Civil Court of the City of New York, Queens County, February 14, 2020

Gary Tsirelman P.C., Brooklyn (Irena Golodkeyer and Stefan M. Belinfanti of counsel), for plaintiff.

The Law Office of Aloy O. Ibuzor, Melville (Medgine Bernadotte of counsel), for Travelers Property & Casualty Ins. Co., defendant.

Law Office of Printz & Goldstein, Melville (Lisa M. Aquino and Tali K. Hernstat of counsel), for GEICO Casualty Company, defendant.

Queens Neurology, P.C. (plaintiff) commenced 27 separate {**67 Misc 3d at 173}actions against various defendants on or about September 6, 2001, October 23, 2001, or January 10, 2002. Thirteen of said actions were against defendant GEICO Casualty Company.^[FN*] In each matter, plaintiff retained the same attorney of record, who was subsequently suspended from practice on or about May 18, 2004, and was disbarred on or about October 11, 2005. All 27 cases have been converted to inactive or disposed on the court's docket.

On or about October 20, 2009, New York State consented to plaintiff's voluntary dissolution. Despite such dissolution, plaintiff was not substituted as a party in any of the matters.{**67 Misc 3d at 174}

Over seven years after its dissolution, plaintiff now moves to (1) consolidate the aforementioned 27 actions pursuant to section 602 of the Civil Practice Law and Rules for the sole purpose of its motion; (2) substitute the attorney of record in each action and compel the transfer of all files related to each action; and (3) stay all proceedings for 90 days pursuant to CPLR 2201. Plaintiff's motion was denied with respect to three matters involving defendant Travelers Property & Casualty Insurance Company due to plaintiff's failure to provide proof of service.

In accordance with the recitation requirements of CPLR 2219 (a), the court considered (1) plaintiff's order to show cause, plaintiff counsel's affirmation and attached exhibits; (2) defendant GEICO's affirmation in opposition and attached exhibits; and (3) plaintiff's counsel's reply affirmation.

Plaintiff's motion must be denied because plaintiff is a dissolved corporation and has failed to establish that it can seek relief from this court. Plaintiff's arguments that it remains entitled to relief despite dissolution lack merit. Except in limited circumstances permitted by statute, upon dissolution, a corporation is "legally dead" and lacks the capacity to use the courts of this state to enforce obligations (Lorisa Capital Corp. v Gallo, 119 AD2d 99, 111 [2d Dept 1986]; see 80-02 Leasehold, LLC v CM Realty Holdings Corp., 123 AD3d 872, 873 [2d Dept 2014]). Plaintiff asserts that section 1006 of the Business Corporation Law permits plaintiff to pursue the current motion; however, plaintiff is no longer able to function under Business Corporation Law § 1006 (see Lorisa, 119 AD2d at 111, 114).

A. Legislative History

Circumstances in which a corporation may continue to act upon dissolution are delineated in Business Corporation Law §§ 1005 and 1006, which permit a dissolved corporation to retain a limited de jure existence solely for the purpose of winding up its affairs (see 80-02 Leasehold, LLC v CM Realty Holdings Corp., 123 AD3d 872, 873 [2d Dept 2014]).

Business Corporation Law § 1005 (a) states, in relevant part, that after dissolution:

"(1) The corporation shall carry on no business except for the purpose of winding up its affairs.

"(2) The corporation shall proceed to wind up its affairs,{**67 Misc 3d at 175} with power to fulfill or discharge its contracts, collect its assets, sell its assets for cash at public or private sale, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business." (Emphasis added.)

Business Corporation Law § 1006 states, in relevant part:

"(a) A dissolved corporation, its directors, officers and shareholders may continue to function for the purpose of winding up the affairs of the corporation in the same manner as if the dissolution had not taken place, except as otherwise provided in this chapter or by court order. In particular, and without limiting the generality of the foregoing: . . .

"(4) The corporation may sue or be sued in all courts and participate in actions and proceedings, whether judicial, administrative, arbitrative or otherwise, in its corporate name, and process may be served by or upon it.

"(b) The dissolution of a corporation shall not affect any remedy available to or against such corporation, its directors, officers or shareholders for any right or claim existing or any liability incurred before such dissolution . . . ."

