Goldmeier v Worksman
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Goldmeier v Worksman 2011 NY Slip Op 32401(U) August 30, 2011 Supreme Court, Nassau County Docket Number: 001315-10 Judge: Timothy S. Driscoll Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT- STATE OF NEW YORK SHORT FORM ORDER Present: HON. TIMOTHY S. DRISCOLL Justice Supreme Court ------------------------------------------------------------------- x ALLEN GOLDMEIER, STEVEN GOLDMEIR , and CENTURY SPORTS, INC. flk/a RAND TRIAL/IAS PART: 22 NASSAU COUNTY INTERNATIONAL LEISURE PRODUCTS, LTD. Index No: 001315- Motion Seq. Nos: 3 & 4 Plaintiffs, Submission Date: 7/8/11 - against - MARK WORKMAN, RAND INTERNATIONAL LEISURE PRODUCTS, LLC flka RAD INTERNATIONAL ACQUISITION I, LLC, and MEL TZER, LIPPE, GOLDSTEIN & BREIT STONE, LLP Defendants. ------------------------------------------------------------------- x The following papers have been read on these motions: Notice of Motion, Affirmation in Support, Affidavit in Support and Exhibits............................................. Memorandum of Law in Support.............................................. Notice of Cross Motion, Affirmation in Support, Affdavit in Support and Exhibits...................................... Affirmation in Opposition/Further Support and Exhibits..... Cro ss Reply Affirma ti 0 D............................................... ... ........... This matter is before the Court for decision on 1) the motion fied by Plaintiff Centur Sports , Inc. (" Centur ) on Februar 14 2011 , and 2) the cross motion fied by Defendant Mark Worksman (" Worksman ) on April 4 , 2011 , both of which were submitted on July 8 2011 following oral argument before the Cour. For the reasons set forth below , the Cour 1) denies [* 2] Century s motion; and 2) grants Worksman s cross motion to the extent that the Cour grants Worksman leave to fie a late Answer in the form provided in his Proposed Verified Answer , and deems that Answer served. BACKGROUND Relief Sought A. Centu moves the Third , 3215 , for a default judgment against Worksman on 1) pursuant to CPLR Four and Ninth Causes of Action in the Complaint; or, alternatively, 2) pursuant to 3212 , for summar judgment on the Third , Fourh and Ninth Causes of Action in the CPLR Complaint. Those Causes of Action are: 1) against W orksman for breach of the Guaranty (Third), 2) against Worksman for recovery of counsel fees pursuant to the Guaranty (Four), and 3) for replevin of the Membership Interests by directing seizure of the Certificates. Worksman opposes Centur s motion and requests that, should the Cour conclude that there has been a default by W orksman in answering, the Cour vacate that default and grant W orksman leave to serve and file his Answer. B. The Paries ' History The paries ' Februar 18 history is set forth in detail in a prior decision of the Cour dated 2010 ("Prior Decision ) in which the Cour inter alia denied Plaintiffs applications for injunctive relief and orders of seizure. The Cour incorporates the Prior Decision herein by reference. As outlined in the Prior Decision , Centur and other entities owned by the Goldmeiers entered into an Asset Purchase Agreement ("AP A"), which W orksman signed in his capacity as Manager of Rand , for the sale of substantially all of their assets to Rand. Rand paid a portion of the Purchase Price at the Closing, and the balance of the Purchase Price was evidenced by a Promissory Note payable by Rand to Centu. As. collateral for the repayment of the Promissory Note , the paries executed numerous Loan Documents , including the Workman Guaranty. To finance its acquisition of the Purchased Assets and provide working capital , Rand obtained two (2) loans from Wells Fargo Ban , N. A. (" Wells Fargo ) pursuant to the Wells Fargo Credit Agreement. Plaintiffs have alleged that , following the Closing, Rand was constatly delinquent in making payments to suppliers , resulting in the loss of valuable business relationships and a ). [* 3] restriction of Rand' s credit lines , and Rand failed to make required payments to the Goldmeirs. Plaintiffs also allege inter alia that Worksman caused Rand to default on the Wells Fargo obligations , which prompted Wells Fargo to declare a default and accelerate the balance due. Plaintiffs allege that this default resulted from Rand' s improper and fraudulent characterization of retured goods as inventory. The Complaint contains thirteen (13) causes of action , three of which are the subject of Centur s motion now before the Cour. In March of2010 , an involuntar chapter 7 case was commenced against Rand in the United States Banptcy Cour for the Eastern District of New York ("Banptcy Action The Goldmeiers and Centur were two of the petitioning creditors in the Banptcy Action. The Banptcy Cour permitted the paries to file amended pleadings , and an amended petition Amended Petition ) against Rand was fied in