Opinion
CV-066799-01/QU
02-14-2020
QUEENS NEUROLOGY, P.C. (a/a/o Jose Hernandez, et al.), Plaintiff, v. TRAVELERS PROPERTY & CASUALTY INS. CO., et al., Defendants.
GARY TSIRELMAN P.C., Counsel for Plaintiff, Queens Neurology, P.C., As Assignee of Jose Hernandez, et al., 129 Livingston Street, Brooklyn, New York 11201 Irena Golodkeyer, Esq., Stefan M. Belinfanti, Esq., LAW OFFICE OF PRINTZ & GOLDSTEIN, Counsel for Defendant, GEICO Casualty Company, 2 Huntington Quadrangle, Suite 2N01, Melville, New York 11747 Lisa M. Aquino, Esq., Tali K. Hernstat, Esq., THE LAW OFFICE OF ALOY O. IBUZOR, Counsel for Defendant, Travelers Property & Casualty Ins. Co., 3 Huntington Quadrangle, Suit 302S-B, Melville, New York 11747, Medgine Bernadotte, Esq.
GARY TSIRELMAN P.C., Counsel for Plaintiff, Queens Neurology, P.C., As Assignee of Jose Hernandez, et al., 129 Livingston Street, Brooklyn, New York 11201
Irena Golodkeyer, Esq., Stefan M. Belinfanti, Esq., LAW OFFICE OF PRINTZ & GOLDSTEIN, Counsel for Defendant, GEICO Casualty Company, 2 Huntington Quadrangle, Suite 2N01, Melville, New York 11747
Lisa M. Aquino, Esq., Tali K. Hernstat, Esq., THE LAW OFFICE OF ALOY O. IBUZOR, Counsel for Defendant, Travelers Property & Casualty Ins. Co., 3 Huntington Quadrangle, Suit 302S-B, Melville, New York 11747, Medgine Bernadotte, Esq.
John C.V. Katsanos, J.
I. Background
Queens Neurology, P.C. ("Plaintiff") commenced twenty-seven separate actions against various defendants on or about September 6, 2001, October 23, 2001 or January 10, 2002. Thirteen of said actions were against defendant GEICO Casualty Company ("Defendant GEICO"). In each matter, Plaintiff retained the same attorney of record, who was subsequently suspended from practice on or about May 18, 2004 and was disbarred on or about October 11, 2005. All twenty-seven cases have been converted to inactive or disposed on the Court's docket.
Plaintiff's motion seeks relief with respect to the following twenty-seven matters: Queens Neurology P.C. a/a/o Jose Hernandez v. Travelers Property & Casualty Ins. Co. (Index No. CV-066799-01/QU); Queens Neurology P.C. a/a/o Alfredo Laro Jr. v. Travelers Property & Casualty Ins. Co. (Index No. CV-066806-01/QU); Queens Neurology P.C. a/a/o Maria Ruiz v. Travelers Property & Casualty Ins. Co. (Index No. CV-066808-01/QU); Queens Neurology P.C. a/a/o Barbara Hawkins v. State Farm General Ins. Co. (Index No. CV-066814-01/QU); Queens Neurology a/a/o Joe Leon v. Progressive Casualty Ins. Co. (Index No. CV-073938-01/QU); Queens Neurology P.C. a/a/o Anna Mekhed v. Kemper Auto & Home Ins. Co. (Index No. CV-066811-01/QU); Queens Neurology P.C. a/a/o Zhanna Azayeva v. Kemper Auto & Home Ins. Co. (Index No. CV-066812-01/QU); Queens Neurology P.C. a/a/o Lasar Ekiman v. Kemper Auto & Home Ins. Co. (Index No. CV-066813-01/QU); Queens Neurology P.C. a/a/o Lioudmila Ekiman v. Kemper Auto & Home Ins. Co. (Index No. CV-066816-01/QU); Queens Neurology a/a/o Peter John v. GEICO Casualty Company (Index No. CV-073837-01/QU); Queens Neurology a/a/o Gurley Latarsha v. GEICO Casualty Company (Index No. CV-073838-01/QU); Queens Neurology a/a/o Mrlon Richardson v. GEICO Casualty Company (Index No. CV-073839-01/QU); Queens Neurology a/a/o Darrell Robinson