Opinion
***
09-24-2019
J.B., Plaintiff, v. M.G., Defendant.
Counsel for Plaintiff: Peter Bronstein and Meredith Strass from Bronstein Van Veen Counsel for Defendant: Marilyn B. Chinitz and Margaret L. Canby from Blank Rome LLP
Counsel for Plaintiff: Peter Bronstein and Meredith Strass from Bronstein Van Veen
Counsel for Defendant: Marilyn B. Chinitz and Margaret L. Canby from Blank Rome LLP
Douglas E. Hoffman, J.
Defendant M.G. ("Husband") moves for an order granting him partial summary judgment on this motion for a declaratory judgment stating that (1) the parties "respective rights and claims with respect to any property held by the other, or jointly, are controlled by the parties' Prenuptial Agreement of August 23, 1994" (the "Prenuptial Agreement"), (2) the Prenuptial Agreement is "valid and enforceable and has not been modified by either" the January 8, 2003 Pledge Agreement (the "2003 Pledge Agreement") or the March 17, 2006 Revocation and Release (the "2006 Revocation"), (3) Plaintiff J.B. ("Wife") is "not entitled to any portion of Defendant's separate property business interests, including, but not limited to, the entity [H.H.H. ] under the express terms" of the Prenuptial Agreement; (4) Wife is "not entitled to any portion of Defendant's separate property business interests, including, but not limited to, the entity H.H.H. under the express terms" of the 2006 Revocation; and (5) property held by the parties "shall be distributed solely according to title in accordance with the express terms of the parties' Prenuptial Agreement."
Names of the parties and other identifying information has been redacted.
Husband also seeks an order directing that (1) Wife "is barred by the statute of limitations set forth in C.P.L.R. § 213(1) from seeking rescission or reformation" of the 2006 Revocation; (2) Wife is barred from challenging the 2006 Revocation because "she has ratified its terms by accepting the economic benefits of Defendant's belief that he was the sole legal owner of H.H.H. for ten years after the execution" of the 2006 Revocation; and (3) Wife is "equitably estopped from asserting any claims to Defendant's business interests, based upon his reasonable detrimental reliance upon her representations that she was waiving any such interest."
Wife opposes the relief sought by Husband, except she agrees that the 1994 Prenuptial Agreement is valid. She also cross-moves for an order (1) compelling Husband to "comply with all discovery requests, includ[ing] the amended document requests and interrogatories dated March 1, 2018," and (2) directing Husband and his counsel to "engage in good faith efforts to resolve any disputes regarding discovery by meeting and conferring rather than engaging in any further motion practice." Husband opposes Wife's discovery requests, arguing that she is seeking discovery over assets that he would like the court to deem his wholly separate property not subject to equitable distribution.
Ostensibly, the instant motion and cross-motion are the parties' second attempt to either obtain or preclude discovery and equitable distribution of H.H.H. (and its related and/or successor entities). By motion sequence 002, Wife previously moved for an Order directing Husband to comply with extensive discovery requests in connection with her application for equitable distribution. Husband opposed those discovery requests, alleging that they were barred by the parties' Prenuptial Agreement and later agreements, and cross-moved for a protective order and to quash Wife's subpoenae to third parties because they sought discovery over his separate property. The court partially granted Wife's motion, stating, in part that:
At this point in the litigation, [granting Husband's requests] would have the effect of granting summary judgment to Husband as to Wife's equitable distribution claim. A motion for summary judgment ‘shall be granted if, upon all of papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party.’ C.P.L.R. § 3212(b). The proponent of summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact. No such showing was made here by Husband ... Husband here has not shown, as a matter of law and fact, that the 2003 Pledge Agreement cannot be enforced. Therefore, it would be inappropriate at this juncture to deny Wife discovery, because to decide otherwise would have the same effect as granting summary judgment, without, however, the requisite showing. Today's order is not a final determination concerning the validity of the 2003 Pledge Agreement, a final determination that must await trial.
February 9, 2018 mot. 002 Decision and Order at 8, internal citations omitted.
Motion sequence 002 was not, however, a formal motion by Husband for summary judgment seeking declaratory relief finding certain agreements valid (the 1994 Prenuptial Agreement, the 2003 Share Purchase, and 2006 Revocation) while finding other agreements invalid (the 2003 Pledge Agreement). Husband now seeks partial summary judgment in the instant motion sequence 003. Wife's cross-motion sequence 003 is her second motion to compel discovery, after her counsel apparently re-issued their discovery requests after the February 9, 2018 Decision and Order on motion sequence 002, which allowed some discovery and quashed other discovery requests. Wife alleges that Husband has not produced any discovery to date.
Factual Background
The following undisputed facts can be gleaned from the parties' submissions, unless otherwise noted: In 1994, the parties entered into a prenuptial agreement, which complied with D.R.L. § 236(B)(3) acknowledgment requirements for matrimonial agreements. Both parties were represented by counsel. At the time, the parties were living in New York. The agreement was signed in New York, and contains a New York choice of law and New York-only jurisdiction provision. Both parties concede that the Prenuptial Agreement is valid and enforceable.
Pursuant to the 1994 Prenuptial Agreement, each Party's separate property is to remain separate, and any gifts received by Wife are to be treated as her separate property:
The husband acknowledges that the Bride has been and will continue to be the recipient of various gifts of both personal and real property from her mother, her father, and her stepfather, and that all of such gifts, consisting of residences, homes, antiques, paintings or any property whatsoever that was gifted or bequeathed to the Bride, shall remain the sole and separate property of the Bride during the entire course of the marriage and will continue to be her separate property in the event of a divorce. No action on the part of the Bride, permitting the use of the property for the benefit of the husband or for their common enjoyment shall affect the character of the property as being separate property. There shall be no defense raised by the husband that the property has appreciated by his act or contribution, has been co-mingled or in any manner whatsoever, has ceased being anything but the separate property of the Bride. (1994 Prenuptial Agreement, ¶7)
There is a shorter, somewhat mirror version of that paragraph, which states that property acquired by Husband by "bequest, devise, or gift" will remain "exclusive and separate property" of Husband. (1994 Prenuptial Agreement, ¶8). Both parties agree that the Prenuptial Agreement was drafted, at least in large part, for the purpose of protecting Wife's separate interests, especially as a result of gifts and inheritances from her family.
The Prenuptial Agreement also requires that any jointly-owned assets be distributed 50-50 unless a "duly subscribed and acknowledged" writing exists to the contrary. 1994 Prenuptial Agreement, ¶6.
The parties also agreed about certain future writing requirements:
To avoid any future controversy, the Parties agree that no agreement or transaction between them with respect to any financial matters, or with respect to any income, assets, or property, real or personal, shall be binding unless made in writing signed by the Parties hereto. No agreement by either of the Parties to make any will or codicil containing any devise, legacy, or bequest, to the other shall be valid unless in writing signed by the Parties. The Parties further agree, that no contractual obligation shall be created or be binding upon either of the Parties with respect to the other unless made in writing signed by the Parties hereto. No waiver, modification, rescission, or cancellation of this Agreement, or any part thereof, shall be in any way effective unless in writing, signed and acknowledged by both Parties. (1994 Prenuptial Agreement, ¶15).
These writing requirements are the minimum required by the parties, and they do not waive or necessarily satisfy statutory requirements. For example, under New York law, wills and codicils must be co-signed by at least two witnesses subscribing to that writing. E.P.T.L. § 3-2.1.
After the Prenuptial Agreement was signed, the Parties married in 1994. Sometime thereafter, the parties moved to Monaco, where they lived for many years. Two children were born of the marriage, both of whom are now over the age of eighteen. Wife now resides in New York, Husband in Monaco.
In and around 2003, Wife's mother, Ms. V. ("Ms. V."), owned several shipping business entities, apparently directly and indirectly, which she inherited from her husband. There were several entities, the names of several of which began with a version of H.H.H. and that name's related variations, based on country of registration or incorporation. At some point during the marriage, Husband also started working in the shipping business.
In or about 2003, Ms. V. wished to give (or, according to Husband, sell) some part of the shipping business to her daughter and son-in-law. Ms. V. offered to transfer 50% of her indirectly-owned H.H.H. shipping-business shares to Husband and an option to Wife, which Wife could exercise within six months of a divorce filing, for half of those shares, i.e. , 25% of H.H.H..
Apparently to effectuate this, a January 2003 Pledge Agreement ("2003 Pledge Agreement") was signed by Husband, Wife, and a representative of [AD1], the company to which Ms. V. would effect the transfer of the H.H.H. shares. At that time, AD1 was wholly owned by Husband, although AD1 had been 50%-50% owned by each of Husband and Wife in 2001. Parties agree that in 2003, AD1 was owned only the Husband. In 2003, although Husband was sole owner of AD1, he did not sign the 2003 Pledge Agreement on behalf of AD1, and instead, it appears that another person signed on behalf of AD1.
This 2003 Pledge Agreement reiterates Ms. V.'s "condition," without naming her (or any of her business entities), other than as "seller" and "third party":
AD1 will acquire 50% of the issued share capital ... of ... H.H.H. from a third party ("the Seller"), on the condition that [Husband] and [Wife] come to an agreement which ensures that [Wife] will be entitled to acquire half of said 50% in case a divorce between [Husband] and [Wife] is imminent;
AD1, [Husband] and [Wife] accept the condition referred to under [paragraph above].
