Opinion
Index No. 7970/2018
07-13-2023
E.V.G., Plaintiff, v. M.G., Defendant.
Grant Herrmann Schwartz & Klinger LLP Law Office of Robert Osuna
Unpublished Opinion
Grant Herrmann Schwartz & Klinger LLP
Law Office of Robert Osuna
Shawn T. Kelly, J.
The following papers numbered 1 to 66 were read on this motion (Seq. No. 003) To vacate. NYSCEF Doc. Nos: 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89.
Plaintiff moves to vacate the June 17, 2022 Stipulation of Settlement contending that the stipulation fails to comply with Domestic Relations Law (herein "DRL") §236(B)(3) and Real Property Law §291, that the stipulation is not properly notarized that the Stipulation fails to comply with the requirements of DRL §170(7); that the Stipulation lacks the indicia of a bona fide, marital stipulation of settlement; that the Stipulation is unconscionable; that the Stipulation is a product of overreaching in substance and execution; that the fiduciary duty between spouses exacerbates the flaws with the Stipulation; that there was a lack of financial disclosure prior to entering into the Stipulation, wherein neither party waived his/her rights to discovery; and that the terms of the Stipulation are vague and unenforceable.
Additionally, Plaintiff moves pursuant to DRL §244 to enforce the July 15, 2019 Pendente Lite Order, or in the alternative, by granting Plaintiff a Money Judgment in the amount of $84,000.00, plus costs and disbursements to be paid and enforceable through the support collection unit. Plaintiff further moves for an order directing that the rent payments from the tenants residing in at the Florida residence be deposited into an account held in Plaintiff's name and requiring Defendant to pay all amounts owed and owing on the Florida property, including the mortgage, taxes, homeowner association fees, and any other fee that has come or becomes due from June 1, 2022 to the present. Lastly, Plaintiff moves for an award of legal fees in connection with the costs associated with the instant motion and pendente lite counsel fees in the amount of $75,000.00.
In opposition, Defendant contends that the matter was settled in open court on March 1, 2022, and that the agreement was reached orally, and the court directed the parties to reduce the agreement to writing and to file the stipulation of settlement. Defendant argues that the stipulation is valid and enforceable, and that Plaintiff's motion must be denied. Additionally, Defendant moves for sanctions and attorneys fees.
This matter was commenced on November 16, 2018. At the time of commencement, Plaintiff was represented by Antonietta M. Monaco, Esq., of Monaco & Monaco, LLP. Defendant answered through who his attorney Robert Osuna, Esq., who continues to represent him today. The action proceeded through discovery and was converted to e-filing on February 25, 2021. Plaintiff signed a consent to change attorney on June 4, 2021, and was then represented by Steven Garfinkle, Esq., of the Sharova Law Firm (NYSCEF Doc. No. 4). The court issued a short form order directing Note of Issue be filed and setting a trial date (NYSCEF Doc. No. 5). Plaintiff's attorney filed Note of Issue on February 23, 2022 (NYSCEF Doc. No. 6). The court held two pretrial conferences on January 10, 2022 and March 1, 2022. Settlement discussions were held in open court and the parties were to continue with their negotiation and inform the court when they had a signed stipulation of settlement. On May 18, 2022, the court reached out to the parties reminding them of the upcoming trial and inquiring about the stipulation of settlement that had been discussed. Both attorneys informed the court that the parties had settled the matter at the last court date and were waiting for Plaintiff to approve the draft settlement that had been sent to her. The attorneys indicated that Plaintiff's counsel had been the one to draft the stipulation of settlement. Plaintiff's attorney filed the signed stipulation of settlement on June 17, 2022 (NYSCEF Doc. No. 7). The attorneys indicated that they would like to proceed on the papers by filing affidavits of allocution, and the court issued a 60-day order directing the filing of the Judgment of Divorce and accompanying papers on July 25, 2022 (NYSCEF Doc. No. 8).
The Sharova Law Firm filed an order to show cause to be relieved on September 26, 2022 (NYSCEF Doc. No. 10) and Plaintiff's prior counsel was relieved by order on December 6, 2022 (NYSCEF Doc. No. 17). Approximately four months later, Plaintiff's current counsel filed a Notice of appearance and filed the present motion on April 17, 2023 (NYSCEF Doc. Nos. 22, 24).
