Opinion
14581/08.
Decided April 22, 2011.
The following papers numbered 1 to 5 read on this motion:
Papers Numbered 1, 2, 3 4 5
Notice of Motion/Order to Show Cause/ Petition/Cross Motion and Affidavits (Affirmations) Annexed Opposing Affidavits (Affirmations) Reply Affidavits (Affirmations) Affidavits (Affirmations) Other PapersUpon the foregoing papers, defendants Bay 49th St. Condominium LLC, Dmitry Druzhinsky and Vadim Kestel move by order to show cause for an order: (1) vacating the judgment against them entered on November 24, 2010; (2) enjoining enforcement of the subject judgment; (3) granting them leave to renew plaintiff's underlying motion for summary judgment; (4) granting them leave to amend their answer; and (5) dismissing the instant action.
Background and Procedural History
Plaintiff commenced the instant action by filing a summons and verified complaint on May 16, 2008. The verified complaint states that at relevant times, plaintiff and defendants Dmitry Dryzhinsky and Vadim Kestel were the members, each possessing an equal one-third ownership share, of defendant Bay 49th St. Condominium, LLC (the Condominium). The pleadings further assert that at relevant times, the Condominium owned the premises known as 177 Bay 49th Street in Brooklyn.
The pleadings further state that in a series of transactions (the last relevant closing of title to a unit occurred on July 17 2007), the Condominium sold six condominium units and five parking spaces for the net amount of $2,204,236.26. Plaintiff claims that this net amount should have been distributed equally among members of the Condominium; such a distribution would have amounted to the amount of $734,745.40 per member. However, plaintiff claims he received only the amount of $623,000.00.
Plaintiff's contention, in essence, is that by failing to distribute one-third of the Condominium's net receipts to plaintiff, defendants Dmitry Dryzhinsky and Vadim Kestel breached both the Condominium operating agreement and their fiduciary duty to plaintiff, a fellow member of the Condominium. Plaintiff sought damages in the principal sum of $111,745.50 (representing the difference between one-third of the Condominium's net receipts from the subject transactions and the amount distributed to plaintiff), with interest thereon from July 17, 2007.
Defendants interposed a verified answer on August 28, 2008. The verified answer is, in essence, a general denial of plaintiff's claims; the pleading does not contain any recitation of facts, affirmative defenses or counterclaims. The answer was prepared and filed by Igor Dodin, Esq., principal of the law firm known as Igor Dodin, PLLC.
Attached as Exhibit U to the instant order to show cause is defendants' proposed amended verified answer, dated January 5, 2011, which does contain affirmative defenses and counterclaims.
On November 5, 2008 and in response to defendants' answer, plaintiff filed and served a request for judicial intervention and request for a preliminary discovery conference. The preliminary conference was conducted on January 5, 2009; defendants were represented at the conference by outside counsel. The conference resulted in an order containing standard provisions for the completion of discovery in the instant action and directing the parties to comply therewith.
Igor Dodin, PLLC was listed at the attorney firm for the defendants; counsel for plaintiff states that outside counsel appeared for defendants at the preliminary conference at the behest of Igor Dodin.
Defendants did not comply with the discovery directives, and on April 7, 2009, plaintiff moved for an order compelling defendants to comply with outstanding discovery demands and provisions of the subject preliminary conference order. In support of the motion, counsel for plaintiff affirmed that she mailed a copy of the motion papers to the office of Igor Dodin. Nevertheless, defendants did not file or serve opposition papers and did not appear to oppose the motion. By order dated May 29, 2009, this court granted the motion and directed defendants to comply with outstanding discovery demands and provisions of the subject preliminary conference order within thirty days.
A discovery compliance conference was held on July 9, 2009. Defendants again did not appear. The order (issued on default), inter alia, directed defendants to appear for examinations before trial on or before July 20, 2009 and directed plaintiff to file a note of issue and certificate of readiness on or before November 10, 2009. On November 17, 2009, this court so-ordered the stipulation of counsel for plaintiff and Igor Dodin to extend the note of issue deadline until February 19, 2010.
On March 4, 2010, plaintiff moved for an order striking defendants' answer, or in the alternative, precluding defendants from offering evidence at trial. Plaintiff asserted that defendants had yet to comply with any discovery demands or provisions of this court's discovery orders. Counsel for plaintiff stated in her good faith affirmation that she had spoken to Igor Dodin and Alan Blumen (who, according to a stipulation dated November 23, 2009, was to be substituted for Igor Dodin as counsel of record for defendants) in early January, 2010. She further stated that further communications were not responded to by either attorney. Once again, defendants did not submit opposition papers or appear in response to plaintiff's motion to strike the answer. By order dated April 30, 2010, this court noted defendants's failure to comply with discovery orders and, therefore, granted plaintiff's motion to the extent that defendants were precluded from testifying or offering evidence at trial.