(2003 Pledge Agreement).
The 2003 Pledge Agreement then contained several provisions apparently to protect Wife's option to acquire her 25% part of the H.H.H. shares:
AD1 hereby grants to [Wife] and [Wife] hereby accepts from AD1 the option to acquire, without any consideration being due, 50% of the [H.H.H.] Shares (the "Option Shares") if [Wife] and or [Husband] formally apply for a divorce, such Option to be exercised in writing within six months of the date of such application.
AD1 hereby pledges ("verpandt") the Option Shares to [Wife] as a security for the fulfillment by AD1 and [Husband] of their obligations arising from this agreement; [Wife] hereby accepts this pledge. In this connection AD1 shall ensure that the Seller shall deliver the Option Shares directly to [Wife], or any person or legal entity indicated by [Wife]. Any third party who at any time is physically holding any of the Option Shares shall be obligated and entitled to deliver the Option Shares to [Wife] upon written demand by [Wife], provided that such demand states that an application for a divorce has been made.
[Wife's] security interest ("pandrecht") in the Option Shares automatically converts into full ownership of those shares (a) when [Wife] exercises the Option or (b) in case AD1 or [Husband] is in Default as defined below and [Wife] informs the party in Default in writing of such Default. Any third party who at that time is in possession of the Option Shares shall be deemed to hold the Option Shares on behalf of [Wife]....
[Husband] unconditionally guarantees the due fulfilment by AD1 of its obligations in connection with this agreement.
AD1 or [Husband] will be in Default if such party commits any breach of this agreement or any other agreement between the parties in connection with this agreement....
No waiver by any party of any breach or default will be a waiver of any breach or default occurring later. A waiver will be valid only if it is in written form.
(2003 Pledge Agreement).
This 2003 Pledge Agreement also contains a Netherlands choice-of-law and jurisdiction clause:
"This agreement is governed by the laws of the Netherlands; any disputes arising from this agreement and any further agreements in connection with this agreement will be subject to the jurisdiction of the District Court of Rotterdam, the Netherlands."
(2003 Pledge Agreement, ¶15).
The three signatures on the 2003 Pledge Agreement — of Husband, Wife, and AD1 representative — are not acknowledged.
Thereafter, Ms. V. transferred the H.H.H. shares. Specifically, in October 2003, P. Establishment (indirectly controlled by Ms. V., and a holder of 100% H.H.H. shares) entered into a share purchase agreement with each of AD1 (controlled by Husband) and T. Limited (an entity apparently controlled by another individual, P.B.) ("2003 Share Purchase Agreement"). This 2003 Share Purchase Agreement transferred the H.H.H. shares, half to Husband's company AD1, and half to Mr. P.B.'s company T.. The agreement contains a merger clause. The stated purchase price was $300,000. In her papers, Wife claims that only Mr. P.B. paid the $300,000 for his half, and that Husband's half was solely a gift from Ms. V.. Husband, in his papers, claims that although Mr. P.B. paid the entire $300,000, Husband eventually repaid Mr. P.B. $150,000 for Husband's half, out of Husband's salary and company dividends, although Husband does not provide proof of this repayment. The 2003 Share Purchase Agreement contains a Liechtenstein choice of law, and a voluntary Liechtenstein jurisdiction clause. The 2003 Share Purchase Agreement appears to be signed by representatives of the three entities, but not by Ms. V., Husband, or Mr. P.B.. The representatives' signatures on the 2003 Share Purchase Agreement are not acknowledged.
Subsequently, in 2006, when parties were living in Monaco, Husband apparently presented Wife with a one-page agreement and/or letter seeking to revoke the 2003 Pledge Agreement ("2006 Revocation"). Husband states that he did so after years of conversations between Husband and Wife, and that she agreed in order to allow Husband and his partner Mr. P.B. to run the shipping business with no risk that either Wife or Wife's mother (indirectly through Wife) would ever have an interest in or interfere with the business. [Def. Aff. at 13]. Wife, however, states that this request was not after any negotiations, and was part of Husband's threat to leave her and the children if she did not sign. Both parties agree that Husband asked Wife to sign the revocation, and that Wife signed it. Their signatures are not verified or acknowledged. There does not appear to be representation by attorneys, stated consideration, financial disclosure, any choice-of-law or jurisdictional provisions.
Validity of the 1994 Prenuptial Agreement
The 1994 Prenuptial Agreement was signed and duly acknowledged as required under D.R.L. § 236(B)(3). Both sides were represented by counsel, there were negotiations about the agreement, disclosures, and the agreement has various provisions that benefit each of the parties (even if not to an identical extent). The agreement has a New York choice of law and New York-only jurisdiction provision. Both parties concede the validity and enforceability of this agreement, and there are no claims of fraud, duress, overreaching, or unconscionability raised regarding this agreement by either side.
A motion for summary judgment "shall be granted if, upon all of papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party." C.P.L.R. § 3212(b). The proponent of summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact. Zuckerman v. City of New York , 49 NY2d 557, 562, 404 N.E.2d 718, 427 N.Y.S.2d 595 (1980) ; see also Winegrad v. New York Univ. Med. Center , 64 NY2d 851, 853, 476 N.E.2d 642, 487 N.Y.S.2d 316 (1985) ("The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. Failure to make such a showing requires the denial of the motion, regardless of the sufficiency of the opposing papers"); Ayotte v. Gervasio , 81 NY2d 1062, 1063, 619 N.E.2d 400, 601 N.Y.S.2d 463 (1993) ; Finklestein v. Cornell Univ. Med. Coll. , 269 AD2d 114, 117, 702 N.Y.S.2d 285 (1st Dept. 2000). C.P.L.R. § 3212[b] also requires that the movant provide a copy of all of the pleAD1ngs, which Husband has failed to do. See, e.g. , Weinstein v. Gindi , 92 AD3d 526, 527, 938 N.Y.S.2d 538, 539 (1st Dept. 2012) ("It is well settled that the failure to attach all of the pleAD1ngs is a fatal procedural defect requiring denial of a motion for summary judgment"). Wife, however, has failed to raise this issue, and the court may not raise this particular issue sue sponte , and therefore, may not deny summary judgment on this basis. Mew Equity, LLC v. Sutton Land Servs., LLC , 144 AD3d 874, 877, 42 N.Y.S.3d 175, 178 (2d Dept. 2016). The court notes, however, that the parties' failure to include their pleadings, including causes of action, answers, and counterclaims, required the court to search and retrieve the parties' 2016 pleadings from the County Clerk, and deprived both parties from the ability to address the actual pleadings in their papers (cf. Biscone v. JetBlue Airways Corp. , 103 AD3d 158, 178, 957 N.Y.S.2d 361, 377 (2d Dept. 2012) ; C.P.L.R. § 2214(c). The court also notes that it cannot grant summary judgment on any basis not raised by the movant because the other side would not have had notice and opportunity to be heard. Patel v. Sharma , 168 AD3d 966, 967, 90 N.Y.S.3d 538 (2d Dept. 2019).
Here, after a search of the parties' pleAD1ngs, it appears that Wife seeks equitable distribution (among other causes of action) [Plaintiff's Verified Complaint for Divorce]. Husband, in his Verified Answer and Counterclaim, requests a "judgment as follows... dismissing with prejudice [the cause of action requesting equitable distribution, among others]," plus an affirmative counterclaim "declaring binding and effective and enforcing the parties' [1994 Prenuptial Agreement], and only entering relief in this action which is consistent with its terms and provisions, and consisted with the [2006] Revocation Agreement." [Defendant's Verified Answer and Counterclaims].
For the purposes of Husband's partial summary judgment request for declaratory judgment that the 1994 Prenuptial Agreement is valid and enforceable, therefore, it appears that a declaration of the validity of the 1994 Prenuptial Agreement is not a specific cause of action, but rather, a portion of the equitable distribution and declaration of separate property claims (among other claims) sought by the parties. Accordingly, although the court denies Husband's partial summary judgment request for declaratory judgment that the 1994 Prenuptial Agreement is valid and enforceable because this is not a cause of action, the court does hold that, on consent of both sides, the 1994 Prenuptial Agreement is valid and enforceable.
Validity of the 2003 Pledge Agreement
The 2003 Pledge Agreement is signed by Husband, Wife, and AD1 representative, but not acknowledged. It contains a Netherlands choice-of-law and jurisdiction clause. Both parties explain that this 2003 Pledge Agreement was signed at the behest of Ms. V., as a condition before she would agree to transfer the H.H.H. shares. Wife was, essentially, a third-party beneficiary. Indeed, Wife's signature may well be considered superfluous on this contract, as Wife has no obligations under it, only rights, including certain immediate voting rights should she choose to exercise them.