Business Corporation Law §§ 1005 and 1006 were passed in 1961 as a part of the legislature's revision of New York's corporation laws in place of the General Corporation Law and the Stock Corporation Law (see AirTran N.Y., LLC v Midwest Air Group, Inc., 46 AD3d 208, 213 [1st Dept 2007]). The relevant language of Business Corporation Law §§ 1005 and 1006 quoted above has remained unchanged since 1961 (see 1961 McKinney's Session Laws of NY at 1639-1640).

After Business Corporation Law §§ 1005 and 1006 were passed, the legislature enacted CPLR 1017 and 1021 in 1962 as part of the legislature's revision and recodification of the Civil Practice Act and the Rules of Civil Practice (see CPLR 101). CPLR 1017, which is entitled "Substitution in case of receivership or dissolution of a corporation," states that "[i]f a . . . corporate party is dissolved, the court shall order substitution of the proper parties" (emphasis added). Significantly, in discussing CPLR 1017, the legislature stated that the term "shall" was used instead of "may" since "there is no apparent need for discretion" (see 5th Preliminary Rep to Legislature by Senate Finance Comm and Assembly Ways and Means Comm relative to Revision of Civ Practice Act, 1961 NY Legis Doc No. 15 at 321).{**67 Misc 3d at 176}

Moreover, CPLR 1021 provides:

"If the event requiring substitution occurs before final judgment and substitution is not made within a reasonable time, the action may be dismissed as to the party for whom substitution should have been made, however, such dismissal shall not be on the merits unless the court shall so indicate. If the event requiring substitution occurs after final judgment, substitution may be made in either the court from or to which an appeal could be or is taken, or the court of original instance, and if substitution is not made within four months after the event requiring substitution, the court to which the appeal is or could be taken may dismiss the appeal, impose conditions or prevent it from being taken."

Courts have noted the potential conflict between the provisions of Business Corporation Law §§ 1005 and 1006 that allow a dissolved corporation to wind up its affairs and the provisions of CPLR 1017 and 1021 that mandate the substitution of a dissolved corporation as a party in an action (see Lance Intl., Inc. v First Natl. City Bank, 24 Misc 3d 1109, 1114 [Civ Ct, NY County 2009]; Painless Med., P.C. v GEICO, 32 Misc 3d 715, 718 n 1 [Civ Ct, Kings County 2011]). Moreover, in 1957, while the CPLR was still being drafted and before the Business Corporation Law was passed, the legislature noted this potential conflict in comparing the subsequently unchanged draft of CPLR 1017 with Business Corporation Law § 1006's predecessor, stating:

"The statutory law on the subject of substitution in case of dissolution of a corporation seems to be in a state of confusion. Article 10 of [former] Stock Corporation Law deals with dissolution without judicial proceedings. Section 105 (8) provides that such a corporation continues for the purpose of paying debts, collecting assets and winding up affairs and 'may sue or be sued in its corporate name.' See also N.Y. Gen. Corp. Law § 29 [now Business Corporation Law §§ 1006, 1113]; N.Y. Tax Law § 203-a. The general provision for receivers is section 106 of the Stock Corporation Law. See also McKinney's Gen. Corp. Law, art. 12 [now Business Corporation Law article 12]. These provisions are not articulate on the subject of substitution in case of appointment of a receiver for a corporate party. Compare section 977-b (19) of the civil [*4]practice act,{**67 Misc 3d at 177} where substitution is contemplated in case of appointment of a receiver for a foreign corporation.

"Most of the case law regarding substitution in case of dissolution deals with the situation where a receiver is appointed for a corporation. The general rule seems to be that the receiver must be substituted in pending actions." (1957 Rep of Temp Commn on Courts, 1st Preliminary Rep of Advisory Comm on Practice and Procedure, 1957 NY Legis Doc No. 6 [b] at 49 [citations omitted] [emphasis added].)

Thus, at the time CPLR 1017 was drafted the legislature (1) was aware of the potential conflict with the winding up provisions of Business Corporation Law § 1006's predecessor; (2) consciously decided to use mandatory language of "shall" rather than "may"; and (3) did not provide an exception to circumstances in which a corporation was winding up its affairs. Notably, appellate courts have not ruled upon the question how these statutes coexist.

