Opinion
Index No. 507010/2017
01-04-2024
PAATA USOIANI and VITALII KASOEV, Plaintiffs, v. DUMBO MOVING & STORAGE, INC. and SHALVA KUNELAURI, Defendants.
Unpublished Opinion
DECISION AND ORDER
INGRID JOSEPH, JUDGE:
The following e-filed papers considered herein:
NYSCEF Doc. Nos.
Orders to Show Cause/Affirmation in Support/Exhibits Annexed ...:.... 176-177, 180-195
Affirmation in Opposition/Exhibits Annexed....................................... 196-212
Reply..................................................................................................... 213-214
Supplemental Memorandum of Law in Support................................... 245
Supplemental Affirmation in Support..................................246
Supplemental Memorandum of Law in Opposition.............................. 237
Notice of Cross- Motion/Affirmation in Support/Exhibits Annexed.... 217-221
Affirmation in Opposition to Cross-Motion.......................................... 243
In this matter, non-party Country-Wide Insurance Company ("Country-Wide") moves by order to show cause (Mot. Seq. No.8) for an order (i) vacating the monetary judgments entered in favor of Plaintiffs Paata Usoiani and Vitali Kasoev (collectively, "Plaintiffs") on the grounds that the judgments were procured by fraud, misrepresentation or other misconduct of Plaintiffs and Defendant Shalva Kunelauri ("Kunelauri") and (ii) dismissing the Plaintiffs' complaint. Similarly, Defendant Dumbo Moving & Storage, Inc. ("Dumbo") filed an order to show cause for an order vacating Plaintiffs' judgments as against Dumbo and dismissing the action as against Dumbo (collectively with Country-Wide's order to show cause, Mot. Seq. No. 8). Plaintiffs oppose both motions on the grounds that (1) the affirmative defense of fraud was never asserted; (2) these orders are an improper collateral attack on the judgment after a jury verdict; and (3) Country-Wide cannot demonstrate that the subject accident was staged. In addition, Plaintiff cross-moves for an order directing the disqualification of Kunelauri and Dumbo's (collectively, "Defendants") counsel Thomas Torto and the Law Office of Thomas Torto due to an alleged conflict of interest (Mot. Seq. No. 9).
This action arises out of a two-vehicle accident that occurred on August 12, 2016, while a vehicle was attempting to park. At the time of the accident. Plaintiffs were passengers in a stationary vehicle owned by Roland Matoyan ("Matoyan"), which was struck by a vehicle owned by Dumbo and operated by Kunelauri. Matoyan and Plaintiffs moved for summary judgment on the issue of liability. In their opposition, Defendants claimed that there were conflicting versions of how the accident occurred warranting denial of summary judgment. Defendants' opposition papers did not allege any fraud in the happening of the accident. On May 6, 2020, Justice Devin P. Cohen granted the motion in favor of Plaintiffs and Matoyan, finding that Dumbo and Kunelauri "bear full responsibility for causing the subject occurrence." The matter then proceeded to a jury trial on damages and a verdict was returned in favor of Plaintiffs on August 3, 2021. Defendants' subsequent motion to set the verdict aside was denied. At no time prior to the filing of Country-Wide's instant motion was the issue of fraud raised in this action.
Matoyan was a named defendant at the commencement of this action. Following the summary judgment determination, Matoyan was removed as a defendant and the caption was amended (NYSCEF Doc No. 114).
NYSCEF Doc No. 95-96.
NYSCEF Doc No. 115.
In that motion, Defendants argued that the jury was precluded from awarding damages for future pain and suffering and the Court erred in directing the jury to re-deliberate when its initial verdict was against the weight of the evidence (NYSCEF Doc No. 141).
