ABOELNAGA v. LLC (2022)

Order, Supreme Court, New York County (Robert R. Reed, J.), entered February 2, 2022, which denied defendants National Bank of Canada (NBC) and National Bank Financial's (NBF) motion to dismiss the complaint as against them pursuant to CPLR 3211(a)(1), (5), and (7), unanimously reversed, on the law, without costs, and the motion granted.  The Clerk is directed to enter judgment accordingly.

Plaintiff's claim that NBC and NBF are defendant Proctor Investment Managers LLC's (PIM) alter egos is barred by both res judicata (see e.g. Matter of Hunter, 4 N.Y.3d 260, 269, 794 N.Y.S.2d 286, 827 N.E.2d 269 [2005]) and collateral estoppel (see e.g. Koch v. Consolidated Edison Co. of N.Y., Inc., 62 N.Y.2d 548, 554, 479 N.Y.S.2d 163, 468 N.E.2d 1 [1984], cert denied 469 U.S. 1210, 105 S.Ct. 1177, 84 L.Ed.2d 326 [1985]).  In 2016, plaintiff sued NBC, NBF, and PIM, alleging – as she does in the instant action – that NBC and NBF were PIM's alter egos.  In August 2018, Supreme Court (Gerald Lebovits, J.) granted NBC and NBF's motion to dismiss that action.

While the prior action did not allege fraudulent conveyance, the doctrine of res judicata bars plaintiff from raising that claim here because she could have raised it in the prior action (see Hunter, 4 N.Y.3d at 269, 794 N.Y.S.2d 286, 827 N.E.2d 269).  Plaintiff learned on or about May 9, 2017 that nonparty Conquest Capital Group had repurchased the equity it had previously sold to PIM. She filed an amended complaint in the prior action on May 26, 2017.  Although plaintiff alleges that she did not discover the price at which Conquest repurchased its equity until November 2018, she could have learned this fact earlier by making inquiries (see Pitcock v. Kasowitz, Benson, Torres & Friedman, LLP, 80 A.D.3d 453, 454, 915 N.Y.S.2d 239 [1st Dept. 2011], lv denied 16 N.Y.3d 711, 2011 WL 1584865 [2011]).

Even if the fraudulent conveyance claims against NBC and NBF were not barred by res judicata, we would dismiss them for failure to state a cause of action.  Neither NBC nor NBF was a transferee (see Federal Deposit Ins. Corp. v. Porco, 75 N.Y.2d 840, 842, 552 N.Y.S.2d 910, 552 N.E.2d 158 [1990]).  The conveyance of which plaintiff complains is the sale of PIM's stake in Conquest, allegedly for less than fair consideration.  PIM gave its stake to Conquest, and Conquest sent money to PIM. PIM subsequently sent the money to plaintiff.

Nor does the complaint allege that NBC and NBF were beneficiaries of the conveyance (see id.).  Furthermore, the damages that plaintiff seeks – the unsatisfied amount of her judgment against PIM – are not a proper remedy under Debtor and Creditor Law former section 278(1) (see e.g. D'Mel & Assoc. v. Athco, Inc., 105 A.D.3d 451, 453, 963 N.Y.S.2d 65 [1st Dept. 2013]).  Plaintiff's reliance on Debtor and Creditor Law new section 276(a)(3)(iii) is unavailing, as that statute applies to transfers made after April 4, 2020, and PIM's sale of its stake in Conquest occurred as of May 4, 2017.