On June 28, 2010, plaintiff moved for summary judgment on his breach of contract and breach of fiduciary duty claims. Plaintiff relied chiefly on copies of closing documents and the subject operating agreement. Also, plaintiff noted that defendants were precluded from testifying or introducing evidence at trial. Plaintiff asserted that the Condominium operating agreement and documents indicating the amount netted by the Condominium demonstrated prima facie entitlement to judgment as a matter of law, and that defendants, precluded from offering evidence, were unable to demonstrate the existence of issues of fact. Defendants did not submit opposition papers or appear in response to plaintiff's motion for summary judgment. By order dated November 1, 2010, this court granted plaintiff's motion, and directed that plaintiff was entitled to judgment in the principal sum of $135,078.40, with interest thereon as well as costs and disbursements. On November 25, 2010, this court entered judgment in favor of plaintiff and against defendants in the amount of $169,770.86, representing principal, interest, costs and disbursements.
Thereafter, by a notice of appearance filed on January 4, 2011 and a consent to change attorney of record filed on January 7, 2011, Elliot S. Martin, Esq., was substituted as counsel for defendants. Defendants, by their new counsel, subsequently filed the instant order to show cause.
The consent to change attorney indicates that Igor Dodin is the outgoing counsel.
Arguments Advanced by Defendants
In support of the instant application, Elliot S. Martin, Esq. (present counsel for defendants) first claims that plaintiff disingenuously obtained an order precluding the defendants from testifying at trial. More specifically, counsel asserts that the discovery plaintiff claimed was outstanding in his motions to compel and preclude was either in plaintiff's possession or easily obtainable. Counsel further claims that plaintiff obtained the April 30, 2010 order precluding defendants from testifying at trial and "parlayed [it] into a finding as to the merits of the action and presented as the basis of a motion for summary judgment which was granted on default; this led directly to the issuance of a judgment[.]" Moreover, counsel for defendants contends that the discovery sought by plaintiff actually demonstrates that his claims lack merit.
Defendants' affirmation in support of order to show cause, ¶ 2.
Counsel next states that the defaults in this action were excusable. In support of this assertion, counsel notes the affirmation of Igor Dodin, Esq., who avers that he reasonably believed that his representation of defendants ended on November 23, 2009, when he signed (as outgoing counsel) a consent to change attorney. Counsel argues that this statement reasonably explains why Igor Dodin failed to oppose or appear in connection with either the motion to preclude or motion for summary judgment. Counsel concludes that defendants have thus demonstrated a reasonable excuse for their defaults.
Also, counsel for defendants claims that plaintiff was precluded from bringing the instant action. Counsel contends that the subject limited liability company operating agreement provides that in the event of a dispute among the members, an arbitration award is a condition precedent to the commencement of an action in any court. Here, counsel notes that plaintiff does not indicate that he attempted to submit the instant claims to arbitration and subsequently obtained an award. Thus, counsel for defendants reasons that the instant action was barred by plaintiff's failure to comply with an explicit condition precedent contained in the applicable operating agreement; therefore, defendants have a meritorious defense to the instant action. For these reasons, defendants conclude that the instant application to, among other things, vacate the judgment entered against defendants on November 26, 2010.
Arguments Advanced by Plaintiff
In opposition to the instant application, counsel for plaintiff first notes the multiple defaults in this action: 1) defendants failed to oppose plaintiff's motion, filed on April 7, 2009, for an order compelling discovery; 2) on May 29, 2009, defendants failed to appear concerning that motion; 2) on July 9, 2009, defendants failed to appear for a scheduled discovery compliance conference; 3) defendants subsequently failed to comply with the compliance conference order; 4) defendants failed to oppose plaintiff's motion, filed on March 4, 2010, for an order precluding defendants from testifying or offering evidence at trial; 5) on April 30, 2010, defendants failed to appear concerning that motion; 6) defendants failed to oppose plaintiff's motion, filed on June 28, 2010, for an order awarding summary judgment to plaintiff; 7) on September 24, 2010, defendants failed to appear concerning that motion; and 8) defendants failed to respond to plaintiff's notice of settlement of the proposed order awarding summary judgment to plaintiff, served on both Igor Dodin and Alan Blumen on September 27, 2010. Thus, contrary to defendants' present contention, plaintiff asserts that there were more than two defaults in the instant action. Moreover, counsel for plaintiff states that she attempted to maintain contact with Igor Dodin and Alan Blumen at all relevant times; however, purported counsel for defendants failed to do the same.