Although in motion sequence 002, neither party challenged the original validity of this 2003 agreement, now, the Husband alleges that the agreement cannot be valid. He states the following reasons for the possible invalidity of the 2003 Pledge Agreement:
First, Husband alleges that the 2003 Pledge Agreement is an attempted "marital agreement" between spouses, and therefore, the strict acknowledgement provisions of D.R.L. § 236(B)(3) would apply, and because this alleged "marital agreement" is not acknowledged, therefore, Husband alleges that the 2003 Pledge Agreement cannot be valid. [Def. Memo of Law at 10]. Husband submits an affidavit of a Dutch attorney, Neill Andre De La Porte, Esq., discussing whether Dutch courts would apply Dutch law to this agreement, given its Netherlands choice-of-law provision, he states that they might not: "Although under the rules of private international law under Dutch law, foreign parties may choose for the laws of a particular jurisdiction, it is not certain that such choice of laws will be upheld by Dutch court in the absence of some nexus (‘connection’) with the Netherlands." [De La Porte Affir. at 5]. Mr. De La Porte provides his curriculum vitae and also states that he is also a "member of the New York Bar since 1993."
Mr. De La Porte opines that there is no "acknowledgement" requirement for either the 2003 Pledge Agreement or the 2006 Revocation Agreement (if that 2006 Revocation were to be analyzed under Dutch law as well), and neither contract would fail purely on the basis of no formal acknowledgment under Dutch or Netherlands Antilles laws.
Additionally, Mr. De La Porte also opines that any challenge to the 2006 Revocation Agreement, if considered under Dutch law, would be barred by that jurisdiction's five-year statute of limitations. [De La Porte Affir. at 10]. Neither Mr. De La Porte, nor the Husband, however, explains how an older agreement, the 2003 Pledge Agreement, would not, therefore, also be subject to the same five-year statute of limitations under Dutch law.
Husband's motion, however, requests that this court apply New York law to the 2003 Pledge Agreement. Mr. De La Porte states that Dutch courts would likely decline jurisdiction, and that New York law should control as to the application of the 2003 Pledge Agreement if it is considered to modify the parties' Prenuptial Agreement:
any attempt to obtain jurisdiction in the Netherlands over any aspect of the matrimonial affairs of [Husband] and [Wife]'s divorce, would in our view, in the absence of any ‘Dutch assets’ or residency not be likely had. Therefore, New York law would apply to a New York Prenuptial Agreement and as is the present case, New York would be the appropriate forum for jurisdiction over the divorce action. Thus, in order for the [2003] Pledge Agreement to modify the distribution plan of the New York pre-nuptial agreement, it would have to comport with all the requirements for modification under New York law such as the requirement for an acknowledgement. Absent the acknowledgment, the original pre-nuptial property distribution plan strictly according to title should control, even could the parties have been able to litigate in another forum.
[De La Porte Affir. at 11-12.]
Husband thus alleges that the 2003 Pledge Agreement is an attempted amendment of the parties' 1994 Prenuptial Agreement and that Wife allegedly wants to enforce the "amended" Prenuptial Agreement. And because this alleged 2003 amendment is not acknowledged, as required by the Prenuptial Agreement for any "modification or waiver," therefore, Husband alleges that the 2003 Pledge Agreement is not valid. Similarly, Husband also alleges that the 2003 Pledge Agreement "fails as either a free standing ‘marital agreement’ or a modification of the Prenuptial Agreement," and therefore, it is not valid. [Def. Memo of Law at 10].
Wife does not, however, allege that the 2003 Pledge Agreement amended or modified the Prenuptial Agreement. [Pl. Memo of Law at 6]. Wife, instead, states that the Pledge Agreement is entirely consistent with the Prenuptial Agreement, and is an agreement evidencing Wife's receipt of certain rights and assets, by gift, just as planned by the Prenuptial Agreement. [Id. at 7]. Wife also states that the 2003 Pledge Agreement, "executed by a third party (Mr. S. on behalf of AD1) as well as by the Husband and Wife" is not a marital or postnuptial agreement, and therefore, "no acknowledgement was required." [Id. at 6] There does not appear to be anything inconsistent between the Prenuptial Agreement and the Pledge, and Husband does not explain what exactly is the alleged amendment of the Prenuptial Agreement.
Husband also has not provided a basis to invalidate the Netherlands choice-of-law provision in the 2003 Pledge Agreement and to apply New York law. Husband's Dutch law expert opines whether a court would accept the Netherlands choice-of-law provision, whether it would seek to apply the law of Dutch Antilles, or another jurisdiction's law. [De La Porte Affir. at 5]. He does not, however, cite or attach any Dutch or Dutch Antilles law to his affidavit (although he does in his reply affidavit). MBI Int'l Holdings Inc. v. Barclays Bank PLC , 151 AD3d 108, 116, 57 N.Y.S.3d 119, 125-126 (1st Dept. 2017) (upholding dismissal of fiduciary-duty allegations that relied on foreign law because plaintiffs "have failed to allege with particularity the applicable Saudi law and only generally discuss" the relevant Saudi legal concepts; citing C.P.L.R. § 4511 ); Warin v. Wildenstein & Co. , 297 AD2d 214, 215, 746 N.Y.S.2d 282, 282-283 (1st Dept. 2002) (upholding trial court's decision, declining to apply French law because plaintiff's expert did not explain his conclusions and provided only some, but not all, of the jurisprudence he relied on, a "gap that (made) it impossible to decide" the legal question presented). Husband's attorney in this case then states that a Dutch court "would apply" Netherlands Antilles law "because it is the situs of the property, the location of the contracting even, and The Netherlands has no connection to the parties." [Def. Affir. at 5]. And, apparently, under those laws, "the parties could not pledge an in rem right to property where they did not possess at the time nor can one create an automatically invoked or ‘springing’ transfer based upon a contingent future event (i.e. a divorce which may or may not ever happen)." [Id. ]
Husband and his expert also state that there is a lawsuit in the Netherlands related to the 2003 Pledge Agreement, which is currently with an appellate court there. [De La Porte Affir. at 10-11]. That suit was apparently brought by Mrs. V. against Husband and other individuals, and seeks certain discovery, among other possible relief, and perhaps does not include Wife as a party. [In her reply, Wife stated that all defendants other than Husband were dismissed from the Dutch lawsuit because they either provided requested discovery documents or signed statements that they do not have any requested discovery responses]. Although determinations in the Dutch lawsuit would not necessarily be dispositive of any issues in the instant matrimonial action, it could be meaningful to know whether Dutch courts are currently applying Dutch law to their analysis of the 2003 Pledge Agreement. Wife's Dutch law expert, Michiel Van Leeuwen, states that Husband, who is a defendant both in this case and in the Dutch case, did not argue in the Dutch proceedings "that the laws of the Netherlands Antilles would apply to any of the matters in issue [unlike he attempts to do here apparently] ... Defendant relied on provisions of Dutch law [in the Dutch lawsuit], apart from the references to the New York proceedings." [Van Leeuwen Affir. at 4]. Wife's Dutch law expert then cites, quotes and discusses Dutch and European Union law on the ability of parties to contract jurisdiction and choice of law, and attaches sworn translations of the relevant Dutch law that he refers to in the affirmation. [Van Leeuwen Affir. at 5-6, Ex. 2].
Wife's Dutch law expert states that neither party in that lawsuit contested the Dutch court's jurisdiction, and that, on "that basis alone, the first instance Judge found that he had jurisdiction. This was based on article 11 CCP which provides that a defense of non-jurisdiction must be raised at the start of a proceeding, before other defenses." [Van Leeuwen Affir. at 6, n.1]. This does not necessarily mean that the jurisdiction is exclusive to the Netherlands. Neither party's Dutch law expert, however, appears to state in their affirmations on this motion whether the Dutch courts made a choice-of-law determination to apply Dutch law to the 2003 Pledge Agreement (although, apparently, the Dutch appellate decision might not have been issued yet).
Citing the Dutch lawsuit, Husband (who is a defendant in that case) has also argued in this motion in this case that Plaintiff Wife (who is not a party to the Dutch lawsuit) "should be bound by the admission of her mother that [Plaintiff's mother's] counsel failed to implement [Plaintiff Mother's] intentions in drafting the [2003] Pledge Agreement." [Def. Memo of Law at 21-22.] Husband cites several cases that stand for the proposition that a formal or informal "judicial admission in one action may become an admission in the evidentiary sense in another action." [Id. , citing Matter of Liquidation of Union Indem. Ins. Co. of New York , 89 NY2d 94, 103, 674 N.E.2d 313 (1996), New Greenwich Litig. Tr., LLC v. Citco Fund Servs. (Europe) B.V. , 145 AD3d 16, 25, 41 N.Y.S.3d 1 (1st Dept. 2016) ; Jack C. Hirsch, Inc. v. Town of N. Hempstead , 177 AD2d 683, 684, 577 N.Y.S.2d 75 (2d Dept. 1991) ]. Husband does not, however, explain how Wife's mother can be considered Wife's agent sufficient to bind Wife to any statements made by her mother in the Dutch proceeding. Husband also does not provide the court with copies of any alleged admissions by Wife's mother (not translated or otherwise; foreign-language court filings would have to be accompanied by a C.P.L.R. § 2101(b) affidavit of translation to be admissible, Reyes v. Arco Wentworth Mgmt. Corp. , 83 AD3d 47, 54, 919 N.Y.S.2d 44, 50 (2d Dept. 2011) ).