Domestic Relations Law §236(B)(3)
Plaintiff's arguments regarding compliance with DRL §236(B)(3) fail as the statute pertains to nuptial agreements, not settlement agreements entered into after commencement of a divorce action (see Rubenfeld v Rubenfeld, 279 A.D.2d 153, 156-58, 720 N.Y.S.2d 29, 31-32 [2001]). The present action was not commenced to give effect to an existing agreement regarding distribution of assets. As there was no opting-out agreement, §236(B)(3) does not apply. Since §236(B)(3) is not triggered, its formalities do not apply to a stipulation, governed by CPLR §2104, settling the matrimonial action.
Real Property Law §291Plaintiff contends that as DRL §236(B)(3) states, "[a]n agreement by the parties, made before or during the marriage, shall be valid and enforceable in a matrimonial action if such agreement is in writing, subscribed by the parties, and acknowledged or proven in the manner required to entitle a deed to be recorded," Real Property Law §291 (herein "RPL") is triggered. However, as stated above, DRL §236(B)(3) does not apply in the present matter, which by extension does not trigger any requirements of RPL §291 (see Matisoff v Dobi, 90 N.Y.2d 127, 132, 681 N.E.2d 376, 379 [1997]).
Notarization
Plaintiff contends that the stipulation must be set aside as improperly notarized and not signed by Plaintiff. Further, Plaintiff contends that the use of a virtual notary is improper and does not satisfy the formalities necessary. In opposition, Defendant contends that all the proper formalities were followed and submits both the transcript and the video recording of the virtual notarization process used when Plaintiff digitally signed the document.
In March of 2020, as the Covid-19 pandemic began spreading through New York, the Legislature amended Executive Law §§ 20 and 29-a to allow the Governor to, by executive order, suspend any law or issue any directive he determined to be necessary to respond to the emergency, provided such suspension of directive was in the interest of the health or welfare or the public and reasonably necessary to aid in the disaster effort. Pursuant to this authority, on March 19, 2020, Executive Order 202.7 was issued (subsequently extended by Executive Order 202.97), which permits the remote notarization of documents during the pandemic as follows:
Any notarial act that is required under New York State law is authorized to be performed utilizing audio-video technology provided the following conditions are met:
• The person seeking the Notary's services, if not personally known to the Notary, must present valid photo ID to the Notary during the video conference, not merely transmit it prior to or after;
• The video conference must allow for direct interaction between the person and the Notary (e.g. no pre-recorded videos of the person signing);
• The person must affirmatively represent that he or she is physically situated in the State of New York;
• The person must transmit by fax or electronic means a legible copy of the signed document directly to the Notary on the same date it was signed;
• The Notary may notarize the transmitted copy of the document and transmit the same back to the person; and
• The Notary may repeat the notarization of the original signed document as of the date of execution provided the Notary receives such original signed document together with the electronically notarized copy within thirty days after the date of execution.
Plaintiff's counsel disingenuously states that there is a requirement that the notary be licensed in the state of New York under Executive Order 202.7. This requirement is not present in the plain language of the order.
Additionally, Executive Order 202.7 applies to electronically signed documents. State Technology Law §304(2) clearly states that "[t]he use of an electronic signature shall have the same validity and effect as the use of a signature affixed by hand." Accordingly, as the Department of State advised in its March 31, 2020 Guidance to Notaries Concerning Executive Order 202.7, "[t]he signatory may use an electronic signature, provided the document can be signed electronically under the Electronic Signatures and Records Act (Article 3 of the State Technology Law). If the signer uses an electronic signature, the notary must witness the electronic signature being applied to the document, as required under Executive Order 202.7" (see also Knapp v Hess, 71 Misc.3d 1217 (A), 144 N.Y.S.3d 554 [2021]).
Under its plain and unambiguous language, Executive Order 202.7 applies to all notarial acts required by State law.