B. Statutory Construction

As the Court of Appeals has stated, "[i]t is a familiar and salutary canon of construction that courts, in construing apparently conflicting statutory provisions, must try to harmonize them" (Matter of Burger King v State Tax Commn., 51 NY2d 614, 620-621 [1980]; see Matter of Dutchess County Dept. of Social Servs. v Day, 96 NY2d 149, 154 [2001] ["Statutes which relate to the same subject matter must be construed together unless a contrary legislative intent is expressed. Courts must harmonize the various provisions of related statutes and ( ) construe them in a way that renders them internally compatible" (internal quotation marks and citations omitted)]). Although another well-established rule of statutory construction provides that a prior general statute yields to a "later-enacted" specific or special statute, this rule does not require that the prior statute be disregarded (see Dutchess, 96 NY2d at 154). To the contrary, in construing two potentially conflicting statutes, the Court of Appeals applied the rule that a prior general statute yields to a later specific statute in reaching a harmonious reading of the statutes (see id. ["The construction we adopt today reconciles both provisions and leaves a role for (the prior statute)"]).

CPLR 1017 and 1021 were enacted after Business Corporation Law §§ 1005 and 1006, and CPLR 1017 specifically addresses the issue of "[s]ubstitution in case of receivership or {**67 Misc 3d at 178}dissolution of a corporation" (CPLR 1017; see 1021; Business Corporation Law §§ 1005, 1006; Dutchess, 96 NY2d at 154). Furthermore, if this court were to wholly disregard CPLR 1017 and 1021 in favor of Business Corporation Law §§ 1005 and 1006, then dissolved corporations could indefinitely avoid substitution under the guise of winding up their affairs, and the provisions of CPLR 1017 and 1021 governing dissolved corporations would have virtually no role in civil practice. Indeed, the only circumstance in which CPLR 1017 and 1021 could apply to a dissolved corporation is if the corporation was purportedly winding up its affairs given that a dissolved corporation that is not winding up cannot sue or be sued (see Business Corporation Law § 1005 [a]; Lorisa Capital Corp. v Gallo, 119 AD2d 99, 111 [2d Dept 1986]). Additionally, CPLR 101 does not require the court to overlook any of these statutes because they are not inconsistent and do not fall within an individual court act (see Ling Ling Yung v County of Nassau, 77 NY2d 568, 571 [1991] [noting that CPLR 101 provides that the "CPLR is to govern civil practice and procedure, but only to the extent that it is not inconsistent with the procedure of the individual courts as described in their court acts" (emphasis added)]).

Harmony can be found in the statutory construction of CPLR 1017 and 1021 as well as Business Corporation Law §§ 1005 and 1006 in reference to CPLR 1021, which provides a dissolved corporation with a window to continue to act as a party to an action without substitution (1) for a "reasonable time" if the [*5]dissolution occurs prior to final judgment; and (2) for "four months" if the dissolution occurs after final judgment. Notably, although the provisions of the Business Corporation Law do not include any time limit for winding up a dissolved corporation's affairs, courts have implied a reasonable period of time as a limit to statutes that are silent (see e.g. Spiegelberg v Gomez, 44 NY2d 920, 921 [1978]; Lance Intl., Inc. v First Natl. City Bank, 86 AD3d 479, 480 [1st Dept 2011]; Matter of Jonathan Neil Corp. v State Liq. Auth., 112 AD2d 70, 72 [1st Dept 1985]).

In Lance Intl., Inc. v First Natl. City Bank, the First Department has relied on this "reasonable period of time" rule of construction to place a time limitation on a dissolved corporation for the winding up of its affairs (86 AD3d at 480 ["(T)he winding up of affairs cannot continue indefinitely"]). The First Department further noted that "[w]hat constitutes a reasonable {**67 Misc 3d at 179}time for a dissolved corporation to wind up its affairs before ceasing to exist altogether is generally a question of law for the court" (id. at 480 n 1). The First Department's decision in Lance is consistent with the time limitation set forth by CPLR 1021 and a harmonious reading of the statutes (see id. at 480; see also Next Millenium Realty, LLC v Adchem Corp., 690 Fed Appx 710, 716 [2d Cir 2017] [applying a "reasonable period of time" limitation on a dissolved corporation's ability to wind up its affairs pursuant to Business Corporation Law § 1006]).