C.P.L.R. § 4511(b) permits the court to take judicial notice of a law of a foreign country under certain circumstances, but courts "shall" take such notice under C.P.L.R. § 4511(b) only if "a party requests it, furnishes the court sufficient information to enable it to comply with the request, and has given each adverse party notice of his intention to request it" Husband's submission does not cite or provide the substantive underlying law, and his expert's affirmation regarding 2003 Pledge Agreement does not comply with the second, "sufficient information," prong of C.P.L.R. § 4511(b). The "sufficient information" prong is exacting, and trial courts have frequently refused to take judicial notice of foreign laws that are not appropriately presented. See e.g. , MBI Int'l Holdings Inc. v. Barclays Bank , 151 AD3d at 116 ; Warin v. Wildenstein , 297 AD2d at 215. Cf. , HSBC Guyerzeller Bank AG v. Chascona N.V. , 42 AD3d 381, 841 N.Y.S. 2d 11 (1st Dept. 2007) (upholding trial court's application of English substantive law where the parties "made substantial submissions interpreting a foreign law"); Zuckerman v. Metro. Museum of Art , 307 F. Supp. 3d 304 (S.D.NY 2018) (discussing detailed Italian law expert reports submitted by both parties, and applying New York choice-of-law test to determine whether there is a conflict between substantive Italian law as opined by the experts and New York law), affirmed although without discussion of foreign law, 928 F.3d 186, 193 (2d Cir. 2019) ("Both parties rely solely on New York law in making arguments concerning laches. Therefore, we do the same"). As Wife points out, Husband's Dutch legal expert's affidavit is "peppered with tentative language," such as "most likely, it is not certain, and it is likely," rather than certainty or any citation to relevant law, specific cases or statutes. [Pl. Memo of Law at 14].
Although both experts concede that under Dutch law, formal acknowledgement is not necessary and the 2003 Pledge Agreement would not be invalidated on that basis, Husband's counsel argues that there are other problems with the 2003 Pledge Agreement, including regarding the share transfer, in rem property, and certain implications of corporate laws of Curaçao. Experts disagree about Netherlands jurisdiction, and Husband's expert takes issue with Wife's expert's reliance on European Union law for jurisdictional conclusions. Neither party provided the court with detailed relevant Dutch, Dutch Antilles, or Curaçao law to allow this court to have "sufficient information" about the alleged law for the court to take judicial notice of the foreign law to make an unequivocal determination about the 2003 Pledge Agreement under the totality of those laws. C.P.L.R. § 4511(b). Therefore, this court does not have sufficient information to determine whether any of Dutch, Dutch Antilles, or Curaçao law would apply to the 2003 Pledge Agreement or how the agreement's validity would be interpreted or determined. Where, as here, the parties do not provide sufficient support to fully prove the foreign law sought, then, "the parties have consented that the forum law be applied to the controversy." Bank of NY v. Nickel , 14 AD3d 140, 148-149, 789 N.Y.S.2d 95, 101-102 (1st Dept. 2004) (holding that defendant did not "prove" foreign law when it did not "state the substance—as opposed to a mere citation of the law, on the one hand, or a verbatim reproduction of the statute, on the other—of the foreign law," and thus, foreign-law defense failed "as a matter of law," and defendant was considered to have consented that New York and federal "forum law be applied to the controversy") (internal citations omitted); see also Minovici v. Belkin BV , 109 AD3d 520, 525, 971 N.Y.S.2d 103, 109 (2d Dept. 2013) (upholding trial court's application of New York law because "plaintiffs failed to plead the substance of the foreign law to be applied, and their opposition papers failed to provide sufficient information concerning the foreign law at issue"); Ponnambalam v. Sivaprakasapillai , 35 AD3d 571, 574, 829 N.Y.S.2d 540, 542 (2d Dept. 2006) (same); MediaXposure Ltd. (Cayman) v. Omnireliant Holdings, Inc. , 29 Misc 3d 1215(A), 1215A, 918 N.Y.S.2d 398, 398 (Sup. Ct. NY Co. 2010) ("I am reluctant to rely on plaintiff's limited submissions alone to take judicial notice of the law of a foreign nation concerning what are complicated issues of law," where plaintiff submitted only "a few cases on the English Law claim of dishonest assistance, and a short excerpt from a treatise"); Matter of Edwards , 114 Misc 2d 703, 708, 452 N.Y.S.2d 293 (Sur. Ct., Onondaga Co. 1982) ("To take judicial notice without certainty of what the law of Mexico is on the subject ... may be an abuse of discretion"). Therefore, for purposes of the present motion, the court cannot apply Dutch law to the 2003 Pledge Agreement, although that may well be the correct law to apply to that agreement, and appears to be the law currently being applied in the Dutch lawsuit between Wife's mother and Husband.
Under New York law (which ultimately might not be the correct law for the review of the 2003 Pledge Agreement), Husband argues that the 2003 Pledge Agreement fails as an unacknowledged matrimonial agreement. It is not, however, clear that under New York law, the 2003 Pledge Agreement would necessarily be considered a matrimonial agreement, where the agreement is signed by a third individual on behalf of a corporate entity, in addition to the two spouses, especially because one of the spouses may be a third-party beneficiary, ( 253 E. 62nd St., LLC v. Moluka Enterprises, LLC , 151 AD3d 489, 490, 56 N.Y.S.3d 314 (1st Dept. 2017), and additionally cites the "seller" (Wife's mother), who is not one of the spouses or signatories. Cf. , Popowich v. Korman , 73 AD3d 515, 517, 900 N.Y.S.2d 297 (1st Dept. 2010) (holding that an agreement between spouses, which included a "written guaranty requir[ing] defendant to repay the loans [to the other spouse], ... is an agreement that makes ‘provision for the ownership, division or distribution of separate and marital property’ [subject to] Domestic Relations Law § 236 [B] [3]"). The 2003 Pledge Agreement provides a structure for receipt of certain property from Wife's mother to the spouses, directly and indirectly via certain controlled entities, including a provision that each of Husband, Wife, and Husband's entity "accept the condition" [presumably non-signatory seller's condition] that "[Husband's company] will acquire [certain TST shares] from [Wife's mother] on the condition that [Husband] and [Wife] come to an agreement which ensures that [Wife] will be entitled to acquire half of said 50% in case a divorce between [Husband] and [Wife] is imminent." . This required acceptance of the seller's condition prior to purchase from a non-spouse seller likely places this agreement outside of what is considered an agreement by the parties-spouses with each other, as defined in D.R.L.§ 236(B) :
Agreement of the parties. An agreement by the parties [to a matrimonial action commenced after 1980, the effective date of D.R.L.§ 236(B) ], made before or during the marriage... [which] may include (1) a contract to make a testamentary provision of any kind, or a waiver of any right to elect against the provisions of a will; (2) provision for the ownership, division or distribution of separate and marital property; (3) provision for the amount and duration of maintenance or other terms and conditions of the marriage relationship; and (4) provision for the custody, care, education and maintenance of any child of the parties.
NY D.R.L. § 236(B)(3).
NY D.R.L. § 236(B) acknowledgement rules would apply to the 2003 Pledge Agreement only if it were a matrimonial agreement, and only if were not a "foreign" agreement. See, e.g. , Lederman v. Lederman , 203 AD2d 182, 612 N.Y.S.2d 851 (1st Dept. 1994) (declining to invalidate a District of Columbia postnuptial for noncompliance with NY D.R.L. § 236(B) because "the law of the District of Columbia controls," thus, D.R.L. § 236(B) is not applicable). Husband has also made an argument that if the 2006 Revocation were invalidated on the basis of NY D.R.L. § 236(B)(3), then Husband would request that D.R.L. § 236(B)(3) apply to the 2003 Pledge Agreement to invalidate that agreement as well, with no legal showing for whether the 2003 agreement is a prenuptial agreement within the meaning of D.R.L. § 236(B)(3) or whether New York substantive law should apply to that agreement.
Additionally, Husband, in his reply in further support of his motion and in opposition to Wife's cross-motion, cites Mahoney-Buntzman v. Buntzman , for the proposition that a "party to litigation may not take a position contrary to a position taken in an income tax return." 12 NY3d 415, 422, 909 N.E.2d 62 (2009). Husband argues that Wife should have declared the 2003 gifted pledge on her United States tax returns on IRS "form 3520 and disclose[d] both the gift from the foreign nongrantor trust ... as the time of the transaction, as well as the ongoing ownership interest in that foreign asset in her tax filings for each year in which she owned that interest.... According to Defendant, Plaintiff did not file this form nor report in her tax filings an ownership interest in H.H.H.." [Def. Reply Memo of Law at 1]. Husband adds that the reason for this "is because [Wife] did not own the shares nor were the shares gifted to [Wife] as she claims." [Def. Reply Memo of Law at 1]. This argument (that Wife never had any interest in H.H.H.) suggests that the 2006 Revocation was not necessary and meaningless to both parties, that the 2003 Pledge either did not exist or both spouses understood it from the beginning to be not valid or worthless. This reAD1ng is not entirely consistent with how either party has previously explained the 2003 and 2006 instruments and events. Further, Husband does not suggest what value Wife should have put in the tax filings, or whether she had access to information sufficient to value those assets.
At this time, there is not sufficient showing for the court to grant summary judgment to Husband to invalidate the 2003 Pledge Agreement, under either Dutch or New York law. There are numerous open questions about the applicable law, the type of contract, its meaning, as well as facts surrounding the transfer. Today's order is not a final determination concerning the validity of the 2003 Pledge Agreement, a final determination that must await trial.