v. GEICO Casualty Company (Index No. CV-073840-01/QU); Queens Neurology a/a/o Robert Roman v. GEICO Casualty Company (Index No. CV-073841-01/QU); Queens Neurology a/a/o Dennis Williams v. GEICO Casualty Company (Index No. CV-073842-01/QU); Queens Neurology a/a/o Tanya S. German v. GEICO Casualty Co. (Index No. CV-073830-01/QU); Queens Neurology a/a/o Alex Gonzalez v. GEICO Casualty Co. (Index No. CV-073831-01/QU); Queens Neurology a/a/o Elena Gorbatova v. GEICO Casualty Co. (Index No. CV-073832-01/QU); Queens Neurology a/a/o Michael Green v. GEICO Casualty Co. (Index No. CV-073833-01/QU); Queens Neurology a/a/o Vanessa Gurley v. GEICO Casualty Co. (Index No. CV-073834-01/QU); Queens Neurology a/a/o Winifred Higgins v. GEICO Casualty Co. (Index No. CV-073835-01/QU); Queens Neurology a/a/o Johnny Ho v. GEICO Casualty Co. (Index No. CV-073836-01/QU); Queens Neurology P.C. a/a/o Anthony Veseleov v. Eveready Insurance Co. (Index No. CV-066802-01/QU); Queens Neurology P.C. a/a/o Tamekia Price v. Country-Wide Insurance (Index No. CV-066801-01/QU); Queens Neurology P.C. a/a/o Irahaim Kadioglu v. Amica Mutual Insurance Company (Index No. CV-066800-01/QU); Queens Neurology P.C. a/a/o Andres Kraas v. Allstate Ins. Co. (Index No. CV-031719-02/QU); and Queens Neurology P.C. a/a/o Nicholette D. v. Allstate Ins. Co. (Index No. CV-031721-02/QU).
On or about October 20, 2009, New York State consented to Plaintiff's voluntary dissolution. Despite such dissolution, Plaintiff was not substituted as a party in any of the matters. Over seven years after its dissolution, Plaintiff now moves to: (1) consolidate the aforementioned twenty-seven actions pursuant to CPLR 602 for the sole purpose of its motion; (2) substitute the attorney of record in each action and compel the transfer of all files related to each action; and (3) stay all proceedings for 90 days pursuant to CPLR 2201. Plaintiff's motion was denied with respect to three matters involving defendant Travelers Property & Casualty Insurance Company due to Plaintiff's failure to provide proof of service.
In accordance with the recitation requirements of CPLR 2219 (a), the Court considered: (1) Plaintiff's order to show cause, Plaintiff counsel's affirmation and attached exhibits; (2) Defendant GEICO's affirmation in opposition and attached exhibits; and (3) Plaintiff counsel's reply affirmation.
II. Discussion
Plaintiff's motion must be denied because Plaintiff is a dissolved corporation and has failed to establish that it can seek relief from this Court. Plaintiff's arguments that it remains entitled to relief despite dissolution lack merit. Except in limited circumstances permitted by statute, upon dissolution, a corporation is "legally dead" and lacks the capacity to use the courts of this State to enforce obligations ( Lorisa Capital Corp. v. Gallo , 119 A.D.2d 99, 111, 506 N.Y.S.2d 62 [2d Dept. 1986] ; see 80-02 Leasehold, LLC v. CM Realty Holdings Corp. , 123 A.D.3d 872, 873, 999 N.Y.S.2d 158 [2d Dept. 2014] ). Plaintiff asserts that section 1006 of New York's Business Corporation Law ("BCL") permits Plaintiff to pursue the current motion, however, Plaintiff is no longer able to function under BCL 1006 (see Lorisa , 119 A.D.2d at 111, 114, 506 N.Y.S.2d 62 ).
