Opinion
Index No. 150679/2022
10-20-2022
Mikhail Teodorovich VINOGRADOV, Plaintiff, v. Anastassiya Sergeyevna SOKOLOVA and Denis Valeriyevich Sokolov, Defendants.
Mermelstein Law, Bronx, NY (Avi Mermelstein of counsel), for plaintiff. Joffe Law P.C., New York, NY (Dimitry Joffe of counsel), for defendant.
Mermelstein Law, Bronx, NY (Avi Mermelstein of counsel), for plaintiff.
Joffe Law P.C., New York, NY (Dimitry Joffe of counsel), for defendant.
Gerald Lebovits, J.
Plaintiff, Mikhail Vinogradov, commenced this action in January 2022 to enforce the judgments of two Russian courts holding defendants, Anastasiia Sokolova and her husband Denis Sokolov, jointly liable for debts owed to Vinogradov. (See NYSCEF No. 2 at 1.) Vinogradov now moves for summary judgment in lieu of complaint under CPLR 3213 and 5303. The motion is granted in part and denied in part as to defendant Sokolova and denied as to defendant Sokolov.
BACKGROUND
In May 2013, Sokolov and Vinogradov entered into a loan agreement, in which Vinogradov agreed to lend Sokolov $434,000 to be repaid by June 30, 2014. Although the loan bore no interest, the loan agreement provided that Sokolov would be obliged to pay a "default charge" of 0.1% of the balance for each day of delay after the June 30 maturity date. In April, May, June, and July of 2015, the parties entered into four additional agreements, totaling $325,000, and requiring that Sokolov repay the loans by October 31, 2016. Each of these four loans had an interest accruing at 12% annually, increasing to 24% annually in case of default. Sokolova guaranteed Sokolov's obligations under the five loans.
The residential addresses of all parties were listed in the loans. The loan agreements provided that if any party's address changed, that party was required within three days to notify all other parties. The agreements further provided that any disputes would "be resolved by the parties in accordance with the current substantive and procedural legislation of the Russian Federation." (NYSCEF No. 24 at ¶ 6.1 [2013 loan agreement]; No. 26 at ¶ 6.1 [April 2016 agreement]; No. 27 at ¶ 6.1 [May 2015 agreement]; No. 28 at ¶ 6.1 [June 2015 agreement]; No. 29 at ¶ 6.1 [July 2015 agreement].)
Sokolov repaid only $48,000 of the principal $434,000 for the May 2013 loan. Neither Sokolov nor Sokolova made any payments on the 2015 loans. In 2016, Sokolov and Sokolova emigrated to the United States. They failed to notify Vinogradov of their relocation.
Vinogradov sued Sokolov and Sokolova in the Primorskiy District Court of St. Petersburg to recover the principal amount and the accrued penalty amounts for the 2013 loan. The Primorskiy court decided the case on December 12, 2017. At a hearing on the case, the court noted the absence of Sokolov and Sokolova, but held that as notice was properly sent to the address in Russia registered with the government, they bore the risk of non-delivery. The court found for Vinogradov and ordered that Sokolov and Sokolova pay him (i) the remaining principal balance of $386,000; (ii) the 0.1% daily default charge through the date of judgment (reduced as disproportionate by the court from the original amount of $471,345 down to $386,000); and (iii) the 0.1% daily charge from the date of judgment through repayment (denominated by the court as a penalty).
Vinogradov filed suit with the Moskovskiy District Court of St. Petersburg for the repayment of the $325,000 outstanding balance on the four 2015 loans. Sokolov and Sokolova again failed to appear. The Moskovskiy court held that as Sokolov and Sokolova were notified of the proceeding at their registered address "on numerous occasions," their failure to notify the court of a change in address was at their own risk. Vinogradov alleges that he had also notified Sokolov of the suit through a Facebook post that Sokolov later deleted. On February 15, 2018, the court found Sokolov and Sokolova jointly liable for the $325,000 balance, as well as interest accruing at the contractual default rate of 24% annually—an additional $154,609.59 as of the date of judgment.
In February 2021, Denis Sokolov passed away.
Vinogradov now moves under CPLR 3213 and 5303 for summary judgment in lieu of complaint against both defendants. He asks this court to recognize and enforce the Russian courts’ judgments in the total amount of $1,251,609.54, "plus interest thereon as set forth in the Russian judgments." (NYSCEF No. 2 at 1.)
DISCUSSION
As an initial matter, Vinogradov served only defendant Sokolova with the initiating papers in this CPLR 3213 motion-action—not both defendants. (See NYSCEF No. 11.) This court therefore lacks personal jurisdiction over defendant Sokolov. The motion is denied, and the motion-action is dismissed, as against Sokolov.
