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Posted: April 15, 2018

Counterclaims for Mutual Mistake and Unilateral Mistake Survive Summary Judgment

On April 3, 2018, Justice Scarpulla of the New York County Commercial Division issued a decision in Securitized Asset Funding 2011-2, Ltd. v. Canadian Imperial Bank of Commerce, 2018 NY Slip Op. 30582(U), holding that counterclaims for mutual mistake and unilateral mistake survived summary judgment because of questions of fact, explaining:

Cerberus argues that CIBC’s counterclaim for mutual mistake must be dismissed because it fails to allege with particularity, pursuant to CPLR 3016(b), exactly what was agreed upon between the parties that was not reflected in the A Note and B Certificate. Cerberus also argues that mutual mistake is not supported by the facts when the counterclaim depends on a mistake unknown to either party, and the agreements at issue were negotiated by sophisticated parties represented by counsel.

Upon review, I find that CIBC sufficiently alleges that the terms of the A Note should have specifically reflected that payments for Synthetic Libor and Synthetic Interest would be reduced by various means, including principal payments. The ambiguity and issues of fact discussed inji-a relates to CIBC’s alleged mistake. I sustain CIBC’s counterclaim for mutual mistake because the parties’ meeting of the minds is not clear. Moreover, CIBC’s course of performance also raises an issue of fact regarding how the parties intended to calculate payments, which may show an intent contrary to Cerberus’s litigation position now.

In the case of unilateral mistake, it must be alleged that one party to the agreement fraudulently misled the other, and that the subsequent writing does not express the intended agreement.
Here, CIBC alleges that the Cash and Synthetic Assets in the A Note were identical to the those in the B Certificate, and that CIBC represented that the B Certificate would have the same provisions regarding payment calculations as the A Note. CIBC further alleges that if Cerberus’s contractual interpretation is correct, i.e., that the basis for calculating payments of Synthetic Libo~ and Synthetic Interest froze in June 2010, then it misrepresented the substance of how the B Certificate would operate as a limited recourse note, and wrongfully induced CiBC to rely on Cerberus’s course of performance.

Cerberus argues that as a sophisticated party represented by counsel, CIBC is unable to establish justifiable reliance when it had the access to same information and terms of the B Certificate. However, Cerberus’s contentions are premature when resolution of how to calculate payments cannot be resolved as a matter of law. Evidence of the parties’ intentions is necessary to resolve that issue, and summary judgment dismissal should not be granted if there is any doubt as to the existence of factual issues.

Moreover, Cerberus submits a May 11, 2011 letter, in which Cerberus states that the B Certificate will have the same terms and provisions as the A Note relating to the identical assets underlying the A Note. At the time Cerberus made this representation, it had already accepted nearly a year of reduced payments for Alfais without asserting that payment amounts froze in June 2010. Even assuming CIBC was not justified in relying on the ambiguous agreement, I find that Cerberus’s representations, coupled with its course of performance, raise an issue of fact as to fraud vis-a-vis unilateral mistake. Accordingly, I also deny Cerberus’s motion for summary judgment dismissing CIBC’s counterclaim for unilateral mistake.

(Internal quotations and citations omitted).

The doctrines of mutual and unilateral mistake are a way to have a court throw a contract out because there was no meeting of the minds by the parties. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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