Collyer v. LaVigne

• Decision Date: 17 February 2022
• Docket Number: 532868
• Citation: 202 A.D.3d 1335,163 N.Y.S.3d 683
• Parties: Barbara U. COLLYER et al., Respondents—Appellants, v. Danielle M. LAVIGNE, Respondent, et al., Defendants, and New York Central Mutual Fire Insurance Company, Appellant—Respondent.
• Court: New York Supreme Court — Appellate Division

202 A.D.3d 1335

163 N.Y.S.3d 683

Barbara U. COLLYER et al., Respondents—Appellants,

v. Danielle M. LAVIGNE, Respondent, et al., Defendants,andNew York Central Mutual Fire Insurance Company, Appellant—Respondent.

532868

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: January 4, 2022

Decided and Entered: February 17, 2022

Rupp Baase Pfalzgraf Cunningham LLC, Buffalo (Marco Cercone of counsel), for appellant-respondent.

True & Walsh, LLP, Ithaca (Peter J. Walsh of counsel), for respondents-appellants.

Lama Law Firm, LLP, Ithaca (Ciano J. Lama of counsel), for respondent.

Before: Egan Jr., J.P., Lynch, Clark and Pritzker, JJ.

MEMORANDUM AND ORDER

Pritzker, J. Cross appeals from an order of the Supreme Court (McBride, J.), entered February 1, 2021 in Tompkins County, which (1) denied plaintiffs' motion to, among other things, strike the pleadings of defendant New York Central Mutual Fire Insurance Company, (2) granted defendant Danielle M. LaVigne's cross motion for partial summary judgment on her cross claims and awarded counsel fees, and (3) denied the cross motion by defendant New York Central Mutual Fire Insurance Company for dismissal of the complaint against it.

This appeal involves claims arising from a fire loss of real property located at 25 Sperry Lane in the Town of Lansing, Tompkins County (hereinafter the property), which is owned by defendant Danielle M. LaVigne. LaVigne's father was convicted in the United States District Court for the Northern District of New York for, among other things, defrauding plaintiffs of approximately $5 million. In connection with that illegal conduct, plaintiffs obtained a nearly $6 million judgment against LaVigne's father. While enforcing said judgment, plaintiffs learned that some of the money of which they were defrauded may have been used for the construction of a house on the property and, accordingly, they brought suit against LaVigne for unjust enrichment. During the pendency of the action, however, the property was destroyed by fire.¹ At the time of the fire, the property was insured by defendant New York Central Mutual Fire Insurance Company (hereinafter the insurance company) and was encumbered by a mortgage held by defendant CFCU Community Credit Union (hereinafter the credit union). The insurance policy provided coverage for loss of the property as well as for debris removal, reasonable repairs and mortgage payments in the event of fire. LaVigne promptly filed a claim for the loss with the insurance company and it was later determined that the estimated replacement cost of the property was $530,333.02. In December 2018, under plaintiffs' unjust enrichment action, Supreme Court (Reynolds Fitzgerald, J.) imposed a temporary constructive trust "on all amounts [LaVigne] receives from any insurance proceeds paid to her from any insurance coverage of [the property]."

In March 2020, before any determination on LaVigne's policy claim had been made, plaintiffs commenced the instant action seeking, as relevant here, to impose a constructive trust on LaVigne's insurance policy and to direct the insurance company to pay (1) the credit union for the unpaid balance of the mortgage, (2) defendant Town of Lansing for the clean-up costs and (3) plaintiffs "the amount by which ... LaVigne is found to have been unjustly enriched at the expense of [p]laintiffs."² The insurance company answered with numerous affirmative defenses, including lack of standing and privity of contract. The Town, the credit union and LaVigne also answered, the latter two of which asserted several cross claims charging the insurance company with breach of contract and bad faith. During this time, the insurance company partially denied LaVigne's claim for loss and offered instead to pay her reduced amounts for structural loss and as a settlement for her personal property loss.

In October 2020, plaintiffs moved (1) to strike the insurance company's pleading, (2) for a default judgment against the insurance company with respect to plaintiffs, LaVigne, the credit union and the Town and (3) to set an inquest for damages. Plaintiffs alleged that the insurance company had deliberately refused to comply with discovery demands, subpoenas, payment demands and court orders, necessitating in response the drastic remedy of striking its pleading. Plaintiffs further claimed that the insurance company, in essence, had refused to pay LaVigne's valid insurance claim because the property had been purchased with illegally obtained funds by her father, even though such conduct did not void the policy. Subsequently, LaVigne cross-moved for partial summary judgment on her cross claims, seeking to direct the insurance company to immediately pay the credit union for the unpaid balance on the mortgage, the Town for the clean-up costs and LaVigne for her loss of personal property and counsel fees.³ The insurance company then cross-moved for dismissal of the complaint based upon, among other things, failure to state a cause of action. Thereafter, the parties stipulated to discontinuing the cross claims between the credit union and the insurance company as well as between the credit union and Lavigne.