A. Legislative History
Circumstances in which a corporation may continue to act upon dissolution are delineated in sections 1005 and 1006 of the Business Corporations Law ("BCL"), which permit a dissolved corporation to retain a limited de jure existence solely for the purpose of winding up its affairs (see 80-02 Leasehold, LLC v. CM Realty Holdings Corp. , 123 A.D.3d 872, 873, 999 N.Y.S.2d 158 [2d Dept. 2014] ).
BCL 1005 (a) states, in relevant part, that after dissolution:
(1) The corporation shall carry on no business except for the purpose of winding up its affairs
(2) The corporation shall proceed to wind up its affairs,
with power to fulfill or discharge its contracts, collect its assets, sell its assets for cash at public or private sale, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business.
(emphasis added).
BCL 1006 states, in relevant part:
(a) A dissolved corporation, its directors, officers and shareholders may continue to function for the purpose of winding up the affairs of the corporation in the same manner as if the dissolution had not taken place, except as otherwise provided in this chapter or by court order. In particular, and without limiting the generality of the foregoing: ....
(4) The corporation may sue or be sued in all courts and participate in actions and proceedings, whether judicial, administrative, arbitrative or otherwise, in its corporate name, and process may be served by or upon it ....
(b) The dissolution of a corporation shall not affect any remedy available to or against such corporation, its directors, officers or shareholders for any right or claim existing or any liability incurred before such dissolution ....
BCL 1005 and BCL 1006 were passed in 1961 as a part of the Legislature's revision of New York's corporation laws in place of the General Corporation Law and the Stock Corporation Law (see Airtran New York, LLC v. Midwest Air Group, Inc. , 46 A.D.3d 208, 213, 844 N.Y.S.2d 233 [1st Dept. 2007] ). The relevant language of BCL 1005 and BCL 1006 quoted above has remained unchanged since 1961 (see 1961 McKinney's Session Laws of NY at 1639 - 1640).
After BCL 1005 and BCL 1006 were passed, the Legislature enacted sections 1017 and 1021 of New York's Civil Practice Law and Rules ("CPLR") in 1962 as a part of the Legislatures revision and recodification of the Civil Practice Act and the Rules of Civil Practice (see CPLR 101 ). CPLR 1017, which is entitled "Substitution in case of receivership or dissolution of a corporation," states that "if a ... corporate party is dissolved, the court shall order substitution of the proper parties" ( CPLR 1017 (emphasis added)). Significantly, in discussing CPLR 1017, the Legislature stated that the term "shall" was used instead of "may" since "there is no apparent need for discretion" (see 5th Preliminary Rep, 1961 Legis Doc No. 15 at 321). Moreover, CPLR 1021 provides:
If the event requiring substitution occurs before final judgment and substitution is not made within a reasonable time, the action may be dismissed as to the party for whom substitution should have been made, however, such dismissal shall not be on the merits unless the court shall so indicate. If the event requiring substitution occurs after final judgment, substitution may be made in either the court from or to which an appeal could be or is taken, or the court of original instance, and if substitution is not made within four months after the event requiring substitution, the court to which the appeal is or could be taken may dismiss the appeal, impose conditions or prevent it from being taken.