This court need not, and does not, address the unusual question of whether Vinogradov could even bring a proceeding for recognition and enforcement of a foreign judgment against a judgment debtor who had died before commencement of the proceeding. In any event, Vinogradov's motion papers do not address the implication of Sokolov's death, nor seek to maintain this motion-action against Sokolov's estate.
With respect to Vinogradov's claim against defendant Sokolova, a plaintiff may move under CPLR 3213 for summary judgment in lieu of complaint to enforce a money judgment. If a money judgment issued in a foreign country is "final, conclusive and enforceable where rendered" ( CPLR 5302 ), it may be enforced by CPLR 3213 motion—unless the judgment is subject to one of the exceptions listed in CPLR 5304. (See CPLR 5303 [a]-[b].)
CPLR 5304 provides exceptions to recognition when the foreign court lacked personal jurisdiction over the party in the original action (see CPLR 5304 [a] [1] ); when "the defendant in the proceeding in the foreign court did not receive notice of the proceeding in sufficient time to enable the defendant to defend" ( CPLR 5304 [b] [1] ); or when the "the specific proceeding in the foreign court leading to the judgment was not compatible with the requirements of due process of law" ( CPLR 5304 [b] [8].) For notice purposes, to the extent that "names and addresses are reasonably known, due process requires notice reasonably calculated, under all the circumstances, to apprise that party of the ... action, so that the party may have an opportunity to be heard." ( Kennedy v. Mossafa , 100 N.Y.2d 1, 9, 759 N.Y.S.2d 429, 789 N.E.2d 607 [2003] [internal quotation marks omitted].) "A plaintiff seeking enforcement of a foreign country judgment bears the burden of making a prima facie showing that the mandatory grounds for nonrecognition do not exist." ( Daguerre, S.A.R.L. v. Rabizadeh , 112 A.D.3d 876, 878, 978 N.Y.S.2d 80 [2d Dept. 2013].) Sokolova contends that at the time of the initial suits, the Russian courts lacked personal jurisdiction over her as she was residing in New Jersey, was never served with any papers, and never received notice of the proceedings. Vinogradov argues that the court that rendered judgment under the 2015 loan agreements—the Moskovskiy District Court of St. Petersburg—had personal jurisdiction over Sokolova pursuant to a provision in all four loans that required that any disputes be decided by that court. (See NYSCEF No. 6 at ¶ 16.) Further, he argues that the Primorskiy District Court of St. Petersburg, which rendered judgment under the 2013 loan agreement, had personal jurisdiction over Sokolova based on the address she provided in the agreement. (See NYSCEF No. 8 at 6-7 [noting that "[s]ec. 28 of the CPC [Civil Procedure Code] of the Russian Federation provides that a claim shall be brought in a court at the defendant's place of residence"].)
Vinogradov contends—and Sokolova does not dispute—that under Russian law, the courts are responsible for giving notice to the parties, and that the courts may use any method to do so, including by mail. Further, when a Russian citizen moves to another address, fails to notify the local branch of the Ministry of the Internal Affairs of the Russian Federation, and does not notify the court, then the last registered address for process remains valid. While still living in Russia, Sokolova knowingly guaranteed Sokolov's obligations under five loan agreements providing that disputes arising from the agreements were to "be resolved by the parties in accordance with the current substantive and procedural legislation of the Russian Federation." (NYSCEF No. 24 at ¶ 6.1.) Under Russian law, she was required to alert the courts of her relocation to the United States; otherwise, her St. Petersburg address would be valid for service of process.
Sokolova does not contend that these aspects of Russian law are fundamentally unfair—only that she should not be held liable for judgments entered in the Russian proceedings due to her lack of notice. But given the failure of Sokolova and her late husband to notify the Russian courts of her change in residence, that lack of notice does not preclude enforcement of the judgments. In Kennedy , for example, the Court of Appeals held that the county was entitled as a due process matter to have foreclosed on a property for tax delinquency, even though the property's owner had never learned of the foreclosure proceeding. (See 100 N.Y.2d at 4, 759 N.Y.S.2d 429, 789 N.E.2d 607.) The Kennedy Court relied on the fact that the tax bills at issue, and the notice of foreclosure, were sent to the address that the owner had given the town and then failed to update after she moved; and that no other mailing address for the owner was reasonably ascertainable. (See id. at 9-11, 759 N.Y.S.2d 429, 789 N.E.2d 607.) Here, too, Sokolova and her husband did not update their address with the relevant authorities in Russia when they emigrated to the United States; and Sokolova does not contend that her New Jersey address was reasonably ascertainable to the St. Petersburg courts. Notice provided by the Russian courts to the Russian address on file for Sokolova and her husband was thus reasonably calculated, under the circumstances, to apprise them of the proceedings at issue.
