AXA Equit. Life Ins. Co. v Epstein
Annotate this CaseDecided on April 24, 2009
Supreme Court, New York County
AXA Equitable Life Insurance Company, AXA Network, LLC & AXA Advisors, LLC, Plaintiffs,
against
Gabriel Epstein, Defendant.
601618/07
Plaintiffs were represented by Joseph Peterson, Esq., of Kilpatrick & Stockton, LLP, 312 W. 52nd St., New York, NY 10019, tel. no. 212-775-8712. Defendant was represented by Darren Oved, Esq., of Oved & Oved, LLP, 101 Avenue of the Americas, 15th Floor, New York, NY 10013, tel. no. 212-226-2376.
Jane S. Solomon, J.
In this action to recover monetary damages for alleged breach of contract,
breach of the covenant of fair dealing, unjust enrichment, conversion, and replevin, defendant
Gabriel Epstein (Epstein) moves for summary judgment dismissing all of plaintiffs' claims,
without prejudice, as premature. The cross motion by AXA Equitable Life Insurance Company,
AXA Network, LLC & AXA Advisors, LLC (together referred to as "AXA") seeks partial
summary judgment on their breach of contract claim. For the reasons below, Epstein's motion is
denied, and plaintiffs' cross-motion is granted.
Background
AXA Equitable Life Insurance Company (AXA Equitable) is a life insurance provider. AXA Network, LLC (AXA Network) is a life and health insurance brokerage. AXA Advisors, LLC (AXA Advisors) is a financial services company.
On April 1, 2005, Epstein entered into contracts with AXA Network and AXA Advisors, LLC. Pursuant to these contracts (together, the April 2005 Contracts), Epstein became an independent contractor agent empowered to canvass and solicit applicants for life insurance to be provided by a predecessor of AXA Equitable, or its affiliates (see Affidavit of Susan M. Cooper in support of plaintiffs' cross-motion, Exhs. 1 & 2).
The complaint references both April 2005 Contracts, but only a copy of the AXA Network contract is annexed as an exhibit. Plaintiffs now contend that annexing only the AXA Network contract was a mistake; in fact, Epstein's work at issue was governed by the AXA [*2]Advisors contract. Epstein contends that his work was subject to the AXA Network contract. Since both contracts are relied upon in the complaint, both are addressed here.
Paragraph III of the AXA Network contract provides that commissions are paid "in accordance with the Schedules of Commissions (issued by AXA Network with notice to the Associate) in force on the date of the application for the policy, as such premiums and considerations become due and paid." Paragraph III of the AXA Advisors contract states that commissions are paid "as may be provided for by schedules and rules published from time to time by or on behalf of AXA Advisors". Paragraph V of the AXA Advisors contract states that the agreement is subject to all rules, regulations, policy guidelines or other instructions that it may publish from time to time. Paragraph XVIII of the AXA Network contract states that AXA shall have the right to suspend or withhold payment of any commission if Epstein violates any term of the agreement until AXA is satisfied that such violation has ceased or been cured. Paragraph VII of the AXA Network contract states that "[t]his Agreement is subject to such rules and regulations as AXA Network has established or may hereafter establish covering the conduct of its business." Paragraph XI of the AXA Network contract, entitled Indebtedness, states, in pertinent part:
AXA Network may offset as a first lien against any claim for compensation under this
Agreement any debt due or to become due ... from the Associate to AXA Network or any of its
affiliates. Debt not fully satisfied by such offset is a personal debt of the Associate recoverable at
any time with interest under AXA Network's rules. "Debt" as used herein includes ... paid but
unearned commissions attributable to ... premiums wholly or partially unpaid or
refunded. (Emphasis added)
Paragraph VIII of the AXA Advisors contract, also entitled Indebtedness, is
substantially the same.