Courts have noted the potential conflict between the provisions of BCL 1005 and BCL 1006 that allow a dissolved corporation to wind up its affairs and the provisions of CPLR 1017 and CPLR 1021 that mandate the substitution of a dissolved corporation as a party in an action (see Lance Intern., Inc. v. First Nat. City Bank , 24 Misc.3d 1109, 878 N.Y.S.2d 572, 576 [Civ. Ct., New York County 2009] ; Painless Medical, P.C. v. Geico , 32 Misc.3d 715, 718 n 1, 929 N.Y.S.2d 357 [Civ. Ct., Kings County 2011] ). Moreover, in 1957, while the CPLR was still being drafted and before the BCL was passed, the Legislature noted this potential conflict in comparing the subsequently unchanged draft of CPLR 1017 with BCL 1006's predecessor, stating:
[T]he statutory law on the subject of substitution in case of dissolution of a corporation seems to be in a state of confusion. Article 10 of [former] McKinney's Stock Corporation Law deals with dissolution without judicial proceedings. Section 105(8) provides that such a corporation continues for the purpose of paying debts, collecting assets and winding up affairs and ‘may sue or be sued in its corporate name.’ See also McKinney's Gen.Corp. § 29 [now Business Corporation Law §§ 1006, 1113 ]; McKinney's Tax Law § 203-a. The general provision for receivers is section 106 of the Stock Corporation Law. See also McKinney's Gen. Corp. Law, art. 12 [now Business Corporation Law Article 12]. These provisions are not articulate on the subject of substitution in case of appointment of a receiver for a corporate party. Compare section 977-b(19) of the civil practice act,
where substitution is contemplated in case of appointment of a receiver for a foreign corporation.
Most of the case law regarding substitution in case of dissolution deals with the situation where a receiver is appointed for a corporation. The general rule seems to be that the receiver must be substituted in pending actions.
(1st Rep of Temp Commn on the Courts, 1957 Legis Doc No. 6(b) at 49) (citations omitted) (emphasis added). Thus, at the time CPLR 1017 was drafted: (1) the Legislature was aware of the potential conflict with the winding up provisions of BCL 1006's predecessor; (2) consciously decided to use mandatory language of "shall" rather than "may"; and (3) did not provide an exception to circumstances in which a corporation was winding up its affairs. Notably, appellate courts have not ruled upon the question how these statutes coexist.
B. Statutory Construction
As the Court of Appeals has stated, "it is familiar and salutary canon of construction that courts, in construing apparently conflicting statutory provisions must try to harmonize them" ( Burger King, Inc. v. State Tax Comm'n , 51 N.Y.2d 614, 620-621, 435 N.Y.S.2d 689, 416 N.E.2d 1024 [1980] ; see Dutchess County Dept. of Social Services ex rel. Day v. Day , 96 N.Y.2d 149, 154, 726 N.Y.S.2d 54, 749 N.E.2d 733 [2001] ("Statutes which relate to the same subject matter must be construed together unless a contrary legislative intent is expressed. Court's must harmonize the various provisions of the related statutes and construe them in a way that renders them internally compatible")). Although another well-established rule of statutory construction provides that a prior general statute yields to a "later-enacted" specific or special statute, this rule does not require that the later statute be disregarded (see Dutchess , 96 N.Y.2d at 154, 726 N.Y.S.2d 54, 749 N.E.2d 733 ). To the contrary, in construing two potentially conflicting statutes, the Court of Appeals applied the rule that a prior general statute yields to a later specific statute in reaching a harmonious reading of the statutes (see id. ) ("The construction we adopt today reconciles both provisions and leaves a role for the [prior statute]").
CPLR 1017 and CPLR 1021 were enacted after BCL 1005 and BCL 1006, and CPLR 1017 specifically addresses the issue of "[s]ubstitution in case of receivership or dissolution of a corporation" (see CPLR 1017 ; CPLR 1021 ; BCL 1005 ; BCL 1006 ; Dutchess , 96 N.Y.2d at 154, 726 N.Y.S.2d 54, 749 N.E.2d 733. Furthermore, if this Court were to wholly disregard CPLR 1017 and CPLR 1021 in favor of BCL 1005 and BCL 1006, then dissolved corporations could indefinitely avoid substitution under the guise of winding up their affairs, and the provisions of CPLR 1017 and CPLR 1021 governing dissolved corporations would have virtually no role in civil practice. Indeed, the only circumstance in which CPLR 1017 and CPLR 1021 could apply to a dissolved corporation is if the corporation was purportedly winding up its affairs given that a dissolved corporation that is not winding up cannot sue or be sued (see BCL 1005 [a] ; Lorisa Capital Corp. v. Gallo , 119 A.D.2d 99, 111, 506 N.Y.S.2d 62 [2d Dept. 1986] ). Additionally, CPLR 101 does not require the Court to overlook any of these statutes because they are not inconsistent and do not fall within an individual court act (see Ling Yung v. County of Nassau , 77 N.Y.2d 568, 571, 569 N.Y.S.2d 361, 571 N.E.2d 669 [1991] (noting that CPLR 101 provides that the "CPLR is to govern civil practice and procedure, but only to the extent that it is not inconsistent with the procedure of the individual courts as described in their court acts ") (emphasis added)).