Validity of the 2003 Share Purchase Agreement
The October 2003 Share Purchase Agreement transferred H.H.H. shares, half to Husband's company AD1, and half to Mr. P.B.'s company. The agreement contains a merger clause. The stated purchase price was $300,000, paid only by Mr. P.B., although there is a factual disagreement between Husband and Wife whether Husband ever paid Mr. P.B. $150,000 for Husband's half, or whether (as Wife alleges), Husband's half was gifted by Ms. V.. [Pl. Memo of Law at 9]. There is not sufficient proof at this time for the court to resolve this factual dispute. The representatives' signatures on the October 2003 Share Purchase Agreement are also not acknowledged.
Husband suggests that the shares were received as a purchase, and not a gift, citing extensive New York law on "donative intent," although without offering a detailed choice of law explanation for why New York law would apply to the 2003 gift or sale. [Def. Reply Memo of Law at 1]. Whether some portion of the 2003 transfer was a gift (and some a sale to Husband's partner) is a disputed question of fact. Husband argues that if the 2003 share transfer was entirely a purchase, and not a gift, then, therefore, it is not at all related to the 2003 Pledge Agreement: the 2003 "Pledge Agreement provided Plaintiff with nothing more than an ‘option’ to acquire 50% of H.H.H. shares if certain conditions were met — which were never met." [Def. Sur-reply at 1.] Defendant correctly points out that the 2003 Share Purchase agreement does not refer back to the 2003 Pledge, which would have bolstered Wife's argument that the 2003 Share Purchase is the presumed second step in the plan commenced with the 2003 Pledge. At this point, however, there is not sufficient information about the share transfer to conclude either whether it was a sale or a partial gift, and whether (and under which country's law) the pledge was already in effect at the signing of the 2003 Pledge Agreement, regardless of the gift/sale characterization of the 2003 Share Purchase agreement (although at least some portions of the 2003 Pledge do appear to be immediately valid by their plain reAD1ng).
Husband further states that the 2003 Share Purchase is not related to the 2003 Pledge agreement because the Share Purchase Agreement is between certain entities and not Wife's mother directly: "Plaintiff's mother is not the vendor; she is not the seller; she is not the owner of H.H.H. and thus could not gift that which she did not own." [Def. Reply Aff. at 6]. Husband then attaches several potentially contemporaneous emails to Wife's mother, including by her attorneys. Wife does not allege that her mother directly owned the shares, but rather owned them indirectly through various entities that she inherited after Wife's stepfather passed away. Wife's mother then, according to Wife, directed the gift and sale, after first obtaining the promises in the 2003 Pledge from both the Husband and his by-then-totally-owned AD1 company, as well as from the [beneficiary/recipient] Wife. Whether Wife's mother owned the shares directly or had indirect control of them does not change the analysis in this case.
Husband's Dutch law expert points out a separate alleged back-dating issue with the October 2003 Share Purchase Agreement: "purportedly ... economic rights were transferred as per December 11, 2001." [De La Porte Affir. at 8]. Mr. De La Porte then adds that "it is unusual and odd to have such economic ownership take place close to two (2) years prior to the date of the agreement. This would require full due diligence on the company involved, in particular as to its financial performance and status, and including a clear diligence on profits and losses, and potentially any purported rights of 3rd parties to the [2003] Pledge Agreement. No such clear information is evident." [Id. ] It is not clear whether Husband thus concedes the current need for "full due diligence" or suggests that there was a requirement for such diligence in 2003.
Wife states that the 2001 date in the 2003 agreement is further support for the 50-50 sharing of this asset between the spouses: "in December 2001, [Husband] and [Wife] were already 50%/50% shareholders of AD1; it was not until the [2003] Pledge Agreement was signed in January 2003 that [Husband] was granted my permission to use my 50% of the AD1 shares on the condition that if we divorce, my half of the H.H.H. shares would revert to me. Accordingly, if the Share Purchase Agreement went into effect as of the back-date of December 2001, then it is all the more clear that [Wife] was the direct recipient of 25% of the H.H.H. share by [Wife's] 50% ownership of AD1." [Wife Aff. at 5-6]. At this time, the court does not have sufficient information to state whether such back-dating would be allowed under any law, or whether the back-dating is necessary or helpful to Wife's claim.
This 2003 agreement contains a Liechtenstein choice of law, and a voluntary Liechtenstein jurisdiction clause. On the prior motion in this case, neither party argued that under the operative Liechtenstein law the agreement would not be valid without an acknowledgment, or for any other reason. To date, no affirmation from a Liechtenstein attorney has been submitted by either side. It is the court's understanding that all of the shares were transmitted pursuant to the agreement, and that all signatories fully complied with the agreement. Neither party seeks to invalidate the 2003 Share Purchase Agreement, although Husband argues that it is not related to the 2003 Pledge. The agreement is therefore presumed valid.
Validity of the 2006 Revocation
The 2006 Revocation was signed by Wife and Husband in Monaco, and was also not acknowledged. It does not contain any choice of law or jurisdiction clauses. Wife has argued that New York law should apply to the 2006 Revocation, and that it is invalid under New York law because it is not acknowledged, as well as because of duress and unconscionability.
As for choice of law and jurisdiction, Mr. De La Porte states that in the 2006 Revocation "no choice of laws was made. However, in the absence of such specific choice of laws, we would anticipate, and assume that both [Husband] and [Wife] would expect as it relates to a Netherlands Antilles entity at the time, that Netherlands Antilles law would apply and similarly a Netherlands Antilles court would apply Netherlands Antilles law and determine the instruction to transfer [the shares] was attempted to be made under application Netherlands Antilles law." [Id. ] He adds, however, that "[i]n particular as under Netherlands Antilles law at the time and now under Curaçao law it is held that the laws governing the corporate body itself, being Netherlands Antilles law at the time, mandate such law to govern the transfer of title as well as the pledging of shares. [fn] Not applicable per se in case of bearer shares only." [De La Porte Reply Affir. at 9-10]. Mr. De La Porte does not cite or include the Curaçao or Netherlands Antilles law he seems to be referring to, or explain whether the H.H.H. shares would be considered the "bearer" shares that he mentions, under either Curaçao or Netherlands Antilles law. [Id. ; De La Porte Reply Affir. at 5-7, same].
Wife submits an affidavit of Dutch counsel Mr. Van Leeuwen to explain why New York law would be controlling for the Revocation. It is not, however, clear whether Dutch choice of law analysis would apply to choice of law for the Revocation, which was signed in Monaco by parties long resident in Monaco. At this stage, therefore, the court has no choice but to review the 2006 Revocation under New York law.
In his Reply, however, Husband quotes a portion of the Dutch 2017 Judgment (Def. Reply Aff. at 14; Ex. O, 2017 Dutch Judgment English-language translation with an affidavit of translation). The Judgment apparently states that the Dutch court at least assumed that Wife revoked her rights in the 2006 Revocation. Without deciding whether this is a final finding of the Dutch court on the issue of the validity and effectiveness of the 2006 Revocation, Wife was not one of the parties to the Dutch action, and therefore, any finding that is "against her interests" in that action would not necessarily attach to her in this proceeding (see, e.g. , TechnoMarine SA v. Giftports, Inc. , 758 F.3d 493, 499 (2d Cir. 2014) ), and would not be a reason to grant Husband summary judgment on that basis.
In the instant action, Husband denies any duress or unconscionability, but concedes that the 2006 Revocation is not acknowledged and that it would fail under NY D.R.L. § 236(B)(3) [Def. Memo of Law at 12, citing Matisoff v. Dobi , 90 NY2d 127, 681 N.E.2d 376, 659 N.Y.S.2d 209 (1997) and Popowich v. Korman , 73 AD3d 515, 517, 900 N.Y.S.2d 297, 300 (1st Dept. 2015) ]. Husband submits that D.R.L. § 236(B)(3) should either apply to both the 2003 Pledge Agreement and the 2006 Revocation, or to neither one, and that therefore, they should either both be valid despite not being acknowledged (and therefore, the 2006 Revocation would "cancel" the 2003 Pledge Agreement) or D.R.L. § 236(B)(3) acknowledgment requirement should preclude both the 2003 Pledge Agreement and the 2006 Revocation from being valid. [Def. Affir. at 9]. Husband adds that any " ‘cherry picking’ of different standards for each document would be completely contrary to the long standing rules of the First Department that a properly executed and valid Prenuptial Agreement shall not be rewritten or reformed because the Court seems to think some other arrangement is better, or even ‘more fair’ or the original arrangement ‘imprudent’ in hindsight." [Id. at 9-10]. As discussed above, however, it does not appear that the 2003 Pledge Agreement is a modification of the parties' 1994 Prenuptial Agreement, but rather, the 2003 Pledge is a document evidencing receipt of a gift as planned under the 1994 Prenuptial Agreement. Wife also argues that the 2006 Revocation is invalid not because it is "imprudent," but because of overreaching and unconscionability (as discussed below). Additionally, as argued by Wife, although under New York law the 2006 Revocation would be considered a marital contract, the 2003 Pledge as a three-party contract in connection with receipt of a gift from a third-party seller would not. See, e.g. , Popowich v. Korman , 73 AD3d 515, 517, 900 N.Y.S.2d 297, 300 (1st Dept. 2015) quoting D.R.L. § 236(B)(3). Similarly, here, the 2006 Revocation makes a "provision for the ownership, division or distribution of separate and marital property," and was signed by the parties during their marriage. Therefore, the 2006 Revocation would fall within D.R.L. § 236(B)(3) and its acknowledgment requirement.