May of201O. By Decision and Order dated June 18 2010 (Ex. 15 to Kushner Aff. in Supp. ), the Banptcy Cour denied Rand' s Motion for Sumar Judgment, and deferred ruling on Rand' Motion for Abstention Dismissing Voluntar Petition. A trial on the Amended Petition was conducted and by decision after trial dated August 31 , 2010 (" Banptcy Decision ) (Ex. 17 to Kushner Aff. in Supp. ), the Banptcy Cour (Trust , l) rendered an opinion that addressed the issue "whether to enter an order for relief against the debtor" and " a subsidiar issue... whether the Cour should abstain from entering an order for relief if an order for relief were otherwse proper" (Bkcy. Dec. at p. 4). The Banptcy Cour concluded that an order for relief should be entered , and that it should not abstain from entering such an order (id. The Banptcy Cour determined that Centur 331 14). is a petitioning creditor that holds a claim in the amount of 702.41 that is not subject to a bona fide dispute as to either liability or amount (id at p. 1 By Order dated September 28 convert the Banptcy 2010 , the Banptcy Cour granted Rand' s motion to Action from Chapter 7 to Chapter 11 (Kushner Aff. in Supp. Opp. at 68). The Cour has received correspondence and conducted conferences addressing the issue 1 In the Prior Decision , the Cour denied Defendants ' cross motion , with leave to renew upon a showing, that Wells Fargo had not been fully repaid in connection with the loans at issue. At the trial of the Banptcy Action , the Banptcy Cour heard testimony and received exhibits that established that the Wells Fargo debt had been paid off in full prior to the Banptcy Filng (Banle Dec. at p. 22). [* 4] of whether the automatic banptcy stay (" Stay ) was applicable to W orksman as well as Rand. W orksman opposes the imposition of a default judgment against him , and asks the Cour to grant him leave to serve and fie an Answer. Worksman provides a Proposed Verified Answer (Ex. B to Rudofsky Aff. in Opp.lSupp. ) which contains nine affrmative defenses , predicated in par on claims of fraud and other improper conduct by Plaintiffs previously raised by W orksman in connection with prior motions before the Cour, and on Worksman s claim that the instat is stayed against him pursuant to the automatic stay provision in 11 U.S. C. C. The Paries ' action 362(a). Positions Centu submits that it has demonstrated its right to a default judgment against W orksman by establishing 1) proof of service of the Complaint on W orksman , 2) proof of the facts supporting Centu' s claim against Workman , consisting of a) evidence that th Worksman Guaranty was pledged in connection with the AP A , and served as collateral security for the repayment of Rand' s obligations to Centu, and b) the Banptcy Decision which constitutes a judicial determination of Rand' s liabilty to Centur, and 3) Worksman s failure to answer the Complaint. Alternatively, Centur argues that it has demonstrated its entitlement to parial sumar judgment by 1) demonstrating the existence and validity of the Subordinated Note and W orksman Guaranty; 2) providing proof, specifically the Banptcy Decision , that the Subordinated Note was not subject to a bona fide dispute as to amount or liabilty, and was due and owing as of March 8 , 2010; 3) establishing its right to attorney s fees pursuant to the express provisions of the Worksman Guaranty; and 4) demonstrating its right to replevin of the Certificate , pursuant to the Pledge Agreement. Worksman opposes Century s motion arguing, inter alia that 1) the Cour should reject Centur s claim that Worksman has defaulted in the instant action , in light of documentation reflecting that W orksman has consistently taken the position that the instat against him by virte of the action is stayed banpt Defendant's obligation to defend and indemnify him; 2) should the Court conclude that there has been a technical default by Worksman , the Cour should vacate that default and permit Worksman to serve and file an Answer; and 3) the Cour should deny Century s alternative application for sumar judgment, which was made prior to [* 5] the joinder of issue , and permit discovery to proceed. RULING OF THE COURT Default Judgment A. CPLR ~ 3215(a) permits a par to seek a default judgment against a Defendant who fails to make an appearance. The moving par must present proof of service of the summons and the complaint , affidavits setting fort due. CPLR ~ 3215 (f); par must v. make a the facts Allstate Ins. Co. v. constituting the claim , the default , and the amount Austin 48 A. D.3d720 (2d Dept. 2008). The moving showing of a cause of action against the defaulting par. prima facie Joosten Gale 129 AD.2d 531 (1st Dept. 1987). par seeking to vacate an order entered upon his default is required to demonstrate though the submission of supporting facts in evidentiar form , both a reasonable excuse for the White default and the existence of a