Harmony can be found in the statutory construction of CPLR 1017 and CPLR 1021 as well as BCL 1005 and BCL 1006 in reference to CPLR 1021, which provides a dissolved corporation with a window to continue to act as a party to an action without substitution: (1) for a "reasonable time" if the dissolution occurs prior to final judgment; and (2) for "four months" if the dissolution occurs after final judgment. Notably, although the provisions of the BCL do not include any time limit for winding up a dissolved corporation's affairs, courts have implied a reasonable period of time as a limit to statutes that are silent (see e.g. Spiegelberg v. Gomez , 44 N.Y.2d 920, 921, 408 N.Y.S.2d 4, 379 N.E.2d 1135 [1978] ; Lance Intern., Inc. v. First Nat. City Bank , 86 A.D.3d 479, 480, 927 N.Y.S.2d 56 [1st Dept. 2011] ; Matter of Jonathan Neil Corp. v. State Liq. Auth. , 112 A.D.2d 70, 72, 491 N.Y.S.2d 632 [1st Dept. 1985] ).
In Lance Intern., Inc. v. First Nat. City Bank , the First Department has relied on this "reasonable period of time" rule of construction to place a time limitation on a dissolved corporation for the winding up of its affairs ( 86 A.D.3d at 480, 927 N.Y.S.2d 56 ("[T]he winding up of affairs cannot continue indefinitely")). The First Department further noted that "what constitutes a reasonable time for a dissolved corporation to wind up its affairs before ceasing to exist altogether is generally a question of law for the court" ( id. at 480 n 1, 927 N.Y.S.2d 56 ). The First Department's decision in Lance is consistent with the time limitation set forth by CPLR 1021 and a harmonious reading of the statutes (see id. at 480, 927 N.Y.S.2d 56 ; see also Next Millenium Realty, LLC v. Adchem Corp. , 690 Fed Appx 710, 716 [2d Cir. 2017] (applying a "reasonable period of time" limitation on a dissolved corporation's ability to wind up its affairs pursuant to BCL 1006 )).
Hence, the proper reading of the statutes is that immediately after a corporation is dissolved, the provisions of BCL 1005 and BCL 1006 permit the corporation to continue to act for the purpose of winding up its affairs. CPLR 1021 essentially places a time limitation on said dissolved corporation to wind up its affairs. Once the time limitation set forth by CPLR 1021 expires, the dissolved corporation is no longer winding up its affairs and the proceeding is stayed pending: (1) the substitution of a legal representative for the dissolved corporation; or (2) a motion to dismiss, without prejudice, filed by a defendant for the failure to make a timely substitution of a dissolved corporate plaintiff (see CPLR 1021 ; CPLR 1017 ; BCL 1005 [a] [1] ; Pena v. Rucon Properties, LLC , 19 Misc. 3d 655, 656, 858 N.Y.S.2d 517 [Sup. Ct., Bronx County 2008] (" CPLR 1021 grants the defendant the option of moving to dismiss for failure to make a timely substitution"); see also NYC TL 2004-a Trust v. Archer , 131 A.D.3d 1213, 1214, 16 N.Y.S.3d 777 [2d Dept. 2015] (stating, generally, "the death of a party divests a court of jurisdiction to act, and automatically stays proceedings in the action pending the substitution of a legal representative") (citing CPLR 1015 ; CPLR 1021 ) (internal citations omitted); compare CPLR 1015 ("If a party dies and the claim for or against him is not thereby extinguished the court shall order substitution of the proper parties"), with CPLR 1017 ("If ... a corporate party is dissolved, the court shall order substitution of the proper parties")). This interpretation encourages prompt resolution of outstanding legal matters of dissolved corporations and discourages counsel from treating a dissolved corporate plaintiff as a "mere puppet" used to accrue fees that may include accumulated interest ( Lance Intern., Inc. v. First Nat. City Bank , 24 Misc.3d 1109, 878 N.Y.S.2d 572, 578 [Civ. Ct., New York County 2009] ).