Plaintiff also suggests that defendants had ample opportunity to challenge this court's discovery directives but instead ignored the subject orders. Plaintiff argues that defendants should not now complain of the content of discovery directives after more than a year of defaults and missed appearances in this action.
Moreover, plaintiff notes that the answer interposed by defendants does not contain any affirmative defenses. Also, plaintiff notes that defendants have not submitted any counterclaims. Plaintiff suggests that defendants should not now be permitted to assert that the action was barred by an arbitration condition precedent, after essentially ignoring the instant action for over a year.
Plaintiff characterizes defendants' dilatory tactics as a strategy to delay the instant action and cause undue prejudice to plaintiff. For these reasons, plaintiff assert that defendants have not demonstrated the required meritorious defense and reasonable excuse for their defaults to vacate the judgment in this action. Lastly, plaintiff asserts that defendants' pattern of behavior warrants the imposition of sanctions. Plaintiff concludes that the instant motion must be denied.
Discussion
The court denies the instant order to show cause. Although defendants seek various items of relief, including leave to file an amended answer and leave to renew plaintiff's motion for summary judgment, the court notes that judgment in the instant action was entered against defendants on November 26, 2010. Thus, defendants are seeking to be relieved from judgment on the ground of "excusable default" pursuant to CPLR 5015 (a) (1). However, "[a] defendant seeking to vacate a default under this provision must demonstrate a reasonable excuse for its delay in appearing and answering the complaint and a meritorious defense to the action" ( Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., Inc., 67 NY2d 138, 141; see also Gray v B. R. Trucking Co., 59 NY2d 649, 650; Abdul v Hirschfield , 71 AD3d 707 , 708; Campbell-Jarvis v Alves , 68 AD3d 701 ; Newell v Hirsch , 65 AD3d 1108 , 1109; Simpson v Tommy Hilfiger U.S.A., Inc. , 48 AD3d 389 , 392). Determining what constitutes a reasonable excuse for a default lies within the sound discretion of the court ( Martins v Yukhayev , 63 AD3d 697 , 697). Here, even assuming that defendants have a meritorious defense, they lack a reasonable excuse for their multiple defaults.
Since defendants have not demonstrated a reasonable excuse for each of their many defaults, the court need not address their alleged meritorious defense. Nevertheless, the court notes that defendants failed to allege the existence of the alleged arbitration condition precedent as an affirmative defense in the answer interposed in this action; nor did defendants assert any counterclaims. This court should not reward defendants' inactivity for over a year and multiple defaults in the instant action by presently granting them leave to serve and file an amended answer that contains defenses known to defendants in 2008.
Defendants mainly suggest the defaults were caused by the imprudent actions and omissions of Igor Dodin, their first counsel of record in this action; therefore, the defaults were reasonably excused. The court rejects this contention. Although a court may vacate a default judgment in its discretion either where the defendant was "victimized by a faithless attorney over an extended period of time" ( Ackerson v Stragmaglia, 176 AD2d 602, 604) or to excuse a default resulting from isolated incidents of law office failure (CPLR 2005; see also Parker v City of New York, 272 AD2d 310, 311), courts need not excuse a pattern of neglect amounting to "a serious lack of concerned attention to the progress of [the] action" ( Lauro v Cronin, 184 AD2d 837, 839); see also Chery v Anthony, 156 AD2d 414, 417 ["When a default results not from an isolated, inadvertent mistake, but from repeated neglect . . . there is no requirement that the court grant the requested relief"]).
This court's characterization of the behavior of Igor Dodin and Alan Blumen should not be read to reflect the actions of defendants' present counsel.
In the instant matter, Igor Dodin (who filed an answer on behalf of defendants) asserts that he had reason to believe that his representation of defendants was terminated in November, 2009. Even assuming that this is so, neither Igor Dodin defendants nor any defendant offers a reasonable explanation for: (1) their failure to appear for deposition on or before March 2, 2009, as directed by the preliminary discovery conference order filed with this court on January 8, 2009; (2) their failure to submit opposition papers or to appear against plaintiff's motion filed with this court on April 7, 2009; (3) their failure to comply with this court's order, dated June 9, 2009, directing them to comply with outstanding discovery requests and provisions of the preliminary discovery conference order; (4) their failure to appear for the discovery compliance conference on July, 9, 2009; and (5) their failure to appear for deposition on or before July 20, 2009, as ordered by this court after the discovery compliance conference.
