Opinion
No. 18450/11.
2012-04-12
Alexander GORELIK and Prompt Enterprise, Corp., Plaintiffs, v. Oksana GORELIK, Mohammad Kahlid, Chaudry M. Khalid, Reurik Meurs, OK Auto Repair, Inc., No. 1 Auto Repair & Body Shop, and Fast Cars, Inc., Defendants.
Andrew B. Siegel, Esq., Goidel & Siegel, LLP, New York, for Plaintiff. James R. Lambert, Esq., Staten Island, for Defendant.
Andrew B. Siegel, Esq., Goidel & Siegel, LLP, New York, for Plaintiff. James R. Lambert, Esq., Staten Island, for Defendant.
CAROLYN E. DEMAREST, J.
+-----------------------------------------------------------------------------+ ¦The following papers numbered 1 to 4 read herein: ¦Papers Numbered ¦ +-----------------------------------------------------------+-----------------¦ ¦Notice of Motion/Order to Show Cause/Petition/Cross Motion ¦1–2 ¦ ¦and Affidavits (Affirmations) Annexed ¦ ¦ +-----------------------------------------------------------+-----------------¦ ¦Opposing Affidavits (Affirmations) ¦3 ¦ +-----------------------------------------------------------+-----------------¦ ¦Reply Affidavits (Affirmations) ¦4 ¦ +-----------------------------------------------------------+-----------------¦ ¦Affidavit (Affirmation) ¦ ¦ +-----------------------------------------------------------------------------+
Other Papers
Defendant Oksana Gorelik moves for an order dismissing the action with prejudice on the ground that the issues before this court have been previously litigated and settled as part of the parties' divorce action in New Jersey ( Gorelik v. Gorelik, Superior Court of New Jersey, Chancery Division–Family Part, Monmouth County, Docket No. FM–13–129–10B).
Although Ms. Gorelik has denominated her motion as a motion to dismiss, the motion must be deemed one for summary judgment under CPLR 3212 since Ms. Gorelik has answered and issue has thus been joined ( see Nowacki v. Becker, 71 AD3d 1496, 1497 [2010];Kavoukian v. Kaletta, 294 A.D.2d 646, 646–647 [2002];Tufail v. Hionas, 156 A.D.2d 670, 671 [1989] ).
Ms. Gorelik's motion is denied.
In this action, it is undisputed that plaintiff Alexander Gorelik and defendant Oksana Gorelik are the sole shareholders of plaintiff Prompt Enterprises Corp. (Prompt), a New York Corporation they formed during their marriage. Plaintiffs have pled causes of action premised on conversion, breach of fiduciary duty, and unjust enrichment, among other causes of action, based on allegations that Ms. Gorelik converted, for personal use, insurance premium payments made to Prompt as part of Prompt's business. Mr. Gorelik and Prompt also allege that Ms. Gorelik diverted these payments to the other co-defendants in this action, and that the absence of these payments from Prompt's escrow account caused a potential purchaser of Prompt to withdraw from the purchase of Prompt.
In July 2009, Ms. Gorelik commenced the New Jersey divorce proceeding, and in November 2009, Mr. Gorelik answered and counterclaimed in the New Jersey proceeding.
As a second count of his counterclaim, Mr. Gorelik alleged that he was entitled to dissolution of the marriage because Ms. Gorelik “has constructively deserted [him] by willfully refusing to disclose the credit card debt she accumulated for several months as well as monies improperly taken from Prompt Enterprise Corporation and potential additional companies for personal unauthorized expenses and continuing to the present time.”
Both Ms. Gorelik and Mr. Gorelik alleged that they were living in New Jersey at the time the New Jersey proceeding was commenced.
During the New Jersey proceedings, Ms. Gorelik moved for an order appointing a forensic accountant to perform an accounting relating to Prompt as well as to the parties' other businesses. The motion was granted in a order directing Ms. Gorelik to hire a forensic accountant. Although Ms. Gorelik apparently supplied records to the forensic accountant, Mr. Gorelik did not comply with the forensic accountant's request that he supply business records relating to the companies owned by the parties. Prior to any accounting being performed, the parties entered into an undated “Matrimonial Settlement Agreement” (Agreement) and, on December 20, 2010, the New Jersey court granted a dual judgment of divorce.