The transcript provided clearly demonstrates that Plaintiff identified herself as E.V., stated that she was signing the stipulation on her own behalf and identified the document as a stipulation (NYSCEF Doc. No. 68). Plaintiff further confirmed to the notary that she signed the agreement of her own free will, that she understood the document and understood that she was legally binding herself to the terms of the document (Id.). In the transcript, Plaintiff states that she is ready to sign the document, that she agrees to use digital signature and that she clicks the box indicating that she signed the agreement (Id.). At the end of the transcript, Plaintiff even discusses how to download the signed agreement and how to pay the notary for her services (Id.).
Similarly, Plaintiff's argument that the stipulation must be vacated because a certificate of conformity was not provided and an out of state notary was used, is unpersuasive. The fact that the stipulation does not contain a certificate of conformity is not a fatal defect (Wager Estate of Cordaro v Rao, 178 A.D.3d 434, 435, 113 N.Y.S.3d 63]) [1st Dept 2019] ["especially where the affidavit was notarized (albeit from an out of state notary"]). The Court can also overlook this mistake pursuant to CPLR §2001 (Mept 757 Third Ave. LLC v Grant, No. 653267/2020, 2021 WL 781321, at *2 [2021]). Accordingly, the stipulation of settlement was properly notarized and signed under New York law.
Indicia of a Bona Fide Marital Stipulation of Settlement
Plaintiff's next arguments relate to the substance of the stipulation. Specifically, Plaintiff contends that the stipulation fails to contain the" indicia of a bona fide, marital stipulation of settlement" and does not establish grounds under DRL §170(7). As it relates to DRL §170(7), Plaintiff argues that the stipulation does not address distribution of "Range Rover: $136,681; Prudential IRA Annuity: $66,211.38+; Prudential Premiere Select IRA: $6,250.79+; New Co-Op $25,000+; New Co-Op Furnishing: $7,500; Shanghai Red (value unknown); Bank Accounts: $85,000+" as well as "unknown" assets. Discovery in this action has been complete at the latest since Note of Issue was filed on February 23, 2022 (NYSCEF Doc. No. 6). Further, the Note of Issue was filed by Plaintiff's prior counsel. For Plaintiff's current counsel to contend nearly two years later that discovery is not complete is disingenuous. Further, the language of the stipulation itself states that
each party has been advised of their rights to obtain full disclosure of the other party's financial condition, including income, expenses, assets, liabilities and assets transferred, and have obtained full and satisfactory disclosure of such
and
Except as expressly provided in this Stipulation, each party hereby waives, releases and discharges all clairns, causes of action, rights or demands, known or unknown, past, present or future, which he or she now or hereafter has, might have, or could claim to have against the other by reason of any matter, thing or cause whatsoever, prior to the date of this Stipulation.
Plaintiff's listing of a string of alleged assets, that were not explicitly listed in the stipulation, is insufficient to vacate the stipulation. The stipulation contains all formalities and terms necessary to resolve a matrimonial action.
Mistake, Fraud, Duress, Overreaching, or Unconscionability
Plaintiff next argues that the stipulation is unconscionable on its face and overreaching in its substance and execution.
"Stipulations of settlement are favored by the courts and are not lightly set aside" (Gilbert v Gilbert, 291 A.D.2d 479, 480, 738 N.Y.S.2d 221 [2002]). A stipulation of settlement, such as the one at bar, which is entered into in open court by parties who assent to its terms and who are represented by counsel, will not be set aside unless it is shown that the agreement was procured by mistake, fraud, duress, overreaching, or unconscionability (see Matter of Crouse v Crouse, 53 A.D.3d 750, 862 N.Y.S.2d 615 [2008]; Shockome v Shockome, 53 A.D.3d 610, 862 N.Y.S.2d 99 [2008]; Doukas v Doukas, 47 A.D.3d 753, 849 N.Y.S.2d 656 [2008]; Kalra v Kalra, 57 A.D.3d 947, 947, 870 N.Y.S.2d 447, 448 [2008]).
