Comments on Recent Cases: September 2021

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Part of my work involves reading court decisions to keep abreast of how judges decide the types of cases I handle. Below, I share some thoughts on recent decisions.

Seller Retains Burden in Establishing Account Stated Claim

In New York, a seller of goods can prevail in a lawsuit to collect amounts due by just demonstrating that it sent an invoice that went unpaid. This is called an “account stated” claim. But a defendant can still defeat an account stated claim, even when it fails to pay the invoice.

This principle was illustrated in a recent case by the state appellate court in Brooklyn. In that case, the plaintiff issued an invoice to a bus company, demanding payment for the gas it sold. The bus company did not pay, and so it sued. Although the account stated doctrine creates a presumption that the bus company owed money on its invoices, the court affirmed the denial of the motion because there was a factual dispute about whether the invoices were accurate.

Cases like this illustrate the burdens debt collectors must meet and also how to oppose their claims.

Court Dismisses Case Due to Discovery Obstruction

Discovery is often very burdensome, expensive, and exhausting. But litigants should take it seriously anyway because courts may punish those who do not. For example, in a recent case, the state appellate court in Brooklyn upheld a decision that dismissed a complaint because the plaintiff deliberately frustrated the discovery process.

On appeal from the order that authorized a disbursement of money to her adversaries, the plaintiff stressed the validity of her case, but the court held that she did not properly appeal the decision striking her complaint, and therefore her claims were barred regardless of their merits.

Cases like this should serve as a warning to litigants who fail to meet the burdens of discovery.

Court Distinguishes Fraudulent Misrepresentation From Fraudulent Concealment

A fraud case often requires an explicit false statement and the plaintiff’s justifiable reliance on the statement. A case based on the failure to disclose the truth, instead of an outright lie, is harder. And a judge may dismiss a fraud claim entirely if the plaintiff knew the truth the whole time.

A recent decision by the New York State appellate court in Buffalo applied these rules. It concerned a home seller who told the buyer that the house had a certificate of occupancy, but did not mention that the certificate had been cancelled by the town because the house had a barn that encroached on someone else’s property. The buyer knew about the encroachment before the purchase, but only learned about the cancellation of the certificate after.

He sued for fraud, but the appellate court affirmed dismissal of his complaint. It did so because the plaintiff knew about the encroachment and could have learned the full truth about the status of the occupancy certificate himself, a fact that the defendant may not have disclosed but did not actively conceal.

This case illustrates the more difficult burden fraud plaintiffs have as compared to plaintiffs in breach of representation cases.

Court Gives Mortgage Priority to a Good Faith Lender

When someone buys property that does not rightfully belong to the seller, the original owner and the new owner often litigate. Generally, courts recognize the right of someone to retain property when they paid fair value for it and reasonably believed the seller owned it.

A recent decision by the New York appellate court in Brooklyn applied this rule to two competing mortgage holders. One mortgage holder accidentally filed a statement that said its loan was paid off. Subsequently another business issued a mortgage to the debtor, believing it to have the sole mortgage on the property. When the two litigated to determine which mortgage had priority, the court held that the second mortgagee did because it “gave valuable consideration for its recorded mortgage, and … it did not have actual knowledge of the plaintiff's alleged mortgage or knowledge of facts that would have put it on ‘inquiry notice’ of that mortgage.”

Cases like this provide confidence to buyers and may caution lenders to be careful about making future lenders aware of their loan.