Opinion
116184/08.
Decided July 10, 2009.
The instant action is integrally related to the legal malpractice case commenced in this court by plaintiffs in 2005, bearing index number 602254/05, against defendants Robert I. Bodian (Bodian) and the law firm of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (Mintz Levin), which case is still pending (the Malpractice Action). Except for the newly added defendant Raymond P. Corona (Corona), an employee of Mintz Levin, the parties in this action are substantially identical to those in the Malpractice Action.
The complaint filed in the instant action alleges that defendants had forged the signature of plaintiff Joseph P. Shelley, Jr. (Shelley), without his knowledge and approval, in connection with another action that was brought by plaintiffs against certain third parties (the Underlying Action), including an entity known as Dixon Equities, in which Shelley purportedly has an ownership interest. Mintz Levin and Bodian were counsel to plaintiffs in the Underlying Action. The complaint asserts that, because the document allegedly forged by defendants (and notarized by Corona) contained incorrect information, plaintiffs suffered dismissal of the Underlying Action, which, in turn, led to their commencement of the Malpractice Action.
Due to the myriad facts and issues in the Underlying Action and Malpractice Action (as summarized and analyzed by decisions of this court rendered in the Malpractice Action), familiarity with such facts and issues are presumed and will not be repeated herein, except as otherwise discussed herein.
Defendants move to dismiss the complaint, pursuant to CPLR 3211 (a) (4) and (a) (7), or alternatively, to consolidate the instant action with the Malpractice Action pursuant to CPLR 602. Defendants also seek an order of this court imposing sanctions and costs against plaintiffs pursuant to 22 NYCRR 130-1.1. For the reasons stated herein, the instant action should be consolidated with the pending Malpractice Action, and the other forms of relief sought in defendants' motion should be denied.
Discussion
In the context of a CPLR 3211 (a) (7) motion to dismiss, the court's task "is to determine whether plaintiffs' pleadings state a cause of action. The motion must be denied if from the pleadings' four corners, factual allegations are discerned which taken together manifest any cause of action cognizable at law [internal quotation marks omitted]." Richbell Info. Services, Inc. v Jupiter Partners, L.P., 309 AD2d 288, 289 (1st Dept 2003), quoting 511 W. 232nd Owners Corp. v Jennifer Realty Corp., 98 NY2d 144, 151-152 (2002). The pleadings are afforded a "liberal construction," and the court is to "accord plaintiffs the benefit of every possible favorable inference." Leon v Martinez, 84 NY2d 83, 87-88 (1994). Although a complaint's factual allegations are accorded "favorable inference," bare legal conclusions of law and inherently incredible facts are not entitled to preferential consideration. Sud v Sud, 211 AD2d 423, 424 (1st Dept 1995).
Dismissal Based On CPLR 3211 (a) (7)
Defendants argue that the complaint should be dismissed pursuant to CPLR 3211 (a) (7) because it fails to state a cause of action. In particular, defendants argue that "Shelley does not identify in the Complaint what type of cause of action he is alleging," and that in any event, "it simply does not allege any cognizable cause of action." Defendants' Brief, at 7-8.
Defendants' argument is unconvincing for various reasons. The complaint alleges that "[o]n or about September 20, 2001, defendants Mintz Levin and Bodian forged [Shelley's] signature on [an affidavit filed in the Underlying Action] or caused same to be forged." Complaint, ¶ 11. It also alleges that "Corona notarized that affidavit and thereby attested to the fact that [Shelley] personally appeared before him on that day and signed such affidavit before him." Id., ¶ 15. It further alleges that "Bodian and Mintz Levin submitted such forged and illegally notarized affidavit to the [court,] knowing that the same was forged, having participated in the forgery, and knowing that it was falsely, illegally, and improperly notarized." Id., ¶ 19. The complaint further alleges that "as a result of the submission of the forged and illegally notarized affidavit which contained incorrect information, plaintiffs' complaint in [the Underlying Action] was dismissed," and they consequently sustained damages. Id., ¶¶ 22-23.Hence, the complaint alleges that defendants had committed forgery, which, as explained below, is a type of fraud.
The defendants in the Underlying Action, including Dixon Equities, had argued that such action was not timely commenced. Plaintiffs claim that if the Shelley affidavit had properly stated that certain payments had been made during the relevant time period, the statute of limitations would have been tolled, and the Underlying Action would not have been dismissed.