The Agreement contains several provisions relevant to the issues before the court. The first is the fourth “WHEREAS” clause on the second page of the Agreement, that, as is relevant here, provides, “WHEREAS, the parties by this Agreement desire to settle all disputes and questions pertaining solely to their marriage, including, alimony, support, and property distribution” (emphasis added). One of the Agreement's general provisions provides, as relevant here, that “[e]ach party represents to the other that the assets and liabilities set forth in this Agreement represent all of the assets and liabilities of the marriage, as known to each of them, which are subject to equitable distribution and allocation in accordance with the laws of the State of New Jersey” (Agreement § 5). Another general provision provides that “[t]his Agreement is intended to be a complete and final resolution of the rights, entitlements, liabilities and responsibilities of the parties as they pertain to the marriage, including, when applicable, alimony, child support, equitable distribution of marital assets, payment of debts and attorneys fees” (Agreement § 7).
While section 7 of the Agreement, quoted above, forecloses any claims related to the parties' rights and responsibilities with respect to the marriage, with regard to non-marital rights, the agreement provides that:
Nothing herein shall be deemed to foreclose either party from pursuing his or her interests respecting non-marital rights or obligations or prevent either party from maintaining a suit for absolute divorce or separate maintenance against the other, in any jurisdiction, based upon any past or future conduct of the other. If, however, either party commences such an action, both parties agree to be bound by all the terms and provisions of this Agreement shall be incorporated into any such Judgment or Order, but notwithstanding such an incorporation, this Agreement shall not be merged in such a Judgment or Order, but shall, in all respects, survive the same and be forever binding and inclusive upon the parties (Agreement § 9).
In return for Ms. Gorelik retaining the proceeds from the sale of the parties' marital home, the Agreement provides that Mr. Gorelik was to retain the businesses listed and the taxi medallions. Prompt is not listed as one of these businesses, but the Areement further provides that “the parties shall cooperate with any investigation stemming from Prompt Enterprises and its sale” (Agreement § 19). Of note, this is the only reference to Prompt in the 21 page Agreement. With respect equitable distribution, the Agreement states that “[t]he parties agree that the terms and provisions of this Agreement act in full and complete satisfaction of any and all claims, which either may have against the other, including their respective rights to equitable distribution under N.J.S.A. 2A:34–20” (Agreement § 20).
It is in the context of this factual background that Ms. Gorelik moves to dismiss the complaint on the ground that the current action is barred by the prior New Jersey divorce action. Under the Full Faith and Credit Clause of the Constitution this court is required to give the New Jersey divorce judgment the same conclusive effect it would have in New Jersey ( see O'Connell v. Corcoran, 1 NY3d 179, 183–184 [2003] ). The scope of the New Jersey judgment turns on the application of New Jersey's “entire controversy” doctrine to the divorce action. Similar to New York's common-law doctrine of res judicata, the central consideration in determining whether a successive claim is barred by New Jersey's “entire controversy doctrine is whether the claim arise[s] from related facts or the same transaction or series of transactions” (Sweeney v. Sweeney, 450 NJ Super 586, 592, 966 A.2d 54, 58 [App.Div.2009];cf. O'Connell, 1 NY3d at 184–185). Despite the broad scope of facts that may be deemed related for purposes of the entire controversy doctrine, the doctrine is ameliorated by the requirement that the court consider fairness to the parties in its application, and by the fact that the doctrine no longer encompasses the joinder of parties ( see Sweeney, 405 NJ Super at 593, 506 A.2d at 58;see also Brennan v. Orban, 145 NJ 282, 291, 678 A.2d 667, 671 [1996];Allstate New Jersey Inc. Co. v. Cherry Hill Pain & Rehab Inst., 389 NJ Super 130, 139–140, 911 A.2d 493, 499 [2006],cert denied190 NJ 254, 919 A.2d 848 [2007] ).
New Jersey courts have held that the entire controversy doctrine applies to divorce proceedings ( see Brennan, 145 NJ at 290, 678 A.2d at 671). New Jersey's desire to insure that all disputes arising out of a marriage are litigated in a single proceeding has broad reach. In this respect, New Jersey courts have used the entire controversy doctrine to require a spouse to litigate, in the parties' divorce action, an intentional tort claim arising from an assault of one spouse by the other, occurring before the commencement of the divorce action. Further, the courts have held that the doctrine could bar a separate action based on the assault ( see Brennan, 145 NJ at 290, 678 A.2d at 671;Brown v. Brown, 208 NJ Super 372, 378–384, 506 A.2d 29, 32–35 [App.Div.1986] ). Also relevant to the application of the entire controversy doctrine to a divorce judgement are the broad powers a New Jersey court has to determine equitable distribution of the parties' assets during a divorce proceeding ( see Kothari v. Kothari, 255 NJ Super 500, 510, 605 A.2d 750, 754–755 [App.Div.1992] ).