After the summary judgment determination and before trial, Defendants' insurer Country-Wide commenced a collateral declaratory judgment action naming Dumbo, Kunelauri, Matoyan and Plaintiffs as defendants under Index No. 524575/2020 (the "DJ Action"). Country-Wide' sought a declaration that it was not obligated to indemnify and/or defend Dumbo and Kunelauri because the accident was an intentional and staged event. The alleged facts supporting Country-Wide's contention are that (a) Matoyan and Kunelauri knew each other prior to the accident; (b) Kunelauri testified that he was trying to park at a low rate of speed, but the force of the accident caused significant damage to Plaintiffs' vehicle, causing Defendants' vehicle to mount the curb and knock down an adjacent telephone pole; (c) Plaintiffs, Matoyan and Kunelauri gave conflicting deposition testimonies; and (d) the police report did not reference any injuries, but Plaintiffs underwent surgeries for alleged injuries sustained in the accident. According to Country-Wide, these facts demonstrate that the accident was intentionally caused and the Plaintiffs' claims are fraudulent. In the DJ Action, Mr. Torto appeared only on behalf of Dumbo and Kunelauri was unrepresented and failed to appear or answer. Matoyan and Plaintiffs interposed an answer, which was rejected as untimely by Country-Wide. On January 10, 2022, Justice Richard J. Montelione granted Country-Wide's motion for a default judgment against Kunelauri, Matoyan and Plaintiffs. Pursuant to an order and judgment dated October 6, 2022, more than a year after the trial had concluded, Justice Montelione determined that Country-Wide was not obligated to defend and/or indemnify Kunelauri. Country-Wide and Dumbo now ask this Court to vacate the jury's verdict due to the declaratory judgment that was granted post-trial in the DJ Action.
NYSCEF Doc No. 174. Matoyan and Plaintiffs appealed the denial of their motion to dismiss for lack of personal jurisdiction and Country-Wide moved to dismiss the notice of appeal (Index No. 2022-08931, NYSCEF Doc No. 2). The Second Department granted Country-Wide's motion and dismissed the appeal (Index No. 2022-08931, NYSCEF Doc No. 3).
As a preliminary matter, the Court finds that Country-Wide has standing to bring its motion as an interested party. CPLR 5015(a) provides, inter alia, that a court which rendered a judgment may relieve a party from that judgment on motion of any interested person (CPLR 5015[a]). Courts have recognized that an insurance company obligated to indemnify parties is an "interested person" (see Harkless v Reid, 23 A.D.3d 622, 622 [2d Dept 2005]; Halali v Vista Env'ts, Inc., 8 A.D.3d 435 [2d Dept 2004]). Plaintiffs do not contest the issue of Country-Wide's standing.
The Court next discusses three relevant legal principles. First, the law of the case doctrine is a "rule of practice, an articulation of sound policy that, when an issue is once judicially determined, that should be the end of the matter as far as Judges and courts of co-ordinate jurisdiction are concerned" (Martin v City of Cohoes, 37 N.Y.2d 162, 165 [1975]). This doctrine only applies to determinations that were resolved on the merits (Gilligan v Reers, 255 A.D.2d 486, 487 [2d Dept 1998] [internal citation omitted]). Absent extraordinary circumstances, such as a change in law or a showing of new evidence, this doctrine may not be ignored (Foley v Roche, 86 A.D.2d 887 [2d Dept 1982] [internal citations omitted]). Second, the res judicata doctrine or claim preclusion "bars the litigation of a claim or defense if, in a former litigation between the parties, or those in privity with them, in which there was a final conclusion, the subject matter and the causes of action are identical or substantially identical" (Williams v City of Yonkers, 160 A.D.3d 1017, 1018 [2d Dept 2018]). This applies to any claims and defenses that could have been or should have been litigated or raised in the prior proceeding (Cnty. of Nassau v New York State Pub. Emp. Reis. Bd, 151 A.D.2d 168, 185 [2d Dept 1989] [internal citation omitted], affd 76 N.Y.2d 579 [1990]; Gerzof v Gulotta, 57 A.D.2d 821, 821 [1st Dept 1977]). Finally, the doctrine of collateral estoppel or issue preclusion precludes a party in a subsequent action from relitigating an issue that was raised in a prior action and decided against that party or those in privity (Suter v Ross, 179 A.D.3d 1127, 1129 [2d Dept 2020] [internal citations omitted]). "It is well settled that res judicata and collateral estoppel only bar a subsequent action or the re-litigation of previously decided claims when the prior action or issues were concluded and decided on the merits" (Cortlandt St. Recovery Corp, v TPG Cap. Mgmt., L.P., 76 Misc.3d 1224[A] [Sup Ct, NY County 2022] [emphasis added]).