Moreover, there is an indication that Igor Dodin's belief — that he was relieved as counsel — was unreasonable. Although defendants offer a purported consent to change attorney, dated November 23, 2009, from Igor Dodin to Alan Bumen, the copy provided by defendants is unsigned by Alan Bumen; also, there is no indication this consent was filed with this court. Lastly, Igor Dodin's suggestion that Alan Bumen undertook the representation of defendants after November of 2009 is disingenuous, as indicated by the fact that Igor Dodin subscribed (as "Outgoing Attorney") defendants' consent to change attorney dated December 22, 2010 and filed with this court on January 7, 2011.
A copy of which is annexed as Exhibit Q to the instant order to show cause.
However, even assuming arguendo that defendants intended that Alan Blumen undertake their representation as counsel of record in this action from November, 2009 onward, there are still multiple unexplained defaults in this action. First, the court notes that the statement made by counsel for plaintiff — that she initiated contact with Alan Blumen in January of 2010, but he did not respond — is unrebutted by any defendant or counsel for defendants. Next, this court notes that two of the motions filed and served by plaintiff — the motion to strike the answer or preclude (filed on March 4, 2010), and the motion for summary judgment (filed on June, 28, 2010) — were mailed to both of the offices of Igor Dodin and Alan Blumen; neither counsel submitted opposition papers or appeared in court in connection therewith. Moreover, neither counsel responded to plaintiff's notice of settlement, which was mailed to the offices of each counsel on September 27, 2010. Lastly, the affirmation of Igor Dodin states that after November of 2009, he "did not reply to any correspondence and mailings by attorney for plaintiff." Nevertheless, Dodin offers no reason for his failure to forward any such correspondence or litigation papers to defendants or their purported counsel.
Affirmation of Igor Dodin, Esq., ¶ 3, attached as Exhibit P to the instant order to show cause.
In sum, the court notes that the purported "failure to understand the urgency of responding to a pleading or discovery request; failure to obtain counsel; [and] failure to obtain substitute counsel" do not suffice as sufficient excuses for multiple defaults (73 NY Jur 2d, Judgments § 295 ["Examples of insufficient reasons; generally"], citing Pagano v U.W. Marx, Inc., 223 AD2d 817; Pallette Stone Corp. v Ebert, 210 AD2d 807; Ryan v Ryan, 177 AD2d 895; City of New York v Simmonds, 172 AD2d 1081; Mauro v Mauro, 148 AD2d 684; Teachers Ins. Annuity Assn. of America v Code Beta Group, Inc., 204 AD2d 193). In the instant action, defendants and their attorneys ignored almost every single appearance, order or demand in this action until plaintiff entered judgment and seized funds contained in defendants' bank accounts. For almost two years, from the date of the preliminary conference — January 5, 2009 — until the instant order to show cause, filed on January 5, 2011 — defendants' sole activity in the instant action was on November 17, 2009 — the execution of one stipulation to extend the note of issue deadline. Given that at least one defendant — Vadim Kestel — verified defendants' answer on August 25, 2008, their assertion that they knew little of the instant action is meritless. This assertion is also belied by the unrebutted statement of counsel for plaintiff, who states that she engaged in settlement negotiations with counsel for defendants before judgment was entered. this court does not vacate the instant judgment or any of defendants' multiple defaults. Also, since judgment has been entered in this action, the doctrine of finality states that the judgment "disposes of all of the causes of action between the parties in the action or proceeding and leaves nothing for further judicial action apart from mere ministerial matters" ( Burke v Crosson, 85 NY2d 10, 15). Accordingly, the application for other relief in the action is denied as moot.
Plaintiff has requested sanctions but has not moved for sanctions on notice to defendants. Therefore, any sanction imposed by this court on defendants would be vacated ( see e.g. Kelleher v Mt. Kisco Med. Group, 264 AD2d 760, 761 [1999]). It behooves plaintiff to seek sanctions by motion on notice to defendants ( 22 NYCRR 130-1.1 [d]; see also Mazo v NYRAC, Inc., 191 AD2d 617 [1993]).
Conclusion
The instant order to show cause is denied insofar as it seeks an order vacating the judgment in this action or any default by defendants. The remaining branches of the instant order to show cause are denied as moot. Any and all temporary restraining orders or stay against enforcement of the instant judgment are terminated.
The foregoing constitutes the decision and order of the court.