meritorious cause of action or defense. v. Incorp. Vilage of Hempstead 41 AD.3d 709 , 710 (2d Dept. 2007). Public policy favors the resolution of cases on Bunch the merits. B. v. Dollar Budget, Inc. 12 AD.3d 391 (2d Dept. 2004). Sumar Judgmem CPLR ~ 3212(a) provides that any par may move for sumar judgment in any action after issue had been joined. Joinder of issue requires the service of a complaint by the plaintiff Shaibani and an answer or counterclaim by the defendant. v. Soraya 71 AD. 3d 1121 (2d Dept. 2010) (trial cour erred in considering merits of motion and cross motion , in effect , for sumar judgment where issue had not yet been joined). C. Res Judicata The doctrine of and Collateral Estoppel res judicata operates to preclude the renewal of issues actually litigated and resolved in a prior proceeding as well as claims for different relief which arise out ofthe same factual grouping or transaction and which should have or could have been resolved in the Luscher prior proceeding. Generalow v. 213 A. D.2d 379 , Arrua 21 A. 3d 1005 , 1006- 07 (2d Dept.), quoting Koether 380 (2d Dept. 1995). Under the doctrine of collateral estoppel , a par is precluded from relitigating an issue which has been previously decided against him in a prior proceeding where he had a full and fair opportity AD.3d at 1007. to litigate such issue. Luscher [* 6] D. Banptcy Stay Stays pursuant to 11 U. banpt co(E. defendants. v. Uta Y. 2011), quoting C. ~ 362(a) are limited to debtors and do not encompass nonJob Site Services, Inc. 2011 U. S. Dist. LEXIS 12587 , ** 2 Annuity Ass ' n of Am. Teachers Ins. Butler v. 803 F.2d 61 64 (2d Cir. 1986). In some cases , however , the automatic stay can be extended to non- debtors , but only where there exist unusual circumstances that would require something more than the mere fact that one of the paries to the lawsuit has fied for Co. v. banptcy. Id. Piccinin 788 F. 2d 994 , 999 (4th Cir. 1986). Such when a claim against the non- debtor the debtor quoting s estate. at ** 3 quotingA. circumstances are tyically found wil have an immediate adverse Queenie, Ltd v. Robins only economic consequence for Nygard Int' 321 F. 3d 282 287 (2d Cir. 2003). Examples of such circumstances include 1) a claim to establish an obligation of which the debtor is a guarantor quoting Queenie at 288 , citing McCartney Integra Nat' l Bank N 106 F.3d v. 506 510- 11 (3d Cir. 1997), 2) a claim against the debtor s insurer citing Johns-Manvile Corp. v. Asbestos Litig. Group, 26 n. R. quoting at 288 Queenie 420 435- 36 (Ban. S. 1983), and 3) actions where there is such identity between the debtor and the third-par defendant that the debtor may be said to be the real par defendant id at ** 4 , citing Queenie 288 , quotingA. H Robins 788 F.2d at 999. E. Application of these Principles to the Instant Action The Cour deniesWorksman s application to extend the Stay to apply to him based on the Cour' s determinations inter alia that 1) the recovery sought by Plaintiffs against Worksman involves an independently enforceable personal guaranty; and 2) Worksman has not demonstrated that permitting the claims against him to proceed would pose a serious threat to the debtor s reorganization efforts or have an immediate adverse economic consequence upon the debtor s estate. The Cour also concludes that , in light of the procedural history of this matter and the public policy favoring the determination of actions on the merits , it is appropriate to excuse Worksman s failure to timely serve an answer to the Complaint. Accordingly, the Cour grants Worksman s cross motion to the extent that the Cour grants Worksman leave to file a late answer, and deems his Proposed Verified Answer served. The Cour thus denies Centu' [* 7] motion for a default judgment. The Cour denies Centur s motion for sumar judgment on procedural grounds , as issue has not yet been joined. The Cour also denies Centu' s motion for summar judgment on substantive grounds. First , the Court concludes that the Banptcy Decision lacks the requisite identity of issues and paries to warant the application of the principles of collateral estoppel or res judicata to that Decision , in par because the Banptcy Decision did not consider or resolve Worksman s liability on the Guaranty and the merit of his defenses with respect to that Guaranty. In addition , as outlined in the Prior Decision , there exist numerous disputed issues regarding the paries ' pre- litigation business relationship that render sumar judgment inappropriate at this juncture. All matters not decided herein are hereby denied. This constitutes the decision and order of the Cour. The Cour directs counsel for the paries to appear before the Cour on October 6 2011 at 9:30 a. m. for a Preliminar Conference. ENTER DATED: Mineola, NY August 30 , 2011 lS. ENTERED SEP 07 2011 NASSAU COUNTY COUNTY CLERK' S OFFICE
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