Hence, the proper reading of the statutes is that immediately after a corporation is dissolved, the provisions of Business Corporation Law §§ 1005 and 1006 permit the corporation to continue to act for the purpose of winding up its affairs. CPLR 1021 essentially places a time limitation on said dissolved corporation to wind up its affairs. Once the time limitation set forth by CPLR 1021 expires, the dissolved corporation is no longer winding up its affairs and the proceeding is stayed pending (1) the substitution of a legal representative for the dissolved corporation; or (2) a motion to dismiss, without prejudice, filed by a defendant for the failure to make a timely substitution of a dissolved corporate plaintiff (see CPLR 1021, 1017; Business Corporation Law § 1005 [a] [1]; Peña v Rucon Props., LLC, 19 Misc 3d 655, 656 [Sup Ct, Bronx County 2008] ["CPLR 1021 grants the defendant the option of moving to dismiss for failure to make a timely substitution"]; see also NYCTL 2004-A Trust v Archer, 131 AD3d 1213, 1214 [2d Dept 2015] [stating, generally, "the death of a party divests a court of jurisdiction to act, and automatically stays proceedings in the action pending the substitution of a legal representative" (some citations omitted)], citing CPLR 1015, and 1021; compare CPLR 1015 [a] ["If a party dies and the claim for or against him is not thereby extinguished the court shall order substitution of the proper parties"], with CPLR 1017 ["If . . . a corporate party is dissolved, the court shall order substitution of the proper parties"]). This interpretation encourages prompt resolution of outstanding legal matters of dissolved corporations and discourages counsel from treating a dissolved corporate plaintiff as a "mere puppet" used to accrue fees that may include accumulated interest (Lance Intl., Inc. v First Natl. City Bank, 24 Misc 3d 1109, 1116 [Civ Ct, NY County 2009]).{**67 Misc 3d at 180}

C. Plaintiff's time limitation for winding up has expired.

As to each of the matters referred to in plaintiff's motion, based on the foregoing discussion, plaintiff was required to be substituted within a reasonable time after dissolution if the dissolution occurred prior to final judgment, or within four months if the dissolution occurred after final judgment, to avoid the matter being effectively stayed pending substitution or a motion to dismiss (see CPLR 1021). Instead, plaintiff waited over 11 years after plaintiff's counsel was disbarred and seven years after plaintiff was dissolved to move to substitute counsel.

As to the prejudgment dissolution matters, the record lacks any indication that the seven-year gap since plaintiff's dissolution constitutes a reasonable time for plaintiff to wind up its affairs. In light of defendant GEICO's opposition, plaintiff was given an opportunity to submit evidence and arguments demonstrating the reasonableness of the over seven-year period to wind up its affairs pursuant to Business Corporation Law § 1006 without substitution (see River View at Patchogue, LLC v Hudson Ins. Co., 122 AD3d 824, 825 [2d Dept 2014] [affirming Supreme Court's decision granting defendant's motion for summary judgment where Supreme Court adjourned the motion for the express purpose of allowing the parties to submit additional evidence and arguments with respect to a specific argument raised by defendant]). However, plaintiff has failed to demonstrate that the seven-year delay without substituting plaintiff with a shareholder or other appropriate party was reasonable (see Rose Ocko Found. v Lebovits, 259 AD2d 685, 690 [2d Dept 1999] [noting that when a corporation is dissolved after an action has been commenced, the court should, under CPLR 1017, allow shareholders to be substituted as parties in its place]; Lance Intl., Inc. v First Natl. City Bank, 24 Misc 3d 1109, 1116 [Civ Ct, NY County 2009] [in finding that a time limit must be placed on how long a corporation may wind up its affairs, the court noted that "by suing and being sued, the business would be resolving both sides of the ledger; it would not just be waiting for a pot of gold at the end of the rainbow. Second, all suits would proceed to quick resolutions, by settlement or trial. A year or two or three comes to mind"]). As to the postjudgment dissolution matters, four months have clearly passed since plaintiff's dissolution. The court need not delve into the procedural posture of each matter; however, the court notes that ongoing matters are effectively stayed pending substitution of a legal representative for plaintiff or a motion to dismiss filed by the respective defendant.{**67 Misc 3d at 181}

Although defendant GEICO asserts in its opposition that the 13 actions against defendant GEICO should be dismissed pursuant to CPLR 1021, defendant GEICO's argument is not properly before this court as a cross motion to dismiss because defendant GEICO failed to serve notice of cross motion pursuant to CPLR 2214 (see Abizadeh v Abizadeh, 159 AD3d 856, 857 [2d Dept 2018] [finding that lower court providently exercised its discretion in denying a cross motion on the ground that that movant's notice of cross motion was deficient]). However, defendant GEICO and, where applicable, defendants in the other matters referred to by plaintiff may submit a motion to dismiss pursuant to CPLR 1021 in accordance with the proper procedures.

Accordingly, it is hereby ordered that plaintiff's motion is denied in its entirety.