0n April 24, 2006, AXA issued Field Bulletin FB 06-198R, "Re: Revised Schedule of Commissions and Service Fees," which the parties refer to as the Refund Memo. The revised commission schedule therein was effective immediately. The portion of the Refund Memo at issue states:
If any premium ... is not paid to AXA Equitable or its subsidiary, or if AXA Equitable or its subsidiary refunds any premium or consideration, ... any compensation paid or prepaid with respect to such premium will be unearned. As a result, AXA Equitable may offset the same against any claim for compensation, to the extent the compensation is not offset, the same will, upon termination of the Financial Professional's or Broker's Agreement, become a personal indebtedness of the Financial Professional or Broker, which AXA Equitable may recover from the Financial Professional or Broker, personally. (Emphasis added)
Epstein submitted to AXA four life insurance applications on the lives of Mali and Benzion Koenig (the Koenigs). The applications are dated May 12, 2006, and amended May 26, 2006. The applicants are the Mali Koenig Insurance Trust A 05/11/06, the Mali Koenig Insurance Trust B 05/11/06, Ben Zion Koenig Insurance Trust A 05/11/06, and the Ben Zion Koenig Insurance Trust B 05/11/06. Wells Fargo Bank, N.A., as trustee, executed each application as owner and applicant, and Epstein signed each as "licensed professional/insurance [*3]broker." Each application sought $10 million of coverage for an aggregate of $40 million.[FN1]
In connection with these applications, Epstein submitted documents stating that the Koenigs had a net worth of $26 million; that they owned a condominium in Miami, a rental home in Brooklyn, and real estate in Israel and Connecticut.
Plaintiffs allege that, as the result of the information contained in the applications, insurance policies were issued to the Mali Koenig Insurance Trusts A and B 05/11/06 and the Benzion Koenig Insurance Trusts A and B 05/11/06. Premiums were paid on the insurance policies totaling more than $5.64 million, and plaintiffs paid Epstein $1,035,736 in commissions in June 2006.
On December 22, 2006, approximately six months after the insurance policies were registered, AXA Equitable sent two letters to Wells Fargo purporting to rescind the policies (the rescission letters) (see Affidavit of James Leonard, Esq., Exh. 1). The rescission letters stated that the policies were being rescinded because they had been "issued in reliance upon the statements and answers in the Applications for Insurance," and that the insurer had since "learned that the assets and net worth reported by the insured[s] were overstated. . . . Had we known this information, the policies would not have been issued."
Enclosed with the rescission letters were checks, which AXA Equitable indicated were "in refund of all amounts paid as premiums, including interest." Each letter further stated that Wells Fargo's "cashing of this check will indicate that you agree with our decision." It is undisputed that the refund checks sent to Wells Fargo with the rescission letters were neither cashed nor returned to AXA (see Affidavit of Henry C. Lewer).
AXA commenced an action against Wells Fargo in the United States District Court for the Northern District of Georgia, seeking a declaration that the insurance policies were properly rescinded and void ab initio (the Georgia Action).[FN2] In its answer, Wells Fargo contended that it did not know the applications were false, and that AXA's request for a declaration should be denied (1) because AXA has unclean hands; (2) under the doctrine of in pari delicto;[FN3] (3) because AXA failed to join indispensable parties; (4) because AXA's claims are barred by its own negligence; (5) under the doctrine of assumption of the risk; (6) because AXA's injury arose from the intervening acts of third parties; and for other reasons. Wells Fargo does not contend that the applications were truthful, accurate, or completed in good faith. Rather, the crux of its opposition is that the alleged misrepresentations originated with AXA or its agent.
Depositions were held in the Georgia Action, and AXA submits partial transcripts in [*4]support of its cross-motion. Mali and Ben Zion testified that, in May 2006, they did not have assets of $26 million, did not own stocks or real estate, had no more than $120,000 in cash, and that neither of them ever had annual incomes over $100,000 (EBT Transcripts annexed to Leonard Aff., Exhibits 3-4).[FN4] They did not tell Epstein that they owned real estate, and their testimony strongly implies that Epstein was involved in providing false asset information on the applications.[FN5] Epstein does not contest the allegations that he knowingly submitted false information on the applications.