Country-Wide argues that the outcome of the DJ Action warrants entitlement to res judicata and/or collateral estoppel and bars relitigation of the issue of whether the accident was fraudulently staged. Plaintiffs argue that the summary judgment determination of Defendants' negligence is law of the case and res judicata and collateral estoppel applies.
First, "res judicata only bars subsequent litigation" and "collateral estoppel prevents a party from re-litigating an issue that was necessarily raised and decided in the previous action" (Sage Realty Corp. v Proskauer Rose LLP, 251 A.D.2d 35, 39 [1st Dept 1998] [internal citations and quotation marks omitted] [emphasis added]). The DJ Action is indisputably the subsequent action when it was filed after the instant matter was commenced and after Plaintiff s summary judgment on liability was determined. Thus, if any decision should be afforded res judicata or collateral estoppel effect it would be those rendered in this action.
Country-Wide's argument that the DJ Action determination supersedes the judgments entered on the jury verdict is unpersuasive and contrary to the law. If any determination is to be afforded deference, it would be the summary judgment decision. Here, Plaintiffs' and Matoyan's summary judgment motions were decided in 2020 and the verdict was rendered in 2021, well before Country-Wide's declaratory judgment was granted on default (cf DSD Acupuncture, P.C. v Metlife Auto &Home, 49 Misc.3d 153[A] [App Term, 2d Dept. 2d, 11th &13th Jud Dists 2015] [affirming dismissal of complaint on basis of res judicata because default declaratory judgment was obtained prior to the filing of the complaint]). The "grant[ing] of summary judgment operates as a final determination on the merits of the claims in question, [and] once a court has granted such a motion based on the facts adduced before it, the doctrine of res judicata applies . . ., as does the doctrine of law of the case" (All Boro Psychological Servs., P.C. v Travelers Prop. Cas. Co. of Am., 44 Misc.3d 48, 50 [App Term, 2d Dept, 2d, 11th &13th Jud Dists 2014] [internal citations omitted]; Methal v City of New York, 50 A.D.3d 654, 656 [2d Dept 2008] ["An order granting a summary judgment motion is on the merits and has preclusive effect"] [internal citation omitted]); Barrett v Kasco Const. Co., 84 A.D.2d 555, 556 [2d Dept 1981], affd56 N.Y.2d 830 [1982] [internal citation omitted]). Moreover, assuming arguendo that Country-Wide could properly raise the issue of collateral estoppel here, since it is undisputed that the judgment in the DJ Action was rendered on default, the issue of the accident being fraudulently staged was not actually litigated for the purposes of applying the collateral estoppel doctrine (Kaufman v Eli Lilly &Co., 65 N.Y.2d 449, 456-57 [1985]; Rojas v Romanoff 186 A.D.3d 103, 109 [1st Dept 2020] ["[T]he default nature of the judgment rendered in the prior declaratory judgment action prevents application of issue preclusion"]; Zimmerman v Tower Ins. Co. of New York, 13 A.D.3d 137, 140 [1st Dept 2004]). The Second Department noted that collateral estoppel may apply to default judgments only "where the party against whom preclusion is sought appears in the prior action, yet willfully and deliberately refuses to participate in those litigation proceedings, or abandons them, despite a full and fair opportunity to do so" (Miller v Falco, 170 A.D.3d 707, 709 [2d Dept 2019], quoting In re Abady, 22 A.D.3d 71, 85 [1st Dept 2005]). Country-Wide has not demonstrated that the exception to the rule applies in this situation because Plaintiffs did interpose an answer in the DJ Action, which was rejected by Country-Wide as untimely, and because Plaintiffs moved to dismiss the DJ Action for lack of personal jurisdiction. Therefore, the Court finds that Country-Wide and Dumbo are barred from relitigating the issue of liability.