Applying these principles here, Prompt, and the defendants other than Ms. Gorelik, were not parties to the matrimonial action. Since the party injured by Ms. Gorelik's alleged actions was Prompt, the real plaintiff in this action is Prompt, not Mr. Gorelik, whose rights are derived from those of Prompt ( see Abrams v. Donati, 66 N.Y.2d 951, 953 [1985][individual shareholder cannot secure personal recovery for a wrong to a corporation]; MatlinPatterson ATA Holdings LLC v. Federal Express Corp., 87 AD3d 836, 839 [2011];Hahn v. Stewart, 5 AD3d 285, 286 [2006] ). In addition, the duties Ms. Gorelik is alleged to have violated did not arise from the marital relationship, but rather were owed to Prompt because of Ms. Gorelik's shareholder/employment relationship with Prompt ( see id.; cf. Sweeney, 405 NJ Super at 593, 506 A.2d at 58).
On the other hand, Mr. Gorelik's current allegations of defalcations by Ms. Gorelik from Prompt, a company solely owned by Mr. and Ms. Gorelik, may have allowed Mr. Gorelik to pierce Prompt's corporate veil in the context of the New Jersey divorce action. In this respect, courts in many jurisdictions have recognized that the powers of a domestic relations court include the equitable remedy of “reverse piercing” of the corporate veil of a corporation solely owned or dominated by parties to the divorce proceeding where one of the spouses has used the corporation as an alter-ego or used corporate funds for personal expenses ( see CH v. RH, 18 Misc.3d 268, 275–277 [Sup Ct, Nassau County 2007][listing cases applying reverse piercing of the corporate veil]; see also Medlock v. Medlock, 263 Neb 666, 678, 642 NW2d 113, 125 [2002];A & L, Inc. v. Grantham, 747 So2d 832, 838–839 [Miss 1999] ). Indeed, where the principal or principals of the corporation are before the court that is addressing the parties' marital assets, some courts have relaxed the general requirement that the corporation be made a party to the proceedings to pierce the corporate veil ( see Mosley v. Builders South, Inc., 41 So3d 806, 811–813 [Ala App 2010]; Medlock, 263 Neb at 685, 642 NW2d at 129–130;see also Rossignol v. Rossignol, 82 AD3d 1335, 1336–1337 [2011];Rohmer Assoc., Inc. v. Rohmer, 36 AD3d 990, 991 [2007];see also Popowich v. Korman, 73 AD3d 515, 524 [2010][Acosta, J., dissenting]; but see Popowich, 73 AD3d at 517 [majority opinion holding that the failure to join the corporate entity as party to matrimonial action precluding a claim to pierce the corporate veil] ). Although the court is not aware of a New Jersey decision expressly addressing piercing the corporate veil in the context of a matrimonial action, it would appear that a New Jersey court's broad powers of equitable distribution of the marital assets would encompass the ability to pierce the corporate veil where a party has failed to abide by the corporate formalities ( see Pulaski Constr. Co., Inc. v. Air Frame Hangars, Inc., 195 NJ 457, 472–473, 950 A.2d 868, 877–878 [2008][stating general principles relating to piercing the corporate veil]; see also Kothari, 255 NJ Super at 510, 605 A.2d at 754–755 [broad power to equitably distribute marital assets] ).
Finding that Mr. Gorelik conceivably could have addressed Prompt's current claims by the reverse piercing of the corporate veil of Prompt in the New Jersey divorce action, however, does not compel the conclusion that the current action is barred by the entire controversy doctrine. As noted above, in applying the entire controversy doctrine, one of a court's primary concerns is fairness to the parties. Certainly relevant to the question of fairness is the apparent absence of New Jersey caselaw addressing a factual situation similar to that presented herein. Where courts from other jurisdictions have found that an earlier marital action bars a later action by or on the behalf of a corporation, these courts have generally done so only where, as part of the marital property settlement, the court expressly addressed the corporate claim, or the parties expressly raised the corporate claim, and released it or settled it ( see Rohmer, 36 AD3d at 991;Avco Sec. Sys., Inc. v.. Beigel, 29 A.D.2d 837 [2007];Mosley, 41 So3d at 811–813;Dahn v. Dahn, 346 SW3d 325, 332–334 [Mo App 2011]; Woodword v. Anderson, 261 Neb 980, 988–989, 627 NW2d 742, 749–750 [2001];McKee v. McKee, 882 P.2d 885, 887 [WY 1994]; but see Hofsommer v. Hofsommer Excavating, Inc., 488 NW2d 380, 384–386 [ND 1992] ). Mr. Gorelik thus did not have any clear notice that he would have been required to litigate the present claims in the New Jersey divorce action.