In New York, it is well-settled that "forgery" is considered a species of "fraud." Piedra v Vanover, 174 AD2d 191, 194 (2d Dept 1992)("It is clear from these definitions that forgery is but one species of fraud") (citations and internal quotation marks omitted). The Piedra Court explained that forgery is "defined by the common law to be the fraudulent making of a writing to the prejudice of another's rights . . . or the making malo animo of any written instrument for the purpose of fraud and deceit. . . ." Id. at 194 (citations omitted). Indeed, the Court noted that, because the concepts of forgery and fraud are "so closely related," the statute of limitations applicable to fraud cases would also be applicable to forgery cases. Id. Applying the rationale and holding in Piedra to this case, the complaint alleges a cause of action sounding in forgery or fraud.
The statute of limitations issue, a defense asserted by defendants in this case, will be discussed in detail below.
Defendants further argue that, even if the complaint seeks to assert a fraud claim, such claim should be dismissed because it "failed to plead with particularity that defendants made a misrepresentation to plaintiff, for the purpose of misleading plaintiff, and that plaintiff justifiably relied upon that misrepresentation." Defendants' Reply Brief, at 2. Defendants rely on Lama Holding Co. v Smith Barney Inc. ( 88 NY2d 413, 421) for their proposition. Defendants' reliance on Lama Holding is misplaced because it is not a forgery case. Moreover, there is no requirement in Piedra (a forgery case) that a claim based on forgery must allege that plaintiff justifiably relied on a defendant's misrepresentation, and none should be required here. Similarly, in Parrish v Unidisc Music, Inc. ( 21 Misc 3d 1122 [A], 2008 NY Slip Op 52152 [U] [Sup Ct, NY County 2008]), there is no discussion that an action to set aside an agreement as fraudulent, based upon the claim of forgery, must allege justifiable reliance. The absence of any requirement to show justifiable reliance is apparent, because in a forgery case, particularly where a defendant allegedly forged plaintiff's signature on a document, any reliance by a plaintiff on the forged signature would be inapposite and counterintuitive.
In any event, in the context of a motion seeking dismissal, a court is required to afford the plaintiff every favorable inference, and determine only "whether the facts as alleged fit into any cognizable legal theory." Leon, 84 NY2d at 87-88. Because the alleged facts in the instant case fit into a legal theory sounding in forgery or fraud, defendants' motion seeking dismissal pursuant to CPLR 3211 (a) (7) is denied.
Dismissal Based On Statute of Limitations Defense
Despite the foregoing, defendants contend that, even if the complaint pleads a cognizable claim, such claim must be dismissed because it is barred by the statute of limitations. Defendants' Brief, at 10. In particular, defendants contend that, because the alleged forgery took place in September 2001, the six-year limitations period for a fraud claim has expired, as this action was not brought until December 2008. Id. Plaintiffs counter that this action is timely brought, because Shelley did not discover that the affidavit was forged until he was working with counsel on October 9, 2007, to prepare responses to the interrogatories interposed in the Malpractice Action, and the limitations period should be computed from that date, under CPLR 213 (8).
CPLR 213 (8) states that "the time within which the action [based on fraud] must be commenced shall be the greater of six years from the date the cause of action accrued or two years from the time the plaintiff . . . discovered the fraud, or could with reasonable diligence have discovered it." In Rite Aid Corp. v Grass ( 48 AD3d 363 [1st Dept 2008]), it is observed that, "the time a reasonably diligent plaintiff could have discovered the fraud turns upon whether a person of ordinary intelligence possessed knowledge of facts from which the fraud could be reasonably inferred." Id. at 364 (citations and internal quotation marks omitted).
Defendants argue that the latest time that Shelley "should have discovered any alleged fraud in the [subject] affidavit" was when he filed the amended complaint in the Malpractice Action on October 27, 2005, which was more than two years from the day when the instant action was commenced in December 2008, and thus, even if the discovery rule under CPLR 213 (8) was applicable, the limitations period for the fraud claim has expired. Defendants' Reply, at 7. In particular, defendants argue that the "papers" (as such term is used in paragraph 30 of the Amended Complaint) prepared by them (as Shelley's counsel) in the Underlying Action, "necessarily included the affidavit," and that Shelley should have discovered the alleged forgery in October 2005. Id.
Specifically, paragraph 30 states: "Defendants, acting' as attorneys for plaintiff herein, failed to set forth and otherwise advise the Court of the payments within the six year period in the papers prepared by them in opposition to the motion to dismiss the complaint [filed in the Underlying Action]."
Apart from the issue that the above argument is raised for the first time in defendants' reply papers, it is an issue of fact as to whether Shelley, in the exercise of reasonable diligence, could or should have discovered the allegedly forged affidavit when the amended complaint was filed in October 2005. Indeed, in his affidavit filed in the Malpractice Action, Shelley swore that he did not find out about the forged affidavit until he met with counsel to prepare interrogatory responses on October 9, 2007, and that he never saw the affidavit until that date.
