Sometimes, a lawsuit is dismissed based upon the concept of claim preclusion or collateral estoppel, which was defined by the court in Sang Seok Na v Schietroma, 172 AD3d 1263 [2d Dept 2019]:
“ The doctrine of collateral estoppel, a narrower species of res judicata, precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same ” (Ryan v. New York Tel. Co., 62 N.Y.2d 494, 500, 478 N.Y.S.2d 823, 467 N.E.2d 487). The doctrine of collateral estoppel applies when: “ (1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and decided, (3) there was a full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits ” (Conason v. Megan Holding, LLC, 25 N.Y.3d 1, 17, 6 N.Y.S.3d 206, 29 N.E.3d 215 [internal quotation marks omitted] ).
Simon & Garfunkel, The 59th Street Bridge Song (Feelin’ Groovy)
A foreign company sued a New York State resident, seeking to force the sale of his house in order to satisfy its judgment. The company existed under New Jersey law with a New Jersey corporate address. The house was located in Nassau County.
Petition to Sell House
The judgment creditor’s petition to sell real property alleged that there was sufficient equity in the house exceeding the homestead exemption and existing mortgage lien. The petition further alleged that attempts to execute on the judgment debtor’s personal property failed and the creditor had otherwise been unable to satisfy its judgment. Combined, these allegations would normally be enough to satisfy the pleading requirements under CPLR 5203, 5206 and 5238.
In response to the petition, the debtor/homeowner retained Richard A. Klass, Your Court Street Lawyer, to defend the proceeding in order to retain his house. The defenses put up included the fact that the mortgage lender had already begun foreclosure proceedings and there was a question as to the validity of the claim that there was any net equity in the property. Further, since the house was owned by the debtor with his wife as a “ tenancy by the entirety, ” the house could not be sold without consideration of her property rights.
Stopping the Creditor in its tracks
Sometimes, a debtor needs a respite from the continual attacks by creditors. One way to accomplish this is by a bankruptcy filing, in which the automatic stay imposed upon filing stops the pecking at a debtor’s assets by creditors. Another way to slow down a creditor is to temporarily stay the lawsuit while the debtor and his family “ circle the wagons ” to either gather up strong defenses or develop an orderly plan in which debts will be repaid or settled. An effective method of getting this pause is by requesting that the judge stay the lawsuit of a non-New York State creditor until the plaintiff/creditor posts security for the costs of the action.
Security for Costs
New York court rules require nonresident plaintiffs maintaining lawsuits in New York courts to post security for the costs for which they would be liable if their lawsuits were unsuccessful. CPLR 8501(a) provides that, “ except where the plaintiff has been granted permission to proceed as a poor person or is the petitioner in a habeas corpus proceeding, upon motion by the defendant without notice, the court or judge thereof shall order security for costs to be given by the plaintiffs where none of them is a domestic corporation, a foreign corporation licensed to do business in the state or a resident of the state when the motion is made. ” CPLR 8502 provides that until security for costs is given pursuant to court order, all proceedings other than to review or vacate such order shall be stayed, and that if the plaintiff shall not have given security for costs at the expiration of 30 days from the date of the order, the court may dismiss the complaint upon motion by the defendant.
Security for costs is a device ordinarily used against a nonresident plaintiff to make sure if he loses the case, he will not return home and leave the defendant with a costs judgment that can be enforced only in the plaintiff’s home state. By directing a nonresident to post a bond, the defendant is protected from frivolous lawsuits and is assured that, if successful, he will be able to recover costs from the plaintiff.
In rebuffing a challenge to the constitutionality of the requirement of security for costs imposed upon a nonresident plaintiff, the court in Clement v. Durban, 147 AD3d 39 [2016] aff’d 32 NY3d 337 [2018] cert denied 139 S.Ct. 2649 [2019] held that the court rules do not deprive nonresident plaintiffs of reasonable and adequate access to New York courts and, thus, are constitutional. Where nonresidents are subject to different treatment than New York residents, there must be reasonable grounds for diversity of treatment (so as to prevent discrimination against citizens of other states). Disparity of treatment of nonresidents is permitted in situations where there are valid, independent reasons for it; in this situation, deterring frivolous or harassing lawsuits and preventing prevailing defendants from having to chase plaintiffs into foreign jurisdictions to collect their judgments are considered valid reasons.
Upon motion by the defendant requesting that the plaintiff post a bond as security for costs, the judge granted the motion and directed the nonresident plaintiff to post security in the amount of $10,000 for costs. The plaintiff did not do so within the 30 day period after the order and, accordingly, the court dismissed the lawsuit.
Sometimes, a court can hold an attorney who brings or continues causes of action deemed “frivolous” or without merit liable for costs and/or sanctions. In Boye v. Rubin & Bailin, LLP, 152 AD3d 1 [1 Dept. 2017], the First Department held that the attorney for the client-plaintiff in a legal malpractice action ought to be sanctioned for frivolous conduct, mainly due to the attorney’s pursuit of a meritless claim. In remanding the case to the lower court, the appellate court held that,…
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After a careful review of the appellate record and the parties’ briefs, we draw the only conclusion such record permits—the bases for the legal malpractice claim have been without merit in law or fact since their inception. More concerning, however, is that despite it having been apparent from the record that successor counsel was the one who withdrew the conversion and breach of contract claims in the federal action and not defendants, and despite being alerted to this fact by the record of this case and Supreme Court on multiple occasions, counsel persists in repeating a materially false claim to this Court.