The evidence presented with respect to the claims addressed in the New Jersey proceeding also demonstrates that Mr. Gorelik did not expressly raise his current claims as part of the equitable distribution process. Although Mr. Gorelik, in his second counterclaim, mentioned Ms. Gorelik's actions in converting Prompt's assets for her personal use, that assertion was made as factual support for his claim of constructive abandonment. Mr. Gorelik's counsel did issue subpoenas requesting testimony and the production of documents that may have been relevant to Prompt's current claims, but it was Ms. Gorelik who moved for the appointment of the forensic accountant with respect to the businesses owned by the parties. The parties, however, reached their Agreement addressing the division of their marital assets before any accounting was performed and apparently before any testimony was taken or documents were produced based on the subpoenas.
The Agreement itself can be read as expressly preserving Mr. Gorelik's right to maintain a separate action relating to Prompt's claims.
In this regard, section 5 of the agreement can reasonably be read as providing that the assets and liabilities of the marriage that are subject to equitable distribution are those set forth in the Agreement. Prompt is not listed as an asset or as a liability of either party, and is only mentioned in section 19 of the Agreement as part of a direction that the parties must cooperate with respect to any investigation of Prompt—a direction that suggests that the parties contemplated further litigation relating to Prompt. As such, Prompt is not part of the parties' marital assets, and is thus not covered by the provision stating that the Agreement is intended to finally resolve all disputes with respect to the marriage (Agreement § 7), but instead, is covered by the provision allowing subsequent proceedings relating to non-marital rights or obligations (Agreement § 9) ( see McKee, 882 P.2d at 887–888).
The parties have not addressed what law governs the interpretation of the Agreement. Since it was signed by the parties as part of the New Jersey divorce proceeding, it would appear to be governed by New Jersey law ( see Matter of Phillipson, 21 Misc.2d 721, 723 [Sur Ct New York County 1959]; see also 915 Broadway Assocs. LLC v. Paul, Hastings, Janofsky & Walker, 27 Misc.3d 1224[A], 2010 N.Y. Slip Op 50879[U] [Sup Ct New York County 2010] ). As New Jersey contract law is essentially the same as New York law, at least as is relevant here ( see Barr v. Barr, 418 NJ Super 18, 31–32, 11 A3d 875, 882 [App.Div.2011] ), the issue of what law should govern the interpretation of the agreement need not be decided.
At the very least, the Agreement's provisions are ambiguous as to whether or not the issues relating to Prompt were intended to be resolved by the Agreement. Thus, parol proof may be considered with respect to the intended scope of the Agreement ( see Barr, 418 NJ Super at 37–38, 11 A3d at 885;Fernandez v. Price, 63 AD3d 672, 675–676 [2009];Chandi v. Shukla, 308 A.D.2d 427, 428 [2011] ). Here, plaintiffs have submitted affidavits from Mr. Gorelik and his New Jersey counsel in which they assert that parties included the provision allowing subsequent proceedings with respect non-marital issues in order to exclude the current claims relating to Prompt from the scope of the settlement. These representations are sufficient to demonstrate a factual issue relating to the parties' intentions with respect to Prompt.
In sum, this court finds that it would be unfair to plaintiffs to bar this action based on the entire controversy doctrine given that: (1) Prompt was not a party to the divorce proceeding; (2) the current action relates to violations of duties owed to Prompt; (3) there is no clearly applicable case law that would have required Mr. Gorelik to have litigated his current claims as part of the New Jersey divorce proceeding; (4) Mr. Gorelik did not expressly raise his current claims as part of any equitable distribution determination in the New Jersey action; and (5) the Agreement does not cover Prompt's current claims, or, at the very least, Mr. Gorelik's counsel understood that the current claims were not to be covered by the Agreement.
Turning to whether the Agreement itself bars this action, the Agreement, as noted above, can be read as expressly excluding Prompt from the resolution of the marital affairs. At the very least, the Agreement is ambiguous as to whether Prompt was intended to be covered, and the affidavits of Mr. Gorelik and his New Jersey counsel are sufficient to demonstrate the existence of factual issues warranting denial of summary judgment with respect to whether the Agreement itself bars this action.
This constitutes the decision and order of the court.