Notably, defendants bear the burden of proof with respect to affirmative defenses, and the statute of limitations is one such defense. Brignoli v Balch, Hardy Scheinman, Inc., 178 AD2d 290 (1st Dept 1991) (defendant bears burden of proof on affirmative defenses). Hence, defendants have to show by credible evidence that Shelley should have discovered the subject affidavit in October 2005, and cannot rely on conclusory allegations that the papers reviewed by Shelley "necessarily" included such affidavit. Accordingly, the motion seeking dismissal of the instant action based on the statute of limitations defense is denied.
Request For Sanctions Pursuant To 22 NYCRR 130-1.1
In their motion to dismiss, defendants also seek an order imposing sanctions and costs against plaintiffs pursuant to 22 NYCRR 130-1.1. Rule 130-1.1 provides, in relevant part, that a court, in its discretion, may impose sanctions and costs if a party engages in "frivolous conduct." Conduct is "frivolous" if it is "completely without merit in law" or if it is "undertaken primarily to . . . harass or maliciously injure another."
In the instant case, contrary to defendants' assertion, the complaint does not fail to state a cause of action sounding in fraud or forgery, as explained above. Thus, plaintiffs have not engaged in "frivolous conduct," as their claim is not completely without merit in law.
Defendants also allege that the instant action is filed "for no other reason than to attempt to garner more bad press for the Defendants." Defendants' Brief, at 7. In particular, defendants allege that "Shelley commenced this action [in December 2008] primarily to harass and maliciously injure Defendants," because the New York Law Journal, in September 2008, had published an article on its front page that reported plaintiffs' allegations of the forged affidavit. Id. at 2. In response, plaintiffs state that neither they nor their attorney had ever contacted the press with respect to the NYLJ article, and that they need not litigate this case in the press. Shelley Affidavit, ¶ 5; Legum Affirmation, ¶ 3. In view of the foregoing, defendants have not established that plaintiffs' filing of the instant action is to "harass or maliciously injure" defendants. Hence, defendants' motion seeking to impose sanctions and costs is denied.
Dismissal Based On CPLR 3211 (a) (4)
CPLR 3211 (a) (4) provides that "[a] party may move for judgment dismissing one or more causes of action asserted against him on the ground that . . . there is another action between the parties for the same cause of action in a court of any state or the United States; the court need not dismiss upon this ground but may make such order as justice requires. . . ."
Defendants argue that the instant action should be dismissed because (1) the Malpractice Action and this action arise out of the same actionable series of alleged wrongs; (2) the parties in both actions are substantially identical, except for Corona, who is an additional defendant in this action; and (3) both actions seek similar relief, even though plaintiffs also seek punitive damages in this action. Defendants' Brief, at 12-13.
Defendants' arguments are not convincing. While both the instant action and the Malpractice Action arise out of a common transaction (i.e., defendants' representation of plaintiffs in the Underlying Action), the alleged wrongs are distinct and separate: legal malpractice is alleged in the Malpractice Action, and forgery or fraud is alleged in the instant action. Accordingly, it is improper to dismiss this action based on CPLR 3211 (a) (4), as the "same cause of action" is not asserted in both actions. See also Montgomery Ward and Co., Inc. v Othmer, 127 AD2d 913, 914 (3d Dept 1987)("The mere fact that two lawsuits emanate from a common transaction or occurrence is not in and of itself enough to invoke CPLR 3211 [a] [4] . . . If the wrongs alleged are separate and independent they may be prosecuted separately") (citations omitted).
On the other hand, there are grounds for consolidating the instant action with the Malpractice Action under CPLR 602 (a), because (1) both actions arise out of the same transaction; (2) the actions involve substantially identical parties; (3) the actions are pending before the same court; (4) the parties do not oppose consolidation; and (5) consolidation of the actions may avoid unnecessary cost and delay. Fay Estates v Toys "R" Us, Inc., 22 AD3d 712, 714 (2d Dept 2005) (consolidated two related actions because they involved common questions of law or fact).
Accordingly, it is
ORDERED that defendants' motion seeking dismissal of the instant action is denied; and it is further
ORDERED that the instant action shall be consolidated with the Malpractice Action pending in this court, Joseph P. Shelley, Jr. et al. vs. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., et al., Index No. 602254/05, under Index No. 602254/05; the pleadings in the actions hereby consolidated shall stand as the pleadings in the consolidated action; and the consolidated action shall bear the following caption:
And it is further
ORDERED that upon service on the Clerk of this Court of a copy of this Decision and Order with notice of entry, the Clerk shall consolidate the papers in the actions hereby consolidated and shall mark his records to reflect the consolidation; and it is further
ORDERED that a copy of this Decision and Order with notice of entry shall also be served upon the Clerk of the Trial Support Office (Room 158), who is hereby directed to mark the court's records to reflect the consolidation.
This constitutes the Decision and Order of the court.