Country-Wide further argues that the judgments should be vacated due to Plaintiffs' and Kunelauri's fraud, misrepresentation, or other misconduct. In addition, Country-Wide argues that the judgments should be vacated as against Dumbo on the grounds that it cannot be vicariously liable for the intentionally staged accident. Country-Wide maintains that in the DJ Action, it made a prima facie showing that the accident was staged. Plaintiffs argue that no defendant raised an affirmative defense of fraud and Country-Wide and Dumbo cannot now move to vacate based on a defense that was not previously asserted. In response, Country-Wide claims that they could only raise the issue of a staged accident in a declaratory judgment action because of the conflict between Country-Wide and Kunelauri since the insurer was obligated to provide a defense. Country-Wide's arguments are unpersuasive. All the facts cited by Country-Wide of the alleged staged accident where readily available to the insurer at the discovery stage (e.g., deposition transcripts, police report, medical records, etc.). Thus, when Country-Wide defended Kunelauri throughout the underlying action with knowledge of these facts, "it made its election and estopped itself from now urging that defense" of fraud or intentionally staged accident (Gerka v Fid. & Cas. Co. of New York, 251 NY 51, 57 [1929] [citations omitted]). There were multiple options available to Country-Wide. If Kunelauri was committing a fraud by colluding with Plaintiffs, Country-Wide could have refused to defend Kunelauri from the start or after interposing a defense, could have withdrawn its representation when it discovered facts supporting the collusion (Schwartz v Sar Corp., 19 Misc.2d 660, 666 [Sup Ct, Kings County 1959] ["It could not, with knowledge of facts constituting a defense against recovery on its policy, both continue with the defense and yet claim that it was not obligated on this policy"], revd on other grounds 9 A.D.2d 910 [2d Dept 1959]. Alternatively, to avoid any possible conflict of interest, Kunelauri and Dumbo could have each been represented by different counsel, even if they were chosen and paid for by Country-Wide (see Utica Mut. Ins. Co. v Cherry, 45 A.D.2d 350, 355 [2d Dept 1974), affd 38 N.Y.2d 735 [1975]; Graci v Denaro, 98 Misc.2d 155, 157 [Sup Ct, Queens County 1979]). If Country-Wide had filed a declaratory judgment action promptly, the issue of its defense of the underlying action could have been resolved prior to Defendants' liability being determined (see Am. Emps. Ins. Co. v Goble Aircraft Specialties, 205 Misc. 1066, 1074 [Sup Ct, NY County 1954]). Moreover, Country-Wide could have asked for a stay of the trial on damages pending a determination of the declaratory action (Peluso v Red Rose Rest., Inc., 78 A.D.3d 802, 803 [2d Dept 2010] [granting stay of proceedings until resolution of declaratory action regarding insurance coverage was proper]). Therefore, the Court does not find that the judgments should be vacated due to Plaintiffs' and Kunelauri's alleged fraud, misrepresentation, or other misconduct. Further, since the issue of liability was already determined, there is no basis to hold that Dumbo is not vicariously liable.
In his affirmation, Dumbo's counsel adopted the factual and legal arguments set forth by Country-Wide in its order to show cause (NYSCEF Doc No. 176).
The Court next addresses Plaintiffs' cross-motion based on a supposed conflict of interest arising from Mr. Thomas Torto's representation of Dumbo and Kunelauri in the present action and his representation of Dumbo and imposition of crossclaims against Kunelauri in the DJ Action. On or about June 13, 2022, Plaintiffs filed a cross-motion in the Second Department seeking the same relief here-disqualification of Thomas Torto, Esq. and the Law Office of Thomas Torto- due to the same alleged conflict of interest. On May 12, 2023, the Second Department denied their cross-motion. Even if the Second Department had not issued its decision, the Court finds that Plaintiffs do not have standing to bring this motion (see A.F.C. Enterprises, Inc. v New York City Sch. Const. Auth., 33 A.D.3d 736, 736 [2d Dept 2006] [affirming denial of motion for disqualification where moving party was neither a present nor former client of subject attorneys]).
NYSCEF Doc No. 249.
Accordingly, it is hereby
ORDERED, that Country-Wide and Dumbo's orders to show cause (Motion Seq. No. 8) seeking the vacatur of Plaintiffs' judgments are DENIED; and it is further
ORDERED, that Plaintiffs' cross-motion (Motion Seq. No. 9) seeking the disqualification of Defendants' counsel is DENIED.
This constitutes the decision and order of the Court.