Supreme Court (McBride, J.) first denied plaintiffs' motion to strike the insurance company's pleadings, finding that the insurance company's conduct was not "willful or contumacious." The court then granted LaVigne's cross motion for partial summary judgment, ordering the insurance company to pay into escrow LaVigne's outstanding claims and counsel fees as well as the Town's clean-up costs. Here, the court sua sponte granted LaVigne's summary judgment cross motion relative to the structural loss of the property, despite such relief having not been requested.⁴ The court reasoned that the insurance company had admitted to their obligation to pay LaVigne and found no reason why it had failed to satisfy its obligations. The court then denied the insurance company's cross motion for dismissal of the complaint, holding that plaintiffs, as third-party beneficiaries, had sufficiently made out a claim against the insurance company under the theory of unjust enrichment and also properly pleaded a constructive trust. The insurance company appeals and plaintiffs cross-appeal.

We turn first to plaintiffs' cross appeal in which they contend that Supreme Court improvidently exercised its discretion in denying their motion to strike the insurance company's pleadings given its egregious conduct during discovery. "The drastic remedy of striking a pleading is appropriate only where the moving party conclusively demonstrates bad faith or willful, contumacious conduct by the party who fails to comply with disclosure or spoliates evidence" ( Dyer v. City of Albany, 121 A.D.3d 1238, 1238, 995 N.Y.S.2d 753 [2014] [internal quotation marks, brackets and citations omitted]; see CPLR 3126 ; Mesiti v. Weiss, 178 A.D.3d 1332, 1334, 116 N.Y.S.3d 109 [2019] ). Although, here, the insurance company's actions were dilatory and frustrated the discovery process, the insurance company did cite having "difficulties" in complying with document production. Notably, the multiple discovery demands were made shortly after COVID–19 lockdowns went into effect in the state. Moreover, the insurance company never stated that it would not produce the documents or that it would not comply with the discovery demands. As such, the record does not clearly support an inference that the insurance company's conduct was willful and contumacious (see Henry v. Datson, 140 A.D.3d 1120, 1122, 35 N.Y.S.3d 383 [2016] ; compare Brandi v. Chan, 151 A.D.2d 853, 854, 542 N.Y.S.2d 827 [1989], appeal dismissed 75 N.Y.2d 789, 552 N.Y.S.2d 98, 551 N.E.2d 591 [1990] ), and thus Supreme Court did not err in denying plaintiffs' motion to strike the insurance company's answer and grant a default judgment.

We turn now to the insurance company's arguments relative to the granting of LaVigne's cross motion for partial summary judgment. Initially, the insurance company contends that Supreme Court erred in sua sponte granting LaVigne summary judgment on her structure loss claim as no party had moved on or briefed relative to this claim. We agree. "Although a court may not generally grant summary judgment sua sponte in the absence of a motion pursuant to CPLR 3212, in certain circumstances, a court may grant such relief, even if it is not demanded, so long as there is no substantial prejudice to the adverse party. In such cases, [this Court] require[s] that the court give notice to the parties that summary judgment is being considered as a remedy, so that they may develop evidence and offer proof in support of or in opposition to the motion" ( Wells Fargo Bank Minn., N.A. v. Garrasi, 80 A.D.3d 1061, 1063, 914 N.Y.S.2d 790 [2011] [citations omitted]; see Ressis v. Mactye, 98 A.D.2d 836, 837, 470 N.Y.S.2d 502 [1983] ). Here, although the court did ask questions regarding the structure loss claim at oral argument, we do not find that to be sufficient notice that summary judgment was being considered and, as such, the insurance company was substantially prejudiced (see Ressis v. Mactye, 98 A.D.2d at 837, 470 N.Y.S.2d 502 ; compare Wells Fargo Bank Minn., N.A. v. Garrasi, 80 A.D.3d at 1063, 914 N.Y.S.2d 790 ). Notably, it is clear from the record that the parties were not "deliberately charting a course for summary judgment" ( Rainbow Hill Homeowners Assn., Inc. v. Gigante, Inc., 32 A.D.3d 533, 533, 821 N.Y.S.2d 223 [2006] ), and in fact were quite surprised by the Supreme Court's questions regarding summary judgment on this claim. Moreover, it appears from the record that the insurance company did not depose LaVigne. Thus, we reverse Supreme Court's order to the extent it granted this relief.

We turn now to the merits of LaVigne's actual cross motion for partial summary judgment as to her personal property losses.⁵ As relevant here, "[t]o recover for a breach of contract, a party must...