. v. UBS Ltd., 2013 NY Slip Op. 33262(U), explaining the distinction between transaction causation and loss causation.
The rules of the Commercial Division change from time-to-time. Currently, there are four proposed rule changes open for public comment.
Proposed creation of a pilot mandatory mediation program in the Commercial Division of the Supreme Court, New York County.
Email comments to CommDivMedPilot@nycourts.gov by February 11, 2014.
Proposed adoption of new Commercial Division Rule 9, relating to the use of accelerated adjudication procedures in the Commercial Division of the Supreme Court.
Email comments to CommDivAccelAdjud@nycourts.gov by February 6, 2014.
Proposed adoption of new Preliminary Conference Form for use in the Commercial Division of the Supreme Court.
Email comments to CommDivPCForm@nycourts.gov by February 3, 2014.
Proposed adoption of a new Rule of the Commercial Division (22 NYCRR § 202.70(g)), relating to use of interrogatories in the Commercial Division of the Supreme Court.
Email comments to CommDivInterrogs@nycourts.gov by January 29, 2014.
On December 4, 2013, Justice Schweitzer of the New York County Commercial Division issued a decision in Karian v. Physician’s Choice, Inc., 2013 NY Slip Op. 33219(U), where the president and sole employee of a corporation sued the corporation and caused it to default.
CPLR Rule 5015 provides the grounds upon which a court may grant relief from judgment. CPLR 5015(a)(l) allows relief from judgment because of excusable default. To vacate a default, a party must show that an excusable default and a meritorious claim or defense. Mr. Karian is the president and sole employee of PCI and, as such, only he can mount a defense for the corporation. Mr. Karian had the power to prevent the default, but chose to take no action in the corporation’s defense. Therefore, the court finds that the default is excusable because the failure of the corporation to proceed is wholly the fault of the Plaintiff himself.
We suppose that the idea of having the corporation’s sole employee sue the corporation and taking a default judgment seemed clever at the time, but surely one would be hard pressed to find a court that would let the plaintiff get away with it. Justice Schweitzer did not.
On December 26, 2013, the Second Department issued a decision in Obstfeld v. Thermo Niton Analyzers, LLC, 2013 NY Slip Op. 08601, reaffirming the rule that unambiguous commercial contracts will be enforced as written, even if it results in possible unfairness to one of the parties.
In Obstfeld, plaintiff contracted in December 2001 to provide investment banking services to defendant’s predecessor-in-interest. The agreement was “cancelable on sixty days notice by either party after August 1, 2002. In September 2002, the parties entered into an addendum to the [a]greement” that granted plaintiff “the exclusive right to act as financial advisor for [defendant’s predecessor-in-interest] for the next two rounds of institutional fundraising following the present round, as well as for any investment or merger/acquisition transaction or IPO.” The addendum by its terms “supersede[ed] any inconsistencies between the addendum and the [original] agreement,” but it neither provided for the termination of the amended agreement nor referred to the cancellation provisions in the original agreement.
A contract is to be construed in accordance with the parties’ intent, which is generally discerned from the four corners of the document itself. Consequently, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms. . . .
It is not news that the parol evidence rule is alive and well in New York. It is a little surprising that there are so many decisions that have to remind us of that fact.
On December 26, 2013, the Second Department issued a decision in Revital Realty Group, LLC v. Ulano Corp., 2013 NY Slip Op. 08607, illustrating the application of “time is of the essence” in real estate transactions.
When a contract for the sale of real property does not make time of the essence, the law permits a reasonable time in which to tender performance, regardless of whether the contract designates a specific date for performance. What constitutes a reasonable time to perform turns on the circumstances of the case. Time may be made of the essence by clear, distinct, and unequivocal notice to that effect giving the other party a reasonable time in which to act.
Here, the contract provided for a closing to take place on March 29, 2012, but did not make time of the essence. Further, as a matter of law, the seller’s attorney’s letter of March 13, 2012, proclaiming “time of the essence” with respect to the closing date was premature and failed to afford the buyer a reasonable time after the March 29, 2012, closing date set forth in the contract within which to perform. Accordingly, the seller failed to demonstrate that it effectively made the March 29, 2012, closing a time of the essence closing date, and the buyer was entitled to a reasonable adjournment of the closing date. Consequently, the buyer cannot be considered in default for failing to appear at the March 29, 2012, closing.
The term “time is of the essence” has great power in real estate sales contracts. However, as the decision in Revital Realty Group shows, it is, at the end of the day, a contract term (or not, as here), not magic words that can be invoked at any time for any purpose.
On December 5, 2013, Justice Sherwood of the New York County Commercial Division issued a decision in Hildene Capital Mgt., LLC v. Bank of N.Y. Mellon, 2013 NY Slip Op. 33181(U), explaining the standard for obtaining non-party discovery.
The threshold requirement for disclosure in New York civil actions is that the disclosure sought be material and necessary in the prosecution or defense of an action. This principle is applicable to non-parties as well as parties. However, a disclosure request directed to a nonparty is governed by principles in addition to those governing a party. CPLR § 3101(a)( 4) directs that a nonparty be given notice stating the circumstances or reasons such disclosure is sought or required so as to afford a nonparty who has no idea of the parties’ dispute or a party affected by such request an opportunity to decide how to respond. . . . [T]he determination of whether to quash a nonparty subpoena does not turn solely on whether the discovery sought is relevant. Rather, . . . more than relevance and materiality is necessary to warrant disclosure from a nonparty.
The court finds [plaintiffs’] proffer in opposition to the motion to quash insufficient in the context of this case to cure the facial deficiency of their subpoenas. It does little to clarify the nature of the inquiry or narrow the scope for the proposed depositions. Thus, [plaintiffs have] failed to meet [their] burden of demonstrating the circumstances and reasons additional testimony from the nonparties is warranted. Moreover, [plaintiffs have] failed to show that the disclosure sought cannot be obtained from other sources.
Litigants often take for granted the right to obtain discovery from third-parties. The court’s decision in Hildene Capital Mgt. illustrates the danger of such an approach; the better approach is to take the requirements of CPLR § 3101(a)(4) seriously and ensure that non-party discovery demands are properly justified (and justifiable).
On December 24, 2013, the First Department issued a decision in RSB Bedford Assoc. LLC v. Ricky’s Williamsburg, Inc., 2013 NY Slip Op. 08526, showing how a prevailing party’s right to recover its litigation expenses can be limited by the degree to which it prevails.
While recovery of attorneys’ fees by “the successful party” is provided for in the lease, the Referee properly reduced the amount sought by plaintiff to reflect that while it was the prevailing party, it did not prevail on all of its claims, particularly those seeking “expectancy” (extraordinary) damages.
The right of the prevailing party to recover its attorneys’ fees sometimes provides an incentive for aggressive litigation. RSB Bedford Assoc. reminds us, however, that courts may not allow a prevailing party to recovery fees for aspects of the litigation in which it did not prevail.

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