This court's conclusion that the Russian judgments may be enforced against Sokolova leaves one further issue—the question of interest. Ordinarily, in a proceeding to enforce a foreign judgment, interest that has accrued on that judgment following its entry is assessed based on "the law of the forum"—i.e. , New York. ( Abu Dhabi Commercial Bank PJSC v. Saad Trading, Contr. & Fin. Servs. Co. , 117 A.D.3d 609, 613, 986 N.Y.S.2d 454 [1st Dept. 2014].) A court may, however, impose a higher rate than the New York statutory rate of 9% (see CPLR 5004 ) when the parties "clearly, unambiguously, and unequivocally" provided in the contract for a higher post-judgment default interest rate. ( Retirement Accounts, Inc. v. Pacst Realty, LLC , 49 A.D.3d 846, 847, 854 N.Y.S.2d 487 [2d Dept. 2008].) But a court may not impose a higher interest rate if that rate would constitute a "penalty." ( CPLR 5302 [b] [2] [providing that CPLR article 53 does not apply to a foreign country money judgment "to the extent the judgment is a ... penalty"]; see also Korea Resolution & Collection Corp. v. Hyuk Kee Yoo , 170 A.D.3d 485, 486, 96 N.Y.S.3d 171 [1st Dept. 2019] [holding that motion court properly "appl[ied] the postjudgment rate of 24% cited in the Korean judgment" rather than 9% rate, because defendant failed to show that the higher was a " ‘penalty’ rather than the default rate set forth under the terms of the underlying loan"].)
The Moskovskiy Court awarded postjudgment interest on the "remaining balances of the loan" at the contractual default "interest rate of 24 percent, annual." (NYSCEF No. 5 at 3 [describing contract], 6 [awarding judgment].) This court likewise awards Vinogradov postjudgment interest running at 24%,—not 9%—from the date of the Moskovskiy judgment. That postjudgment interest accrues only on the outstanding balance of the loan ($325,000), not on the full amount of the Moskovskiy judgment ($479,609.59). The amount of the judgment itself incorporates prejudgment default interest accruing on the loan balance, and does not provide for interest-on-interest. (See id. at 6.)
The Primorskiy Court did not award postjudgment interest, because the loan was interest-free. (See NYSCEF No. 4 at 4-5.) Instead, in addition to the principal amount of the loan, the court imposed what the contract termed a "default charge," and what the Primorskiy court described as a "penalty"—namely, a 0.1% daily charge on the outstanding balance of the loan, running until repayment. (Id. at 5.) As a penalty, this aspect of the Primorskiy judgment may not be given recognition and enforcement by this court. (See CPLR 5302 [b].) With respect to the Primorskiy judgment, therefore, Vinogradov is entitled only to postjudgment interest on the amount of the judgment, accruing under CPLR 5004 at 9% annually.
Further confirmation that this aspect of the judgment is not entitled to recognition can be seen from the Primorskiy court's treatment of the relevant contract provision for the period between the maturity date and the date of the judgment. As discussed above in the Background section, this 0.1%-balance-daily provision, if given full effect, would have resulted in an additional sum of $471,345 on top of the unpaid principal amount of $386,000. (See NYSCEF No. 4 at 3.) The Primorskiy court, concluding that awarding that full sum would be "disproportionate to damages caused by failure to meet the obligation" (id. ), reduced it to the unpaid principal amount—as when a New York court declines to give full effect to a liquidated-damages provision because doing so would constitute an unenforceable penalty. (See LeRoy v. Sayers , 217 A.D.2d 63, 69-70, 635 N.Y.S.2d 217 [1st Dept. 1995] [discussing and applying this principle].)
Accordingly, it is
ORDERED that plaintiff's motion for summary judgment in lieu of complaint as against defendant Sokolov is denied, and the motion-action is dismissed as against Sokolov for lack of personal jurisdiction; and it is further
ORDERED that the branch of plaintiff's motion seeking summary judgment in lieu of complaint as against defendant Sokolova is granted, but only to the following extent: plaintiff is awarded a money judgment against Sokolova in the amount of (i) $772,000, with interest on that sum running at 9% annually from December 12, 2017; plus (ii) $479,609.59; plus (iii) interest on the sum of $325,000 running at 24% annually from February 15, 2018; plus (iv) costs and disbursements, to be taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that plaintiff serve a copy of this order with notice of its entry on defendant Sokolova and on the office of the County Clerk, which shall enter judgment accordingly.