Husband's counsel also argues that the 2006 Revocation is a valid "revocation" of the 2003 Pledge agreement even without the acknowledgement because the 2003 Pledge Agreement did not require any "additional formalities to waive its entitlements on its face... and nothing more was required to do so." [Def. Affir. at 7]. It is not clear, however, that lack of specific stated "formalities" in an agreement would necessarily mean that the agreement is rescindable without any formalities, i.e. , without application of relevant statutory requirements. For example, as discussed above, the parties' Prenuptial Agreement requires that "any will or codicil containing any devise, legacy, or bequest, to the other [Party] shall be ... in writing signed by the Parties." But this "in writing" is a minimum required by the parties, it does not and cannot waive or necessarily satisfy statutory requirements, including the requirement under New York law that wills and codicils must be co-signed by at least two witnesses subscribing to that writing. E.P.T.L. § 3-2.1.
There may be several issues with the 2006 Revocation, however, at least one of which is conceded by Husband's Dutch law expert, including what he characterizes as apparently typographical errors in the 2006 Revocation regarding which company's shares are to be waived or canceled. The Revocation states that it cancels the "pledge in relation to ‘ADMI Investments NV’ .... [and requests the] transfer of 3,000 certificates representing the shares of H.H.H. to [Husband's company]." [De La Porte Affir. at 9]. Mr. De La Porte then states that it is "clear that the reference to ADMI was a typographical error [instead of H.H.H.], as in the same letter a correct reference is made to the transfer of the shares in H.H.H.." [Id. ] Mr. De La Porte does not cite or include any relevant Dutch or Netherlands Antilles law on resolution of typographical or scrivener's errors.
Certain "additional issues" with the 2006 Revocation were also raised by this court in its 2018 Decision and Order on motion sequence 002: "There may be additional issues with the 2006 Revocation, such as its possible use of a different company name, lack of a third signature (the 2003 Pledge Agreement it seeks to revoke was signed by each of Husband, Wife, and an AD1 representative), and reference to ‘attached papers’ that were not attached to the copies provided to the court. At this time, the court need not address these issues. Similarly, the court cannot decide, on the basis of the current information before it, whether the 2006 Revocation would be invalidated as unfair or unconscionable in this divorce action, because there has been no or very little disclosure about value of the assets in dispute, either at the time of the 2006 Revocation or during this matrimonial proceeding." Id.
Wife echoes these "additional issues" with the 2006 Revocation and states that they were not sufficiently addressed in Husband's papers to grant summary judgment. Wife argues that Husband has made admissions in the current Dutch proceeding, including about the not "de minimus " value of H.H.H., which admissions support her "unconscionability" claim: Wife states that Husband allegedly testified "before the Dutch Court of Appeals" that he "personally" created a document that shows that H.H.H. issued approximately $60 million in dividends between 2002 — 2008. [Pl. Memo of Law at 19, Ex. 13; Pl. Aff. at 3]. Value of H.H.H. may be relevant to Wife's unconscionability claim, and Wife raises sufficient facts on that claim, including potential H.H.H. value, to prevent summary judgment on the issue of validity of the 2006 Revocation.
Wife's Dutch law expert raises additional concerns about the 2006 Revocation, stating that it may be a letter to a third party and not a contract or an agreement: a "message with a notice and a request to a third party, whether co-signed or not, does not in itself constitute an agreement between the co-signing parties. Indeed the message itself suggests a prior event (‘shareholders have decided’) but there is no evidence whatsoever of such event having taken place for each of the items supposedly decided." [Van Leeuwen Affir. at 9.] Mr. Van Leeuwen also points out that the "subject matter" of the 2006 Revocation "is not the same" as of the 2003 Pledge: the 2003 Pledge was a "tripartite agreement dealing with a number of issues between those three parties including an option granted by AD1 to the Plaintiff. AD1 has signed that [2003] agreement but not the [2006] Revocation letter. The Defendant had guaranteed the due fulfilment of AD1 of its obligations ... AD1 has not been discharged of those obligations. There were further subjects addressed in that [2003] agreement, of which the security interest of the Plaintiff in the form of a pledge was only one." [Van Leeuwen Affir. at 9.]
Wife also points out that the Revocation states that plural term "shareholders" have agreed to transfer the shares, except, at that time, Husband was the only shareholder, so it is not clear what or who was agreeing. [Pl. Memo of Law at 11]. In his reply, Husband attempts to explain the use of plural "shareholders": "To the extent Plaintiff characterizes the use of the word ‘shareholders’ as a typo, it is actually (and only) the overly inclusive simplistic phrase as opposed to ‘shareholder and Pledge signator’ which was dictated to me as ‘fully effective’ by Cornelius Siebesma, the Managing Director of AD1 and TST [in 2006] " [Def. Reply Aff. at 14]. The plural term "shareholders" remains a potential typographical or scrivener's error, or a mistake, an issue not resolved on this motion for summary judgment. Somewhat similarly to his argument related to the 2003 Pledge (that statements allegedly made by Wife's mother in the Dutch lawsuit about the 2003 Pledge Agreement should bind the Wife), Husband's counsel here, in relation to the 2006 Revocation, states that the "knowledge, duties and actions" of Mr. S., managing director of AD1 and H.H.H. in 2006, and who apparently effectuated the 2006 transfer of the shares, should be "impute[d]" to "both" Wife and Wife's mother because, as the "signatory on all of the relevant documents, it is within his power and authority to determine that the parties were free to revoke the pledge." [Def. Affir. at 5; Def. Reply Aff. at 14]. Husband also claims that both spouses instructed the Curaçao trustee Mr. S. to transfer the shares, whereas Wife claims it was only Husband who spoke with Mr. S.. As Wife points out there is nothing in Husband's papers to definitively show that Mr. S. was Wife's "agent" or to impute his actions to the Wife. [Pl. Memo of Law at 11-12; Pl. Aff. at 7].
There are several other factual disputes about the 2006 Revocation: although Husband states that the agreement was signed after "years" of discussions, Wife, on the other hand, states that there was no legal or financial advice, no consideration, no financial disclosure, she signed under duress (by a threat that Husband would leave her, which was his legal right, however), and there were no drafts or prior communications regarding the revocation. [Pl. Memo of Law at 11]. The issue of disclosure and valuation is perhaps most paramount to Wife's claim of unconscionability and overreaching.
On Wife's claim that the 2006 Revocation Agreement may be invalid due to overreach or unconscionability, Husband cites cases that require a very high burden to overturn otherwise valid prenuptial agreements on those bases. [Def. Reply Memo of Law at 10]. Wife does not disagree that it is a high burden, but argues that a rushed, uninformed, and unrepresented waiver of a still-unknown-to-her value may well be considered overreaching or unconscionable.
As the First Department stated in the 2014 Anonymous v. Anonymous case, there is a heavy burden on the spouse challenging a matrimonial agreement, and it is the rare exception, rather than the rule, that a matrimonial (prenuptial or postnuptial) agreement can be overturned:
New York has a long-standing "strong public policy favoring individuals ordering and deciding their own interests through contractual arrangements" ( Matter of Greiff , 92 NY2d 341, 344, 680 N.Y.S.2d 894, 703 N.E.2d 752 (1998) ). It is axiomatic that a duly executed prenuptial agreement is presumed to be valid and controlling unless and until the party challenging it meets his or her very high burden to set it aside (see Bloomfield v. Bloomfield , 97 NY2d 188, 193, 738 N.Y.S.2d 650, 764 N.E.2d 950 (2001) ). However, in many instances, "agreements addressing matrimonial issues have been subjected to limitations and scrutiny beyond that afforded contracts in general" ( Kessler v. Kessler , 33 AD3d 42, 46, 818 N.Y.S.2d 571 (2d Dept. 2006) ; lv. dismissed 8 NY3d 968, 836 N.Y.S.2d 540, 868 N.E.2d 221 (2007) ). Although "there is a heavy presumption that a deliberately prepared and executed written instrument manifests the true intention of the parties" ( Brassey v. Brassey , 154 AD2d 293, 295, 546 N.Y.S.2d 370 (1st Dept.1989) ), an agreement between prospective spouses may be invalidated if the party challenging the agreement demonstrates that it was the product of fraud, duress, or other inequitable conduct (see Christian v. Christian , 42 NY2d 63, 72, 396 N.Y.S.2d 817, 365 N.E.2d 849 (1977) ). Nevertheless, such results remain the exception rather than the rule.
The burden of producing evidence of such fraud, duress or overreaching is on the party asserting the invalidity of the agreement ( Matter of Greiff , 92 NY2d at 344 ; Cohen v. Cohen , 93 AD3d 506, 940 N.Y.S.2d 250 (1st Dept.2012) ).
