Robbins v. Growney

• Decision Date: 25 July 1996
• Citation: 645 N.Y.S.2d 791,229 A.D.2d 356
• Parties: Norman ROBBINS, et al., Plaintiffs-Appellants, v. E. Michael GROWNEY, Defendant, Kazi Hasan, Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 791

645 N.Y.S.2d 791

229 A.D.2d 356

Norman ROBBINS, et al., Plaintiffs-Appellants, v. E. Michael GROWNEY, Defendant, Kazi Hasan, Defendant-Respondent.

Supreme Court, Appellate Division,

First Department.

July 25, 1996.

Ray Beckerman, for Plaintiffs-Appellants.

J. Edward Meyer, for Defendant-Respondent.

Before SULLIVAN, J.P., and ELLERIN, ROSS, NARDELLI and WILLIAMS, JJ.

MEMORANDUM DECISION.

Order of the Supreme Court, New York County (Alice Schlesinger, J.), entered September 25, 1995, which denied plaintiffs' motion to dismiss defendant Hasan's second and third affirmative defenses, is unanimously reversed to the extent appealed from, on the law, without costs or disbursements, and plaintiffs' motion to dismiss said affirmative defenses is granted.

Plaintiffs obtained a default judgment against Hasan Growney Co., Inc., a brokerage firm in which the defendants herein were the sole shareholders, directors and principal officers. Thereafter, the Supreme Court denied a motion by the corporation and defendant Hasan to vacate the default judgment on the grounds it had been obtained by fraud. This action was commenced by plaintiffs to pierce the corporate veil against the individual defendants with respect to the unsatisfied judgment. Defendant Hasan raised as a first affirmative defense plaintiffs' failure to state a cause of action; the second affirmative defense alleged plaintiffs' fraud in procuring the judgment against the corporation; the third affirmative defense alleged laches and bad faith giving rise to an estoppel.

The fraud defense was not interposed in the underlying action against the corporation. The corporation defaulted in opposing plaintiffs' motion for summary judgment, which established the corporation's indebtedness to plaintiffs. Defendant Hasan's motion to vacate the default, in which he raised the fraud defense, was denied by the Supreme Court and the defense rejected; no appeal was taken from that denial. Accordingly, the second affirmative defense, i.e., that the judgment against the corporation was procured by fraud and illegal behavior should have been dismissed as barred by the doctrines of res judicata and collateral estoppel.

The doctrine of res judicata is applicable to a judgment taken by default which has not been vacated (Spindell v. Brooklyn Jewish Hosp., 35 A.D.2d 962, 317 N.Y.S.2d 963, affd. 29 N.Y.2d 888, 328 N.Y.S.2d 678, 278 N.E.2d 912), as well as to defenses raised in the prior action or which,...