C. Plaintiff's Time Limitation For Winding Up Has Expired
As to each of the matters referred to in Plaintiff's motion, based on the foregoing discussion, Plaintiff was required to be substituted within a reasonable time after dissolution if the dissolution occurred prior to final judgment, or within four months if the dissolution occurred after final judgment, to avoid the matter being effectively stayed pending substitution or a motion to dismiss (see CPLR 1021 ). Instead, Plaintiff waited over eleven years after Plaintiff's counsel was disbarred and seven years after Plaintiff was dissolved to move to substitute counsel.
As to the prejudgment dissolution matters, the record lacks any indication that the seven-year gap since Plaintiff's dissolution constitutes a reasonable time for Plaintiff to wind up its affairs. In light of Defendant GEICO's opposition, Plaintiff was given an opportunity to submit evidence and arguments demonstrating the reasonableness of the over seven-year period to wind up its affairs pursuant to BCL 1006 without substitution (see River View at Patchogue, LLC v. Hudson Ins. Co. , 122 A.D.3d 824, 825, 998 N.Y.S.2d 55 [2d Dept. 2014] (affirming Supreme Court's decision granting defendant's motion for summary judgment where Supreme Court adjourned the motion for the express purpose of allowing the parties to submit additional evidence and arguments with respect to a specific argument raised by defendant). However, Plaintiff has failed to demonstrate that the seven-year delay without substituting Plaintiff with a shareholder or other appropriate party was reasonable (see Rose Ocko Foundation, Inc. v. Lebovits , 259 A.D.2d 685, 690, 686 N.Y.S.2d 861 [2d Dept. 199] (noting that when a corporation is dissolved after an action has been commenced, the court should, under CPLR 1017, allow shareholders to be substituted as parties in its place); Lance Intern., Inc. v. First Nat. City Bank , 878 N.Y.S.2d 572, 576, 576 n., 24 Misc.3d 1109[[Civ. Ct., New York County 2009] (in finding that a time limit must be placed on how long a corporation may wind up its affairs, the court noted that "by suing and being sued, the business would be resolving both sides of the ledger; it would not just be waiting for a pot of gold at the end of the rainbow. Second, all suits would proceed to quick resolutions, by settlement or trial. A year or two or three comes to mind.")). As to the post-judgment dissolution matters, four months has clearly passed since Plaintiff's dissolution. The Court need not delve into the procedural posture of each matter, however, the Court notes that ongoing matters are effectively stayed pending substitution of a legal representative for Plaintiff or a motion to dismiss filed by the respective defendant. Although Defendant GEICO asserts in its opposition that the thirteen actions against Defendant GEICO should be dismissed pursuant to CPLR 1021, Defendant GEICO's argument is not properly before this Court as a cross-motion to dismiss because Defendant GEICO failed to serve notice of cross-motion pursuant to CPLR 2214 (see Abizadeh v. Abizadeh , 159 A.D.3d 856, 857, 72 N.Y.S.3d 566 [2d Dept. 2018] (finding that lower court providently exercised its discretion in denying a cross-motion on the ground that that movant's notice of cross-motion was deficient)). However, Defendant GEICO and, where applicable, defendants in the other matters referred to by Plaintiff may submit a motion to dismiss pursuant to CPLR 1021 in accordance with the proper procedures.
III. Conclusion
Accordingly, it is hereby ordered that Plaintiff's motion is denied in its entirety. This constitutes the decision and order of the Court.