New York First Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 52217(U))

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Queens County (Diane A. Lebedeff, J.), entered October 8, 2008. The order, insofar as appealed from as limited by the brief, granted the branches of defendant’s motion seeking to amend the answer to include the defense of fraudulent incorporation and to compel plaintiff to produce its owner, Valentina Anikeyeva, for a deposition.

ORDERED that the order, insofar as appealed from, is affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, the Civil Court granted so much of a motion by defendant as sought leave to amend its answer, pursuant to CPLR 3025 (b), to assert the affirmative defense that plaintiff was a fraudulently incorporated medical provider (see State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]), and to compel plaintiff to produce its owner, Valentina Anikeyeva, for a deposition. Plaintiff appeals, as limited by its brief, from so much of the Civil Court’s order as granted said branches of defendant’s motion.

The Civil Court did not improvidently exercise its discretion in granting defendant’s application for leave to amend its answer in order to interpose the affirmative defense of fraudulent incorporation, in the absence of any showing that prejudice or surprise would result [*2]therefrom (see McCaskey, Davies & Assoc. v New York City Health & Hosps. Corp., 59 NY2d 755 [1983]; Tomasino v American Tobacco Co., 57 AD3d 652 [2008]; Mackenzie v Croce, 54 AD3d 825 [2008]), and since the proposed affirmative defense was neither devoid of merit nor palpably insufficient as a matter of law (see CPLR 3025 [b]; Ingrami v Rovner, 45 AD3d 806, 808 [2007]; Hill v 2016 Realty Assoc., 42 AD3d 432, 433 [2007]). Plaintiff’s contention, that the defense of fraudulent incorporation must be asserted in a timely denial of claim form, is without merit (Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37, 38-39 [App Term, 2d & 11th Jud Dists 2007]). Moreover, defendant sufficiently demonstrated that the deposition testimony of Ms. Anikeyeva regarding plaintiff’s corporate structure was material and necessary (see CPLR 3101), so as to warrant the granting of the branch of its motion seeking to compel Ms. Anikeyeva’s deposition.

Pesce, P.J., and Steinhardt, J., concur.

Golia, J., concurs in a separate memorandum.

Golia, J., concurs in the result only, in the following memorandum:

While I agree with the ultimate disposition in the decision reached by the majority, I strenuously disagree with the majority gratuitously raising a nonexistent issue, namely that a Mallela defense (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]) may be disallowed if “prejudice or surprise would result therefrom.” This impression was created by the majority in choosing here to excise an important requirement with regard to the law of amending an answer. The actual statement by the Court of Appeals in McCaskey, Davies & Assoc. v New York City Health & Hosps. Corp. (59 NY2d 755, 757 [1983] [emphasis added, citations and internal quotations marks omitted]) is that, “Leave to amend the pleadings shall be freely given absent prejudice or surprise resulting directly from the delay.”

Inasmuch as it is inconceivable that a Mallela defense of fraudulent incorporation could ever create prejudice or surprise that resulted directly from the delay in raising such defense, it is clear that such analysis is unwarranted.

To me, it is extremely unlikely that an individual who creates a fraudulent entity for the purpose of defrauding an insurance company would forget that he/she did so and be prejudiced or surprised when it was discovered. Such would be akin to a person running a “Ponzi” scheme deciding to invest in his own firm because it was obtaining such good results.
Decision Date: October 23, 2009