Plaintiffs commenced this action on May 15, 2007. Epstein answered with counterclaims for breach of contract, breach of the covenant of good faith, unjust enrichment, conversion, replevin and employment discrimination. He alleges not only that he is entitled to his commission from the insurance policies, but that AXA wrongfully withheld compensation due from other transactions as a set-off. In June 2007, Epstein sought a stay under CPLR 2201 until the Georgia Action was resolved. I denied the motion in a decision and order filed January 30, 2008, because neither the parties nor the causes of action are the same in this and the Georgia Action.
In his summary judgment motion, Epstein contends that plaintiffs failed to perform a
contractual condition precedent in that, although AXA Equitable sent refund checks that were
received and retained by Wells Fargo, the checks were not cashed. Accordingly, he argues, until
either the trustees or owners of the insurance policies have accepted the refund, or the Court in
the Georgia Action orders that the insurance policies are rescinded, the instant action is
premature.
Discussion
Both plaintiffs and defendant seek summary judgment pursuant to CPLR 3212. To obtain summary judgment, a movant must establish entitlement to judgment in its favor as a matter of law (see Alvarez v Prospect Hosp., 68 NY2d 320 [1986]). "[I]t must clearly appear that no material and triable issue of fact is presented" (Glick & Dolleck v Tri-Pac Export Corp., 22 NY2d 439, 441 [1968]; see also Giuffrida v Citibank Corp., 100 NY2d 72 [2003]), because summary judgment is a drastic remedy that should not be invoked where there is any doubt as to the existence of a triable issue or when the issue is even arguable (see Zuckerman v City of New [*5]York, 49 NY2d 557, 562 [1980]).
Epstein asserts that he is entitled to summary judgment because, as of the date these motions were submitted, he had no duty under the contracts to return the commissions, which duty would arise only after the refund checks have been negotiated and the proceeds received by the payees. He acknowledges that AXA sent checks reimbursing the premiums paid, plus interest, but argues that this was not a "refund" within the meaning of the April 2005 Contracts.
Plaintiffs maintain that they are entitled to summary judgment because AXA Equitable rescinded the policies and refunded the premiums, and under the terms of their contracts Epstein must return the commission. In reply, Epstein argues that extrinsic evidence is needed to interpret the meaning of "refund" because it is ambiguous. He argues that, to the extent AXA relies upon the terms of the Refund Memo, a question of fact exists as to whether the April 2005 contracts clearly refer to an extrinsic document to permit it to be incorporated by reference. He also claims that discovery is needed into whether AXA rescinded the insurance policies in good faith.
Since the Georgia Action is still pending, the issue of whether the insurance policies are rescinded and void ab initio under Georgia law is not resolved. However, resolution of that dispute between AXA and Wells Fargo is not necessary to determine whether Epstein must return the commissions under the terms of the April 2005 Contracts.
Epstein contends that his compensation was due under the AXA Network contract, not the AXA Advisors contract, and the Refund Memo is not specifically referenced by the AXA Network contract. Although the Refund Memo does not provide on its face that it was issued by AXA Network, it states that it includes the revised schedule of commissions for financial professionals and brokers, and is part of all current financial professional and broker agreements with AXA Network and/or its affiliates (Refund Memo, annexed to Epstein Aff. at Ex. C). It includes rules and regulations issued with respect to the April 2005 Contracts (see Cooper Aff. paragraph 5). The April 2005 Contracts specifically reference extrinsic rules and regulations that may be issued from time to time (see AXA Advisors contract, paragraph V and AXA Network contract, paragraph VII). Accordingly, the April 2005 Contracts are sufficiently specific to permit incorporation of the terms of the Refund Memo.
The Refund Memo provides that no commission is payable on unpaid or refunded premiums. It does not require AXA to first establish its legal rights as against the policy owner before refunding a premium.