An agreement is unconscionable only if it is one "such as no [person] in his [or her] senses and not under delusion would make on the one hand, and as no honest and fair [person] would accept on the other" (Hume v United States, 132 U.S. 406, 411 [1889]), the inequality being '"so strong and manifest as to shock the conscience and confound the judgment of any [person] of common sense" '" (Christian v Christian, 42 N.Y.2d 63, 71, 396 N.Y.S.2d 817 [1977] [ quoting Mandel v Liebman, 303 NY 88, 94, [1951]; see Giustiniani v Giustiniani, 278 A.D.2d 609, 610-611, [2000], lv. denied 96 N.Y.2d 706, 725). Moreover, judicial review of separation agreements should be limited to encourage spouses to resolve issues on their own (see Christian, supra at 71-72; Croote-Fluno v Fluno, 289 A.D.2d 669, 670 [2001]).
Courts, however, will scrutinize agreements between spouses more closely than general business contracts to ensure that the agreement was entered into freely and is not unconscionable (see Christian v Christian, supra at 72; Vandenburgh v Vandenburgh, 194 A.D.2d 957, 958, 599 N.Y.S.2d 328 [1993]).
A separation agreement is not per se unconscionable simply because marital assets are divided unequally (see Croote-Fluno v Fluno, supra at 670), because one spouse "gave away more than [that spouse] might have been legally required to do" (Schoradt v Rivet, 186 A.D.2d 307, 307 [1992]; see, Lyons v Lyons, 289 A.D.2d 902, 905 [2001], lv. denied 98 N.Y.2d 601), or because the spouse's decision to approve the agreement might be characterized as unwise (see Clermont v Clermont, 198 A.D.2d 631, 632 [1993], lv. dismissed 83 N.Y.2d 953; Lounsbury v Lounsbury, 300 A.D.2d 812, 814, 752 N.Y.S.2d 103, 107 [2002]).
Plaintiff contends that the stipulation meets the higher standard of "shocking the conscience." Specifically, Plaintiff argues that the stipulation only addresses 3 assets- the Florida residence and business, and the marital residence. Again, Plaintiff hinges her argument on "undisclosed assets" which she alleges Defendant is retaining.
Merely alleging an unequal division of assets is not sufficient to state a claim to rescind based upon unconscionability (see Cosh v Cosh, 45 A.D.3d 798, 799 [2007]; Morand v Morand, 2 A.D.3d 913, 915 [2003]; see also Barocas v Barocas, 94 A.D.3d 551 [2012]).
"'To rescind a separation agreement on the ground of overreaching, a plaintiff must demonstrate both overreaching and unfairness'" (Jon v Jon, 123 A.D.3d 979, 979-980 [2014] [quoting Kerr v Kerr, 8 A.D.3d 626, 626-627 [2004]; see Levine v Levine, 56 N.Y.2d 42, 47 [1982]). "'[N]o actual fraud need be shown, for relief will be granted if the settlement is manifestly unfair to a spouse because of the other's overreaching... in its execution'" (Jon, supra [ quoting Kavanagh v Kavanagh, 2 A.D.3d 688, 689 [2003] [internal quotation marks omitted]). "'[C]ourts may examine the terms of the agreement as well as the surrounding circumstances to ascertain whether there has been overreaching'" (Jon, supra at 980, [ quoting Kerr supra at 627]). "However, generally, if the execution of the agreement is fair, no further inquiry will be made" (Jon, supra at 980; see also Heinemann v Heinemann, 189 A.D.3d 1553, 1555, 139 N.Y.S.3d 340, 343 [2020]).
In the present action, which has been actively litigated since 2018, there has been no indica that the stipulation is manifestly unfair. Plaintiff has been zealously represented by three different attorneys and has not produced any credible evidence of unconscionability or overreaching. Plaintiff's present dissatisfaction with the resolution of her divorce amounts to nothing more than buyer's remorse and is not sufficient to vacate the stipulation of settlement.
Fiduciary Duty Between Spouses
Plaintiff correctly notes that "[a]greements between spouses, unlike ordinary business contracts, involve a fiduciary relationship requiring the utmost of good faith" (Christian v Christian, 42 N.Y.2d at 72). Plaintiff contends that Defendant breached his fiduciary duty to his wife in "proposing, executing and foisting upon wife this Stipulation which so clearly benefits him to the wife's sever, inequitable detriment." Despite using forceful language, Plaintiff has offered no evidence of a breach of fiduciary duty by the Defendant (see Hershkowitz v Levy, 190 A.D.3d 835, 139 NYS.3d 617, 620-21 [2021]).