Anonymous v. Anonymous , 123 AD3d 581, 582, 999 N.Y.S.2d 386 (1st Dept. 2014).
Although it is possible to shift this burden to demonstrate fraud or overreaching, such burden shifting is possible only after a showing that it is "certain" that the "stronger party" had a "probable" unfair advantage, and then, the burden may be shifted for that "stronger" party to affirmatively demonstrate that there was no fraud or undue influence:
Whenever the relations between the contracting parties appear to be of such a character as to render it certain that either on the one side from superior knowledge of the matter derived from a fiduciary relation, or from an overmastering influence, or on the other from weakness, dependence, or trust justifiably reposed, unfair advantage in a transaction is rendered probable, it is incumbent upon the stronger party to show affirmatively that no deception was practiced, no undue influence was used, and that all was fair, open, voluntary and well understood.
Greiff , 92 NY2d at 345.
Although the Greiff court did not set out specific factors to show this "certainty," courts have analyzed the following non-exclusive factors, as summarized in Estate of Buzen :
i) detrimental reliance on the part of the poorer spouse (citing Greiff )
ii) relative financial positions of the parties (citing Greiff )
iii) the formality of the execution ceremony itself (citing Greiff ; Christian )
iv) full disclosure of assets as a prerequisite to a knowing waiver (citing Matter of Van Zandt , 117 AD2d 810, 499 N.Y.S.2d 432 (2d Dept. 1986) )
v) the physical or mental condition of the objecting spouse at the time of execution (citing Gordon v. Bialystaker Ctr. & Bikur Cholim , 45 NY2d 692, 695-96, 385 N.E.2d 285 (1978) )
vi) superior knowledge/ability and overmastering influence on the part of the proponent of the agreement (citing Gordon v. Bialystaker )
vii) the presence of separate, independent counsel for each party (citing Greiff )
viii) the circumstances in which the agreement was proposed and whether it is fair and reasonable on its face (citing In re Phillips' Estate , 293 NY 483, 58 N.E.2d 504 (1944) )
ix) provision for the poorer spouse in the [agreement or otherwise] (citing Sunshine's Estate , 40 NY2d 875, 876, 357 N.E.2d 999 (1976) ).
Estate of Buzen , 1999 NYLJ LEXIS 913, NYLJ, Apr. 2, 1999, at 35, col 1 (Sur. Ct., Nassau Co. 1999) (quoted by Estate of Rappaport , 184 Misc 2d 660, 662, 709 N.Y.S.2d 921, 922 (Sur. Ct., Nassau Co. 2000), In re Kazuba , 9 Misc 3d 1116(A) (Sur. Ct., Nassau Co. 2005), In re Estate of Menahem , 16 Misc 3d 1125(A), 847 N.Y.S.2d 903 (Sur. Ct., Kings Co. 2007), aff'd sub nom. In re Menahem , 63 AD3d 839, 880 N.Y.S.2d 500 (2d Dept. 2009) ).
A.A. v. B.B. , 61 Misc 3d 1223(A), (Sup. Ct., NY Co. 2018)
In this case, Wife alleges that there was no disclosure prior to the 2006 Revocation, there was no representation by counsel, there was no "formal" ceremony, her Husband possessed (and possesses to this day) "superior knowledge" about the subject of the alleged revocation, and that she still does not know the true nature of his "relative financial position" or the value of the assets she was asked to waive. Wife presents evidence that at least $60 million in dividends may have been paid to H.H.H. shareholders 2002- 2008, a document apparently created by Husband, which meets at least the preliminary burden to Wife, and raises serious questions about the value of H.H.H. (either in 2006 or currently if those assets are to be traced).
According to both Husband and Wife, Husband is working in the shipping business to this day, through several companies, some of which he owns at least in part, and which may or may not be successor entities to H.H.H.. The court was not provided with a current value of the shipping businesses. Husband alleges that he owned several of the companies with his partner Mr. P.B., who recently passed away, and thereafter, Husband purchased Mr. P.B.'s interest from his widow for approximately $4 million. [Def. Ex. B]. Husband cites this purchase amount for the purpose of allegedly valuing the overall business, arguing that the price represents a third-party seller's valuation of the fair market value of 50% of the business. Wife disagrees, arguing that there are numerous as-yet-unknown factors, such as prior dividends to the two partners (of approximately $60 million according to Wife) or other financial and non-financial considerations, and without discovery, she cannot possibly assess whether Husband's valuation is correct. In her permitted sur-reply, Wife also points out that the $4 million buy-out agreement with Mrs. P.B. as submitted by Husband also states that some shares were transferred to Husband "pursuant to a separate share purchase agreement," which is apparently not attached. [Pl. Sur-reply at 8]. Additionally, Wife argues that although Husband has stated that the H.H.H. business has "disintegrated" (H. Aff. at ¶33), and his 2013-registered H.H.H. of Nevis "bears no relation to H.H.H. of Curaçao," the TST Group (now apparently run at least in part by Husband) "boasts as of today that it has been a ship owner, operator, and manager since 1979 — which was when the Wife's stepfather founded the company." [Pl. Memo of Law at 12, Pl. Aff. at 11]. The TST "businesses" apparently have at least some of the "same clients" as they did when Wife's step-father was alive, and apparently, the promotional literature [Pl. Aff. Ex. 17] "also emphasize the companies' 30 year history and [Wife's] step-father's original client U.S. Steel." [Pl. Aff. at 11].
Wife also argues that Husband's lack of disclosure necessarily forecloses summary judgment [Pl. Memo of Law at 19], although the court does not need to reach that issue here, where there are sufficient factual issues regarding the 2006 Revocation to prevent summary judgment declaratory relief that the 2006 Revocation Agreement is valid, not unconscionable or the product of overreaching.
Husband also makes an equitable estoppel argument that Wife should be precluded from seeking discovery now into the alleged unconscionability of waiving an asset in 2006 without apparently asking for any disclosure at that time, especially since Husband relied on that 2006 Revocation and continued to provide Wife with support and even purchased an apartment titled in Wife's name with what he thought were his separate funds in 2013, which apartment is now apparently worth $1,750,000. [Def. Affir. at 13-14]. Courts have, however, allowed discovery and invalidated prenuptial agreements more than ten years after the fact, see, e.g. , Rabinovich v. Shevchenko , 93 AD3d 774, 775, 941 N.Y.S.2d 173 (2d Dept. 2012) (invalidating a 1997 agreement as unconscionable); Siclari v. Siclari , 291 AD2d 392, 393, 736 N.Y.S.2d 908 (2d Dept. 2002) (invalidating a 1987 agreement as unconscionable). Wife also replies that Husband cannot rely on equitable estoppel principles because of Husband's allegedly "unclean hands," citing Sardanis v. Sumitomo Corp. , 282 AD2d 322, 324, 723 N.Y.S.2d 466 (1st Dept. 2001). The court cannot decide equitable issues of estoppel or unclean hands on the current factual record before it, where the facts surrounding both the signing of the 2006 Revocation and current issues of unconscionability are hotly contested by the two spouses. Equitable relief cannot be granted on summary judgment on the basis of such facts, which are meaningfully and sufficiently disputed by each side.
This is not a final determination concerning the 2006 Revocation's validity at trial, or the parties' equitable arguments, as neither side met the effective summary judgment requirements of a "prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case." Winegrad , 64 NY2d at 853. At this time, there appears to be a good faith basis to allow Wife to proceed to discovery.
Discovery Requests
By her cross-motion, Wife is continuing to seek discovery to trace the assets, value, dividends, and funds from the 25% H.H.H. shares. Husband argues that the discovery requests are both precluded by his summary judgment requests, and are also overbroad and unduly burdensome, covering over thirteen years of documents, requesting 2003 drafts of the Pledge agreement, and covering any and all TST companies. [Def. Reply Affir. at 13-14].
In her allowed sur-reply, Wife states that discovery is necessary to trace the assets she was asked to waive by the 2006 Revocation — if the value of those assets is as meaningful as she now states is possible, her revocation would be unconscionable and product of overreaching by Husband (especially when coupled with Wife's allegations of no disclosure, no legal representation, and no meaningful time to either investigate or consider the presented revocation). Wife adds that her allegedly narrow and detailed discovery requests are based in part on Husband's alleged disclosure of approximately $60 million in dividends in a seven-year span, plus on a document (Sur-Reply Ex. 2), which Husband apparently provided to Wife "when [Husband and Wife] were initially discussing [their] separation and divorce terms," and which lists total assets of "nearly $21 million" from multiple listed entities, including H.H.H.... [Sur-Reply Aff. at 3]. Wife also states that she is concerned that Husband engaged in "divorce planning" when she moved to New York with the children: she alleges that Husband transferred the H.H.H. shares from AD1 to Catfish [wholly owned by Husband], then he closed Catfish and moved H.H.H. shares to "an unknown entity or entities" and changed H.H.H.'s registration from Curaçao to Nevis. [Id. ] Wife states that she seeks discovery sufficient to trace and value the H.H.H. assets.
Wife also alleges that Husband has not complied with any discovery demands, but he has full access to his own financial information, his emails, and apparently Wife's emails: Wife alleges that Husband has access to her "old Monaco" email account, that he has apparently sent emails from that email address but signed with his name (sur-reply Ex. 4), that the service provider has not allowed Wife to close the account without Husband's permission, and she remains concerned that not only does he continue to have unfettered access to her emails, but that he may have the ability to generate emails from her account. [Sur-Reply Aff. at 4]. In contrast, Wife states, she does not have access to either the relevant business records or emails.
