When suing a municipality, you are generally required to file a Notice of Claim, the purpose of which is to give the municipality prelitigation notice of the claim and afford it an opportunity to investigate and, if warranted, settle such claim without the risk and expense of litigation. Such a filing is considered a jurisdictional condition precedent to maintaining an action against a Village or Town.
There are limited exceptions to this rule, but a recent case introduced a new twist to the analysis. The issue before the court is whether, if the Village commences the action, does the defendant need to give notice of its counterclaim? This would be difficult given the time constraints related to filing an answer.
The New York State Court of Appeals recently upheld the determination of the Appellate Division, Second Department, which reversed the lower court’s order and dismissed the counterclaim interposed by Defendant. In Incorporated Village of Freeport v. Freeport Plaza West, LLC, the Village had sued a developer which had agreed to purchase and develop several vacant lots from the Village in order to create a mixed residential and commercial building site, claiming that Freeport Plaza West had improperly delayed the transaction and had not closed as required by the contract. Freeport Plaza West interposed an answer denying the allegations in the complaint and counterclaimed for anticipatory breach of contract. The Village filed a Reply to the counterclaim which did not specifically raise the lack of a Notice of Claim but did contain an affirmative defense asserting that the Defendant had “failed to perform all conditions precedent” prior to filing the counterclaim.
The matter proceeded through discovery and several years later, on the eve of trial, the Village asked the Court to dismiss the counterclaim because Defendant had not complied with CPLR Section 9802, which provides, in pertinent part, that “no action shall be maintained against [a] village upon or arising out of a contract… unless a written verified claim shall have been filed within one year after the cause of action shall have accrued.” The statute precluded the commencement of any action based on the notice of claim “until forty days have elapsed after the filing of the claim in the office of the village clerk.” Given the time constraints on filing an answer, this would be impossible unless the Village would consent to extending the time in which the defendant must file its answer until sometime after the 40 days had passed.
The statute also clearly states that failure to present a claim shall be a bar to any claim or action against the Village. Nonetheless, the lower court denied the Village’s motion on the ground that its participation in the litigation, without specifically raising or moving to dismiss based on the defense, equitably estopped it from doing so at this late date. The Appellate Division, finding that the Village had litigated to prosecute its own claim for breach of contract and not to mislead or discourage the Defendant from timely serving the Notice of Claim, reversed and dismissed the counterclaim. The parties then entered a stipulation which submitted the matter to the Court of Appeals.
In reviewing the matter, the majority opinion (there was one dissenting Judge) agreed with the Appellate Division and determined that the Village had not committed any wrongful or misleading conduct in an effort to induce the Defendant’s detrimental reliance. The Court therefore upheld the decision of the Appellate Division’s dismissal of the counterclaim and found that the Defendant should have found a way to timely file both the required Notice of Claim and the counterclaim.
The lesson here is that when dealing with a municipality, you need to know your rights and responsibilities so that you are not precluded from prosecuting your claim.
If you find yourself in a situation where you believe you may have a claim against a municipality, please contact one of our litigation attorneys who can advise you how to proceed.