Lack of Financial Disclosure
Plaintiff contends that she was unaware of specific assets prior to entering into the stipulation of settlement. As has previously been discussed, this matter has been litigated extensively since 2018. At all times, Plaintiff has been represented by competent attorneys, and has engaged fully in the discovery process. Discovery was concluded and a Note of Issue filed by Plaintiff's attorney on February 23, 2022 (NYSCEF Doc. No. 6). Plaintiff has not demonstrated a lack of disclosure that would render the stipulation of settlement improper.
Money Judgment
Plaintiff contends that Defendant has failed to pay any spousal support to her since the July 15, 2019 Pendente Lite Order required Defendant to pay $2,000 a month in spousal support. As a result of a motion made by Plaintiff on April 2, 2019, the court issued a pendente lite order on July 15, 2019, which ordered Defendant to pay $2,000 a month in spousal support commencing on July 15, 2019. At a subsequent conference on November 25, 2020, Plaintiff did not raise any concerns regarding Defendant's failure to pay spousal support, nor were any alleged issues with pendente lite maintenance raised in this court's January 14, 2022 order, or any other subsequent conference.
Further, by its very nature, pendente lite relief is only designed to provide temporary relief pending disposition of the matter in a final judgment of divorce; once the judgment of divorce is issued, the support provision in the judgment supersedes the prior pendente lite order, which is extinguished (see DeGroat v DeGroat, 164 A.D.3d 466 [2018]). Counsel's argument that a money judgment should be awarded for $84,000 calculating support through April 2023 borders on frivolous given that the matter was settled in June 2022. Plaintiff's motion for a money judgment is denied.
Attorneys Fees
Plaintiff moves for $75,000 in legal fees contending that Plaintiff owes $12,500 in retainer and an additional $13,374.50 in legal fees. The court notes that nothing in the Plaintiff's papers would suggest that Plaintiff's counsel has spent over 50 hours in the preparation of this motion as alleged. Plaintiff's fee application pursuant to DRL §237(a) is denied. The court also notes that during the course of this litigation, Defendant has provided Plaintiff's attorney with payments as ordered by this court.
Sanctions
Defendant's application for sanctions, will be treated as a cross motion for the purposes of this decision. Pursuant to 22 NYCRR §130.1.1(a), a court in a civil action is authorized to award the reasonable attorney's fees and expenses incurred by a party as a result of the opposing party's frivolous conduct. Conduct is frivolous for the purposes of a motion for sanctions if: (1) it is completely meritless; (2) it is done to delay or prolong the litigation or to harass or injure another party; or (3) it asserts false material statements of fact (see 22 NYCRR §130.1.1[c]).
The remedy of sanctions is to be one reserved for situations of "extreme behavior" (Hunts Point Term. Produce Coop. Ass'n v New York City Econ. Dev. Corp., 54 A.D.3d 296, 296 [1st Dept 2008]). Indeed, in order to avoid a chilling effect, even arguments "lacking in legal merit" must have something even more "egregious" in order to rise to the level of frivolous conduct warranting sanctions (see Parametric Capital Mgmt., LLC v Lacher, 26 A.D.3d 175, 175 [1st Dept 2006]). Sanctions must "not be imposed in such a manner as to restrict ultimately unpersuasive, yet good-faith, arguments" (Levy v Carol Mgmt. Corp., 260 A.D.2d 27, 35 [1st Dept 1999]). In evaluating frivolousness, a "court must consider the circumstances under which the conduct took place and whether or not the conduct was continued when its lack of legal or factual basis was apparent or should have been apparent" (Matter of Kover, 134 A.D.3d 64, 74 [1st Dept 2015]).
Though Plaintiff's actions border on frivolous, they stop just short of crossing the line. The court will not award sanctions against Plaintiff's counsel at this time.
Accordingly, it is hereby
ORDERED that Plaintiff's motion is denied in its entirety; and it is further
ORDERED that Defendant's cross motion for sanctions is denied.
This constitutes the decision and order of the court.