There can be no good faith basis for the repetition of this materially false claim on appeal, and we find that counsel’s behavior would satisfy any of the criteria necessary to deem conduct frivolous. In fact, the only fair conclusion is that the prosecution of this appeal and knowing pursuit of a materially false and meritless claim was meant to delay or prolong the litigation or to harass respondents.
“Among the factors we are directed to consider is whether the conduct was continued when it became apparent, or should have been apparent, that the conduct was frivolous, or when such was brought to the attention of the parties or to counsel (22 NYCRR 130-1.1 [c]), circumstances that are replete in this record as noted above” (Levy v Carol Mgt. Corp., 260 AD2d 27, 34 [1st Dept 1999]).
We also consider that sanctions serve to deter future frivolous conduct “not only by the particular parties, but also by the Bar at large” (id. at 34). The goals include preventing the waste of judicial resources, and deterring vexatious litigation and dilatory or malicious litigation tactics.
Here, counsel was ethically obligated to withdraw any baseless and false claims, if not upon his own review of the record, certainly by the time Supreme Court advised him of this fact. Instead, counsel continued to repeat a knowingly false claim in what could only be described as a purposeful attempt to mislead this Court, and pursued claims which were completely without merit in law or fact.
The appropriate remedy for maintaining a frivolous appeal is the award of sanctions in the amount of the reasonable expenses and costs including attorneys’ fees incurred in defending the appeal (see Matter of Levine, 82 AD3d 524, 527 [1st Dept 2011]). Thus, we remand the matter to Supreme Court for a determination of the amount of expenses and costs including attorneys’ fees incurred by defendants in defending this appeal, and for entry of an appropriate judgment as against plaintiff’s attorney.
A seldom-used tactic in litigation is the “tender” of payment by a defendant of an amount which is believed to be due to the plaintiff. If the proper amount is tendered, and the plaintiff does not accept that amount, then the defendant will not be found liable for interest and court costs.
This legal tactic was successfully used by the author in a case involving the building of a large boys’ yeshiva. The yeshiva purchased a building to tear it down and construct a new school. The prior owner took back a mortgage from the yeshiva for $900,000, with interest-only payments for 15 years and no prepayments allowed. Shortly after the purchase, the yeshiva obtained work permits to demolish the existing structure to build the new school building.
The mortgagee/prior owner brought an injunction action, claiming that the demolition of the existing structure violated the terms of the mortgage (a common clause in the form of mortgage states that the mortgagee’s consent is needed before alteration of the structure on the mortgaged premises in order to protect the value of the collateral). During the course of ongoing court conferences, the yeshiva offered to pay off the mortgage in full, but the mortgagee was insistent on obtaining not only the principal amount of $900,000 but also the future 14 1/2 years’ worth of interest (a windfall of about $1.2 million).
The mortgagee then decided to unilaterally declare a default under the mortgage, alleging that the disconnection of the water and electric lines amounted to an alteration of the structure; her attorney served an “acceleration notice,” demanding the payment of the mortgage in full plus accrued interest.
From an initial review of the situation, it looked bleak for the yeshiva. But, upon further examination, the concept of “tender” saved the day! The yeshiva collected pledges totaling $911,000 (the principal amount plus accrued interest to the date of tender) and deposited that amount with the Clerk of Kings County as a “tender.” A motion was then made to dismiss both the injunction and foreclosure actions based upon the tender.
The court held that there was a valid tender, since the mortgagee accelerated the mortgage note, seeking the unpaid principal amount with “accrued” interest. Based upon the ambiguity of the language of the mortgage note, “accrued interest” may have meant interest accrued only to the date of default or future interest past the date of default.
Tender can be effectively utilized in situations where the defendant expects to owe something to the plaintiff but nowhere near the amount claimed. A tender can place a greater onus on the plaintiff to substantiate additional damages. Further, it can be a good method of settling a case by offering the plaintiff an amount which it may be willing to accept to terminate the litigation.
After a suit is filed against a debtor to collect upon a debt, the defendant will file an Answer which may include ” affirmative defenses ” or ” counterclaims. ” These allegations must be handled with vigilance from the onset to attempt successful recovery in the litigation.
An ” affirmative defense ” is a defense to a law suit which must be proved by the defendant. Examples of affirmative defenses would include, e.g., bankruptcy, statute of limitations, improper service, and accord and satisfaction. The notion is that those types of defenses would likely be determinative to the claim. Therefore, the defendant must assert them in the Answer so as not to “surprise” the plaintiff-creditor at the time of trial. Some affirmative defenses must be asserted either pre-Answer or in the Answer, or they are deemed waived by the defendant. After receipt of the Answer, the plaintiff’s counsel should scan the Answer to identify any affirmative defenses and assess their viability. To the extent that an affirmative defense seems frivolous, meritless, or superfluous, an appropriate motion to dismiss the affirmative defense should be made sooner rather than later. The court will then determine whether to sustain the affirmative defense or dismiss it from the onset of the litigation.
As to any counterclaims which may be asserted in the Answer, a careful review must take place as to whether it relates to the matter complained of in the complaint, or relates to a separate matter. Sometimes, the plaintiff will have an insurance policy which covers the counterclaim, and the insurance company will provide a defense to the counterclaim separate from the prosecution of the underlying suit. If it is deemed that the counterclaim “fails to state a valid cause of action,” then an appropriate motion may be brought to dismiss the same.
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