Even without reference to the Refund Memo, however, the April 2005 Contracts permit AXA to offset an agent's debt against his compensation, and to treat debt not fully offset by compensation as the agent's personal debt (AXA Network contract Paragraph XI and AXA Advisors contract Paragraph VIII). Debt is defined to include paid but unearned commissions attributable to refunded premiums. If AXA Equitable refunded the premiums paid for the insurance policies, Epstein is contractually obligated to return the premium.
Plaintiffs assert that the premium was refunded when AXA Equitable sent the rescission letters and refund checks to Wells Fargo, who retained the checks. Epstein argues that "refund" is an ambiguous term as used in the contracts.
Ambiguity of a contract term is a question of law to be determined by a court of law (see Wallace v 600 Partners Co., 86 NY2d 543 [1995]). "[W]hen parties set down their agreement in [*6]a clear, complete document, their writing should as a rule be enforced according to its terms" (W.W.W. Assocs., Inc. v. Giancontieri, 77 NY2d 157, 162 [1990]; see also Reiss v Fin. Performance Corp., 97 NY2d 195 [2001]).
AXA sensibly refers to a dictionary definition of "refund" for its plain meaning. "Refund" means "to give or put back", according to the Merriam-Webster's Collegiate Dictionary (10th Ed. 2002). As used in the contracts, the term "refund" is not ambiguous a refund is made when the premium is given back. That Wells Fargo received the refund checks but chose to hold them rather than cash them is not an issue in this lawsuit.
Since plaintiffs' are granted summary judgment on the breach of contract claim, the claims alleging unjust enrichment are dismissed (see Clark-Fitzpatrick, Inc. v LIRR Co., 70 NY2d 382 [1987]). Plaintiffs' other claims are dismissed as duplicative of the contract claim. Epstein's counterclaims necessarily are dismissed based upon the foregoing, except for the employment discrimination claim, which was not addressed on these papers. Accordingly, it hereby is
ORDERED that Epstein's motion for summary judgment is granted in part to the extent that plaintiffs' second through fifth causes of action are dismissed, and otherwise is denied; and it further is
ORDERED that plaintiffs' cross-motion for partial summary judgment on their breach of contract claim is granted, and plaintiffs are entitled to judgment thereon in the amount of $1,035,726, with interest from June 30, 2006, and the Clerk shall enter judgment thereon with costs and disbursements as taxed at the conclusion of the remainder of this action; and it further is
ORDERED that upon searching the record, Epstein's first through fifth counterclaims are dismissed; and it further is
ORDERED that counsel shall appear in Part 55 for a preliminary conference on the
remaining claim on May 18, 2009 at 12 noon.
Dated: April, 2009ENTER:
_______________________
J.S.C.
Footnotes
Footnote 1: Epstein alleges in his answer
that the trusts are limited liability companies (presumably he means that the trust beneficiaries
are LLCs) owned 99% by the Koenig's son, Samuel Koenig, without identifying who owned the
remainder.
Footnote 2: The Georgia Action is titled:
AXA Equitable Life Insurance Company v Wells Fargo Bank, N.A., as Trustee of the Mali
Koenig Trusts A and B 5/11/06, and as Trustee of the Benzion Koenig Trusts A and B
5/11/06, Civil Action No. 1:07-cv-0512-MHS.
Footnote 3: "The principle that a plaintiff
who has participated in wrongdoing may not recover damages resulting from the wrongdoing"
Black's Law Dictionary, 7th Ed., 794
Footnote 4: Epstein does not challenge the
admissibility of these statements in considering the cross-motion.
Footnote 5: Q:Do you recall how you came
to sign [the application]?
Ben Zion Koenig: It could be that the insurance man came and brought me the paper
saying everything is okay and he told me to sign.
Q:Who is that insurance man?
BZK: Gabe Epstein, I think. Gabe Epstein.
Ben Zion Koenig Dep. Transcript, 19.
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