Wife also alleges that Husband has used discovery in this New York action to avoid discovery in the Netherlands, and therefore, presumably, he should now comply with that New York discovery: at "the hearing on the [Dutch] appeal, the Defendant stated that there was a decision on the Plaintiff's discovery request in New York, and that the court in New York had found that there Plaintiff was entitled to ‘discovery sufficient to trace the shares and related funds and assets of the 25% share of TST N.V., pursuant to New York law,’ [which was allegedly] used as a further argument why Ms. V. should not obtain the same information." [Van Leeuwen Affir. at 3]. Wife does not, however, attach a transcript or filing from the Dutch court demonstrating this statement (both parties have stated that there may not be a transcript of the appeal proceedings). If Husband did argue to the Dutch appellate court that he should not have to comply with discovery in that lawsuit because he is complying with similar discovery in the instant matrimonial lawsuit, this may be relevant to his discovery responses here. On the current record, however, it is not clear what exactly was stated by Husband and in relation to exactly which discovery requests.
Broad discovery in matrimonial actions is "critical" to the determination and valuation of known assets, to distinguish marital and separate property, and to uncover potential hidden assets. Jaffe v. Jaffe , 91 AD3d 551, 553—54, 940 N.Y.S.2d 1, 3 (1st Dept. 2012). C.P.L.R. § 3101(a) provides that "[t]here shall be full disclosure of all evidence material and necessary in the prosecution or defense of an action." The terms "material and necessary" are "liberally interpreted to require disclosure, upon request, of any facts bearing on a controversy which will assist in sharpening the issue at trial." Roman Catholic Church of Good Shepherd v. Tempco Sys. , 202 AD2d 257, 258, 608 N.Y.S.2d 647 (1st Dept. 1994). Discovery requests, therefore, need not be limited to "evidence directly related to the issues in the pleAD1ngs." Allen v. Crowell-Collier Publishing Co. , 21 NY2d 403, 408, 235 N.E.2d 430, 288 N.Y.S.2d 449 (1968).
In a divorce action, "broad pretrial disclosure which enables both spouses to obtain necessary information regarding the value and nature of the marital assets is critical if the trial court is to properly distribute the marital assets" Jaffe , 91 AD3d at 553—54 (citing Kaye v. Kaye , 102 AD2d 682, 686, 478 N.Y.S.2d 324 (2d Dept. 1984) ). A "minority" interest is sufficient to prevent a protective order, and instead, allow a "searching exploration of each other's assets and dealings at the time of and during the marriage, so as to delineate the extent of marital property, distinguish it from separate property, uncover hidden assets of marital property, discover possible waste of marital property, and in general gain any information which may bear on the issue of equitable distribution, as well as maintenance and child support." Id. ; see also Reich v. Reich , 36 AD3d 506, 507, 830 N.Y.S.2d 29 (1st Dept. 2007) (affirming denial of a motion to quash subpoenas regarding an entity of which husband was a 2.5% owner, stating "searching exploration is more than justified in the case of close corporations, the ownership of which is in the hands of a small number of stockholders and for which there is little objective evidence of fair market value"); Sanford v. Sanford , 170 AD2d 1047, 1048, 566 N.Y.S.2d 115 (4th Dept. 1991) ("defendant is entitled to discover the extent of plaintiff's interest in family-held close corporations, regardless of the extent of that interest") (citing Kaye , 102 AD2d at 688 ). A narrow time window is also not necessary. Jaffe , 91 AD3d at 554 (citing Kaye , 102 AD2d at 686 ).
In the instant case, issues of maintenance and child support have been resolved, and the only remaining financial issues are declarations of separate or marital property, if there is any marital property after the application of the Prenuptial Agreement. Given the settlement of all maintenance and child support issues, the application of the Prenuptial Agreement would, however, foreclose any discovery into truly separate property of either spouse that is correctly titled to that spouse. Therefore, only the issue of Wife's possible 25% interest in the H.H.H. assets remains open. As previously stated in the 2018 Decision, Husband's statement that all of his assets are separate property is not sufficient to prevent all discovery and tracing sought by Wife. Husband and Wife both consented to litigate their divorce in this court. Husband has not demonstrated that the 2006 Revocation is clearly valid. For the reasons stated above, Wife is entitled to discovery sufficient to trace the value and related funds and assets of the 25% share of H.H.H., pursuant to New York law. The court is not deciding at this point whether Wife would be entitled, as part of a final judgment, to the shares and assets over which she seeks discovery in the instant motion.
Although Husband states that none or practically none of those assets remain, and that the rest of his assets are purely separate property unrelated to H.H.H., Wife should be allowed to test that assertion, as it relates to those assets. Husband's argument is similar to that in Lobatto v. Lobatto , 109 AD2d 697, 700, 487 N.Y.S.2d 326 (1st Dept. 1985), where the husband sought to prevent discovery by arguing that his assets were purchased solely with his separate property. The Lobatto court allowed the wife broad discovery to trace that asset, stating that "[o]nly by a detailed tracing of the sources of these assets and their increase in value can such a position be sustained. [Husband] asserts he is prepared to demonstrate that his 12 acquired properties all sprung from assets separately held prior to the marriage. The only way [wife] can challenge that assertion is to have evidence of the financial sources of these assets." Id. at 700.
Both parties agree that 25% shares in H.H.H. were actually transferred from AD1 to another entity wholly owned by Husband soon after the 2006 Revocation. It also appears that Husband (with his now-deceased partner Mr. P.B.) controlled H.H.H. from at least October 2003. Therefore, meaningful tracing of those assets requires allowing discovery to a period from October 2003 to the present. Matrimonial discovery and interrogatory requests cannot be overbroad, however, and should instead "satisfy the standard of reasonable particularity in identifying the information to be produced." Lobatto , 109 AD2d 697 ; Ehrlich v. Ehrlich , 74 AD2d 519, 425 N.Y.S.2d 11 (1st Dept. 1980).
Wife has submitted revised discovery requests, which Husband states are still overbroad and unduly burdensome. To the extent that Husband's opposition to Wife's discovery requests may be treated as the Husband seeking a protective order pursuant to C.P.L.R. § 3103, the court notes that C.P.L.R. § 3122, however, requires that a particularized objection/response must be made within 20 days of service of the C.P.L.R. § 3120 notice for discovery and production. Missing this C.P.L.R. § 3122 deadline generally forecloses relief under C.P.L.R. § 3103 for a protective order (other than for privilege, which is not applicable here). See, e.g. , Anonymous v. High School for Environmental Studies , 32 AD3d 353, 358-59, 820 N.Y.S.2d 573, 578 (1st Dept. 2006). In Anonymous v. High School for Environmental Studies , the Appellate Division, First Department held that the failure to timely "object to the [ C.P.L.R. § 3120 ] demand generally limits our review to the question of privilege under C.P.L.R. § 3101(b)." 32 AD3d at 358-59. Defendants in Anonymous also failed to submit a privilege log as required by C.P.L.R. § 3122(b) and responded only with "boilerplate claims of privilege, which are insufficient as a matter of law." Id. at 359. "However, of greater significance is the havoc that the defendants' abuse of the provisions of C.P.L.R. § article 31 has wrought on plaintiff's case. Plaintiff is now no further along in discovery than she was when the demand was first served in March 2004. We hold that defendants' failure to comply with any provision of article 31 constitutes a waiver of any objections to disclosure." Id. at 359—60. Similarly, in Rubino , a nonparty served with a subpoena duces tecum moved pursuant to C.P.L.R. § 2304 to quash the subpoena and for a protective order pursuant to C.P.L.R. § 3103. The nonparty movant did not, however, file a copy of a C.P.L.R. § 3122 particularized response to the subpoena and never alleged that such a response was served on the subpoena issuer, as required by C.P.L.R. § 3122(a)(1). Therefore, the Rubino court denied the motion because "the correct procedure for objecting to a subpoena duces tecum has not been complied with." Rubino v. 330 MAD1son Co., LLC , 39 Misc 3d 450, 453, 958 N.Y.S.2d 587, 589 (Sup. Ct., NY Co. 2013).
Here, as in Rubino and Anonymous , there is no submitted evidence that Husband filed particularized objections within 20 days of the C.P.L.R. § 3120 demand, limiting the court's ability to issue a protective order. Even assuming that Husband did serve timely and particularized objections to Wife, and was not late, nevertheless, a protective order could only cover specific categories. Therefore, counsel are directed to conduct a meet-and-confer conference within ten (10) days of this Decision and Order, regarding the parameters and logistics of appropriate discovery in this case. Counsel are also directed to appear in this court, Part 44 at 71 Thomas Street, courtroom 210, on October --, 2019 at 2:30 p.m., time certain, for a discovery status and compliance conference.
For the reasons stated above, the court grants Defendant Husband's motion in part, and denies it in part, and grants Plaintiff Wife's Cross-Motion in part and denies it in part, as stated above.
Any relief requested but not granted above is denied.
This constitutes the Decision and Order of the court.